Chinese cloud companies gears up for US$ 3.8 billion. Kingsoft, a Chinese Internet and Technology corporation, is spinning off its cloud division and listing it in the U.S.

It comes in the face of a global coronavirus pandemic that has sent stocks tumbling, and the recent Chinese Luckin Coffee fraud scandal.

Kingsoft Cloud said that if the so-called over-allocation option is exercised, it will issue 25,000,000 American Depositary Shares (ADS) and up to 3,750,000 more. This choice allows the underwriting banks to sell more of the shares than the original set number.

Each ADS should be priced from $16 to $18. Kingsoft Cloud said this would raise between $3.4 billion and $3.8 billion, as long as the option to over-allocate is not exercised. The company plans to start trading on the Nasdaq on Friday with the price of the initial public offering (IPO) on Thursday.

Kingsoft Cloud provides products ranging from storage to networking and computing. Its sales grew 78.4 per cent year-on-year to 3.9 billion yuan ($568.3 million) in 2019 but its net loss fell from 1 billion yuan in 2018 to 1.1 billion yuan in 2019.

Chinese cloud companies gears up for US$ 3.8 billion last month, the Chinese video streaming platform iQiyi was accused by research company Wolfpack Research of fraud and inflating its financial figures.

iQiyi, a spinoff from Chinese internet giant Baidu, said it believes the study includes “numerous mistakes, unsubstantiated claims and misleading assumptions and interpretations.” Jay Clayton, Chairman of the Securities and Exchange Commission (SEC), cautioned last month that filings by emerging market companies, including those from China, bear “substantially greater risk” of being “incomplete or misleading.”

Kingsoft Cloud said net IPO proceeds could range between $392 million and around $451 million. Current shareholder Xiaomi and Carmignac Gestion have expressed interest in buying shares of up to $50 million each. Xiaomi’s founder and CEO Lei Jun is Kingsoft Group’s Chairman.

Kingsoft said it would use the money it raises to invest in infrastructure upgrades and growth, and to improve technology and product creation in areas such as artificial intelligence. Most of the proceeds will go toward spreading worldwide.

P.J. The IPO is being underwritten by Morgan, UBS, Credit Suisse and the Chinese investment banking company, China International Capital Corporation (CICC).