HONG KONG—One of China’s most popular “selfie” app makers is preparing to raise up to $ 1 billion through a listing on the Hong Kong exchange, in a test of whether that market can compete with New York and mainland China for a wave of expected Chinese startup offerings.
The app maker, Meitu Inc., filed an application with Hong Kong regulators on Friday for an initial public offering that could raise $ 500 million to $ 1 billion, and is expected in the fourth quarter, according to people familiar with the situation. A successful IPO could strengthen Hong Kong’s hand as it tries to persuade Chinese startups such as $ 46 billion phone-maker Xiaomi Corp. and $ 36 billion ride-hailing app Didi Chuxing Technology Co. to list in the former British colony.
The New York Stock Exchange and the Nasdaq Stock Market NDAQ 0.17 % have long been the preferred destinations for China’s internet giants to launch initial public offerings, for a variety of reasons including share-structure rules that let executives retain more control of the company and the familiarity of U.S. investors with tech business models. Chinese online shopping giant Alibaba Group Holding Ltd. BABA -0.14 % flirted with a Hong Kong listing before picking New York for its record-breaking $ 25 billion IPO in September 2014. Other marquee Chinese internet companies, including JD.com Inc. JD 2.01 % and online search leader Baidu Inc. BIDU 1.21 % also trade in the U.S.
Tech firms accounted for just 10% of the Hong Kong stock market’s total capitalization at the end of July, with the biggest being $ 244 billion online game-maker Tencent Holdings Ltd. TCEHY -1.02 % Others listed in Hong Kong include personal computer-maker Lenovo Group Ltd. LNVGY -5.13 % and software firm Kingsoft Corp. KSFTF 0.56 %
That relative lack of tech firms was attractive to Meitu, which thinks analysts and portfolio managers might value its shares more highly because of it, according to a person familiar with the situation. The company’s management team, which doesn’t include strong English speakers, also feels more comfortable interacting with Hong Kong investors, who can use its Chinese-language apps themselves, than U.S. investors, the person said.
Founded in 2008 by Chinese entrepreneur Cai Wensheng, the Xiamen-based company has a number of apps available in China and overseas that allow users to edit photos of themselves for posting on social-media sites. More than a billion mobile devices world-wide use Meitu’s products, according to its website.
Meitu was valued at about $ 3.8 billion following a private fundraising round this year led by Hong Kong asset-management firm Keywise Capital Management (HK) Ltd. and is seeking a valuation of roughly $ 5 billion from its IPO, the people said.
Meitu’s investors include Taiwanese electronics manufacturer Foxconn Technology Group, 2354 0.47 % U.S.-based hedge fund Tiger Global Management, as well as China-focused venture capital funds IDG Capital Partners and Qiming Venture Partners.
Many Chinese tech companies are incorporated overseas, part of an attempt to sidestep rules that forbid foreign investment in mainland internet firms, and their listings gravitate to markets such as Hong Kong and New York.
Hong Kong’s listing rules, unlike those of U.S. markets, don’t allow companies to have multiple classes of shares with different voting rights, and frown on structures that let executives control their companies despite relatively small holdings. That was one reason Alibaba chose to list in New York. The majority of the e-commerce giant’s board is nominated by a group of managers.
Some bankers also say that U.S. investors and analysts have a better understanding of tech business models that are focused on building scale without profitability. Chinese tech companies often follow approaches pioneered by Silicon Valley: Xiaomi has modeled itself after Apple Inc., AAPL 0.26 % while Didi is similar to Uber Technologies Inc., for example.
Hong Kong has also faced competition for tech listings from China’s domestic stock markets, particularly the Shenzhen market where companies like video-streaming company Baofeng Group Co., which trades at 150 times earnings, can fetch sky-high valuations.
Recently, China’s over-the-counter stock market in Beijing has attracted some startups such as UCAR Inc., a chauffeur car-hailing app ranked just behind Didi and UberChina in usage that saw its valuation soar to more than $ 6.8 billion a week after the listing.
The Hong Kong market has in the past served mainly as a gateway to connect big Chinese state-owned companies like oil giant Cnooc Ltd. CEO -0.66 % and Industrial & Commercial Bank of China Ltd. IDCBY 0.17 % to global investors. State-owned Postal Savings Bank of China Corp. is expected to launch an offering of at least $ 7 billion later this year that could be the world’s largest in 2016.
—Rick Carew contributed to this article.