Bilibili loses some shine as ‘growth-at-all-costs’ model comes under scrutiny from investors

Chinese video-streaming and mobile gaming company Bilibili, once an investor darling for its popularity among the country’s youth, is losing some of its shine as more people question business models focused heavily on user growth, analysts say.

The company’s shares dropped more than 10 per cent on Monday in Hong Kong, after a 10 per cent drop last Thursday before being suspended on Friday as the company announced a plan to raise up to US$1.6 billion by issuing convertible debt.

Although shares typically fall after a convertible debt announcement due to a dilution effect, the sell-off is in sharp contrast to the heady early days of Bilibili’s share price performance, when the stock was perceived by investors as a shining tech star.

In the space of just four months, the company’s shares on Nasdaq rose from around US$45 at the beginning of November 2020, to a peak of US$156.4 in February. A month later, Bilibili completed its secondary-listing in Hong Kong, raising US$2.6 billion, about 7 per cent less than its initial target.

“The recent collapse of Bilibili’s share price from its peak shows investors have lost confidence in its grow-at-all-costs approach,” said Michael Norris, research & strategy manager at research firm AgencyChina, “For investors to regain confidence, Bilibili needs a coherent strategy that goes beyond accruing new users in pursuit of its 2023 monthly active users (MAU) target.”

Bilibili has repeatedly stated it aims to hit a 400 million MAU target by 2023. Norris also notes that Bilibili’s losses are mounting and user stickiness has deteriorated since last year as “it shifts from a niche entertainment platform to something more mainstream.”