Riding the IPO wave, 5173 plans to raise $100 million in a Hong Kong IPO. Will it get what it wishes?

On the morning of September 13, China's largest online virtual goods trading platform, 5173.com, with its customer service center located in Jinhua, Zhejiang, finally approached the threshold of listing on the Hong Kong Stock Exchange. According to a report by IFR, a subsidiary of Thomson Reuters, 5173 has already submitted its application for listing to the Hong Kong Stock Exchange. It is expected that the company will undergo its IPO hearing as early as this month and be listed in the fourth quarter, raising approximately $150 million to $200 million. However, to my knowledge, 5173 itself has not released any official news about going public, and these reports are merely hearsay. Whether it can truly list remains uncertain.

It was reported that a virtual goods online trading company called Feike Online (a pseudonym) had once planned to go public in Hong Kong. However, the first question posed by Hong Kong brokers to Feike Online was: "What exactly are the legal rights associated with these virtual items being traded? Are they property rights, creditor's rights, or intellectual property rights? To whom do these rights belong?"

Clearly, due to the lack of relevant domestic laws, Feike Online could not answer this question. Consequently, Feike Online began seeking to list in the United States. Similarly, in the U.S., the institutions' first question to Feike Online was almost identical to the one mentioned earlier—how to clearly define the rights and ownership of these virtual items.

Simply put, the issue lies in how to establish clear legal rights for these virtual items. If such rights cannot be established, how should subsequent legal disputes be handled, and what risks might this bring to the company? Due to its inability to answer such questions, Feike Online had no choice but to retreat and seek alternative paths for listing.

For 5173, it faces the same problem—it cannot answer this question either. The talk of going public has been ongoing for five years. Abandoning plans to list in the U.S. may have been an attempt to avoid certain legal risks, as Western systems are far more developed than those domestically.

Publicly available data shows that 5173 engages in various services related to game item transactions, including game currency trading, account trading, prepaid card trading, and equipment trading. On average, over 160,000 transactions occur daily, with more than 15 million active registered users. Last year, the total transaction amount reached 7 billion RMB. Despite the popularity of virtual transactions, disputes continue to arise.

A friend of mine obtained a mythical beast (a pet in the game) while playing a certain game. Wanting to convert it into RMB, he used 5173 for the transaction. However, during the transaction process, the buyer used a name identical to that of the intermediary (referring to 5173), and ultimately, the mythical beast was scammed away. Throughout the entire process, 5173 assumed no responsibility for any errors. In other words, if the transaction succeeded, 5173 would receive its transaction fee; if it failed, the player would bear the loss. Therefore, many trading websites often have strange disclaimers.

"Considering the special nature of the Internet and online transactions, this site cannot identify or judge the source, ownership, authenticity, performance, specifications, quality, quantity, etc., of the virtual goods being traded or already traded. Thus, all parties involved in the transaction should carefully examine and prudently consider and evaluate the various risks that may arise from the transaction."

"Any disputes arising from virtual item transactions between users or between users and game developers/operators," "Any behavior by anyone using this site or due to the use of this site that infringes upon others' legitimate rights and interests," our site assumes no responsibility whatsoever.

In China, the Ministry of Culture officially implemented the "Interim Measures for the Administration of Online Games" in August 2010, but it still does not involve virtual items. Due to the lack of legal constraints, virtual trading platforms do not assume responsibility. However, if a company wishes to go public, this becomes another matter entirely, as subsequent disputes could become a major concern for the company.

Compared to the relatively relaxed market domestically, South Korea imposes stricter regulations. For example, unauthorized game currency trading websites are subject to legal penalties. The Korean Ministry of Culture, Sports, and Tourism has also enacted laws prohibiting minors from trading accounts or participating in power-leveling services. Therefore, if 5173 wishes to go public, the legislative gap in virtual transactions needs to be filled urgently so that there is a legal basis to follow. Otherwise, any minor incidents could leave 5173 in a state of constant unease. Of course, under China's unique system, things might be different.