STX Entertainment Files Draft IPO Prospectus in Hong Kong

Robert Simonds’ STX Entertainment has filed a draft prospectus with the Hong Kong Stock Exchange that is expected to lead to an initial public offering of its shares in the coming months.

STX, which counts numerous investors from Greater China among its existing shareholders, would likely become the first U.S.-domiciled Hollywood entertainment firm to list in Hong Kong or China. Hong Kong, a former British colony that returned to China some 20 years ago, has one of the deepest and most orderly capital markets in Asia. It is expected to be one of the top three IPO destinations in the world leader this year.

The draft prospectus shows leading financial institutions J.P. Morgan and Goldman Sachs as sponsors of the share issue. At this early stage there is no requirement for the company to disclose details of the pricing, how much of its equity will be sold to the public or institutions, nor how much finance it expects to raise through the share sale. Subsequent drafts of the prospectus will likely be issued over the coming three or four months, with each adding new layers of detail.

The prospectus describes an early stage growth company, that books film and TV project development and production expenses as pure cost in its profit and loss statement. As the company releases more films into the market, revenues will catch up. It says that once running at full speed, STX expects to release 12-15 typical films per year.

The draft prospectus shows revenues in the financial year to end September 2017 reaching $201 million. Losses in the same period were $11.8 million. The subsequent quarter to end December showed revenues climbing 41% to $93 million, with losses of $28.1 million. Cash on hand at the end of December had expanded to $109 million at the end of December.

STX was founded in 2011, and began operations in 2014 with the backing of TPG Growth and China’s Hony Capital. Subsequent rounds of capital raising have brought in China’s tech colossus Tencent and Hong Kong telco and media operator PCCW as investors. At the end of last year John Malone’s Liberty Global also took a stake. It is understood that none of these investors are looking to sell their shares in the IPO.

The prospectus pitches STX as being built for the new economy, with a focus on mid-budget ($30-40 million) films, and as straddling the Hollywood and China markets from the outset.  STX recently enjoyed rare crossover success with the Jackie Chan-starring U.S.-China co-production, “The Foreigner,” a dramatic action film directed by Martin Campbell. STX’s development project “Killer’s Game” with Jason Statham has financial backing from Tencent. And, upcoming sci-fi picture, “Steel Soldiers” has financial investment from Alibaba Pictures, part of China’s e-commerce giant Alibaba.

 

 

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