Social media platform Xiaohongshu, known as “Little Red Book,” is preparing for an initial public offering (IPO) in Hong Kong as its profitability surges, according to sources familiar with the matter. The Shanghai-based platform, widely popular among young Chinese women for its lifestyle and user-generated content, has selected underwriters, including China International Capital Corporation, for its planned listing.
The company, valued at $17 billion after a recent investment by DST Global, expects its profits to more than double this year, exceeding $1 billion. This growth is largely attributed to advertising revenue, while its e-commerce segment continues to face profitability challenges despite rising sales.
With over 300 million monthly active users and backing from prominent investors like Tencent, Temasek, and GSR Ventures, Xiaohongshu has positioned itself as a major player in China’s tech landscape. The platform offers users a wide array of lifestyle content, ranging from travel tips and fashion advice to job opportunities and product reviews. Its format—featuring live streams, short videos, and an easy-to-navigate interface—has made it a go-to search engine for lifestyle topics, akin to TikTok’s role in the West.
Xiaohongshu’s financial success has been driven by robust user engagement. The platform’s daily search volume reached 600 million this quarter, doubling from the previous year and surpassing half of Baidu’s search traffic. The company posted $500 million in net profit last year on $3.7 billion in revenue. In the first quarter of 2024, it achieved $1 billion in sales and $200 million in profit.
The platform has recently made organizational adjustments to boost efficiency. In August, co-founders Mao Wenchao and Qu Fang, both Stanford alumni, warned against “big company disease,” citing inefficiencies caused by complex structures. To address this, the company simplified its job grading system and consolidated algorithm teams under a newly created “applied algorithms department.”
While no specific timeline for the IPO has been announced, Xiaohongshu’s plans come as Hong Kong’s IPO market rebounds. Fundraising in the financial hub reached $11.5 billion by November 30, up 80% year-on-year, fueled by renewed investor optimism and Beijing’s commitment to supporting stock and property markets.
With its strong revenue growth and strategic organizational adjustments, Xiaohongshu appears well-positioned to capitalize on favorable market conditions for its anticipated IPO.
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