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Why does Lei Jun insist on selling "Internet price"? Six-round financing from millet

via:博客园     time:2018/6/12 12:02:08     readed:339

Why Lei Jun insisted on selling "Internet prices"? To start with the six-round financing of Xiaomi

Du Qingqing

A good company, plus a good price, is a good deal. On the contrary, even a great company can make you lose money if the price of investment is too high. Therefore, pricing is very important.

The China Securities Regulatory Commission's official website announced on the 11th the “Xiao Mi Group Public Offering Depositary Receipt Prospectus” (hereinafter referred to as “CDR Prospectus”), and Xiaomi is expected to become the first strategic bid for “strategic distribution fund”.

The first financial executive learned that as the founder and actual controller of the Xiaomi Group, Lei Jun also appeared in the fund company on the 11th and began roadshows. In order to obtain a higher initial valuation, Xiaomi explained to the organization that it had already developed from a mobile phone hardware manufacturer to an Internet technology company and became a goal of Lei Jun personally “out of the mountain” road show.

How much money will the millet's CDR be worth? By strategically placing fund participation in CDR“ playing new ”, how much income can be obtained? At present, these two key issues are still inconclusive. However, at the other end, "advertising bills into the vegetable market", "" fourth-tier cities retired elderly were promoted double-digit capital preservation placement fund """ and other exaggerated cases have been frequent, institutional sales led "blind vote" "hot" .

Millet“lower limit” and"upper limit”

As the first single application after the opening of the CDR by the New Deal, Xiaomi's synchronization of Hong Kong IPOs and domestic issuance of CDRs has attracted the attention of all parties in the market. However, strategic allocation funds have already been sold when Xiaomi has not completed pricing.

According to regulatory requirements, the first batch of pilot companies must be overseas listed red chip companies with market capitalization of no less than 200 billion yuan, or innovative companies with operating revenue of at least 3 billion yuan in the latest year and valuation of no less than 20 billion yuan.

Xiaomi said that the company’s main revenue in 2017 was not less than RMB 3 billion, and during the reporting period, the second, third and fourth round of F round financing, the financing valuation was not less than RMB 20 billion, in line with the innovation pilot. Corporate regulations.

The First Financial reporter learned that Lei Jun has already started an institutional roadshow with executives. Xiaomi is a mobile phone hardware manufacturer, or a high-tech Internet company? The division into different industries means that the valuation of the targets is vastly different. This is an important issue Lei Jun is very concerned about.

In the prospectus, Xiaomi called himself "an Internet company with mobile phones, smart hardware, and an IOT platform at its core." Last year, the company's revenue was 114.6 billion yuan, of which the largest business smartphone revenue was 80.6 billion, IOT and consumer products was 23.4 billion, and internet service was 9.9 billion.

As the listing approached, the valuation of the company rose. Xiaomi’s loss due to changes in the fair value of the convertible redeemable preference shares increased. As of March 31, 2018, the company’s uncovered loss amounted to 135.2 billion yuan. However, after deducting the non-equity, the net profit attributable to shareholders of the parent company's common stock was -2.238 billion, which was 233 million, 3.945 billion, and 1.038 billion for 2017, 2016, and 2015, respectively.

Based on such profit scale, Xiaomi's valuation method is doomed to be different from the usual practice of A-share listing. However, in the Xiaomi prospectus, the company’s “gambling” arrangement with the preferred stockholders determines the lower limit of Xiaomi’s valuation.


As of now, Xiaomi Group has completed A, B, C, D, E, and F rounds of preferred stock financing. There is an agreement between Xiaomi and the shareholders of the preferred stock. If the company does not complete the qualified listing before Dec. 23, 2019, it will need to redeem.

From that date, the company's shareholders other than the F-Preference Shareholders, or the majority of the F-Preference Shareholders, have the right to request the company to buy back in two ways. The investment cost plus annual compound interest is 8%. Withdrawn but not yet paid dividends, or redemption point market fair value. The highest price will prevail.

The company’s charter also clearly stipulates “qualified listing” and is limited to HKEx, NYSE, NASDAQ, or A, B, C, D, E, F held by the company more than 50%. The preferred stockholders of the round or the converted common stockholders of class B common stock have agreed and require the company to reach a certain level of valuation when it is listed.

After the first six rounds of financing were completed, the company’s shareholders increased to 71 seats. Among them, Class A ordinary shares accounted for 31.9706%, Class B ordinary shareholders accounted for 17.8666%, and the remaining six rounds of preferred shares accounted for 50.1628%.

Therefore, if the company fails to achieve a qualified listing within a limited time, the company is faced with the redemption of preferred stocks, which may cause greater risks to the company's operations and finances.

From January 1, 2018 to the time of the listing of the company, the overall increase in the valuation of the company will result in a substantial increase in the fair value of the preferred shares, which will result in large fair value change losses in the current period. In April 2018, Xiaomi issued 69.395 million Class B shares of common stock to smart mobile holding limited controlled by Lei Jun. The equity incentives confirmed the payment of 9.83 billion yuan of shares. Based on the two major factors mentioned above, Xiaomi may expect the net profit of the financial statements for the year to be listed may still be negative.

Xiaomi did not announce in the "CDR Prospectus". In the agreement reached with the shareholders of preferred stocks, "pre-listing valuations reached a certain level", which is the specific amount. The industry has speculated that it is about 600 billion US dollars. Regardless of the specific amount, this also determines the lower limit of Xiaomi's valuation.

"Millet may grow into a good company, but it is not at this time worth 80 billion, 90 billion US dollars this price, it is difficult to say. "A senior fund investor told the First Financial reporter that Xiaomi's hardware and software are separated from each other. According to the ideal state, the hardware benchmarks Apple and the software benchmarks Tencent, and the final market value is difficult to reach the current part. Agency's valuation level.

In August 2010, Xiaomi A's round of financing was increased by US$0.1/share; in September 2011, Xiaomi’s C round of financing was US$2.0942/share; in June 2012, round of D financing was US$8.1882/share; and in December 2014, , F round of financing, additional issue price of $20.1682 per share.

Can that price be used as a reference?

"Ruledly, we should not be affected by the previous round of financing valuation. Past financing has nothing to do with how much price I now give him. If it is related to the financing of the past, it is very simple. I will find a few investors. I will make a round every six months, the valuation will double, and then come to the market. Then you will follow my financing in the last six months. Pricing? That is not enough. "In the eyes of the above-mentioned funds, investors will need to use equity investment funds to assess the level of pricing regardless of whether they invest in the primary market or the secondary market. Looking at the PE (P/E ratio) simply requires a change.

Placing Funds' “blind vote” & “ blindly ”

Xiaomi, as the first single to apply for the issuance of CDR, has also become the main evaluation target for investors participating in strategic placement funds.

However, it is worth noting that since the regulator will strictly control the number and pace of CDR issuance this year, it will still be uncertain which enterprises will be issued next. At what price these companies will be issued, it is uncertain.

In other words, when investing in a strategic placement fund, investors cannot know the future direction of the fund, nor do they know the future fund's participation in CDR prices.

In the draft of the "Measures for the issuance of underwriting and management of securities issued in May this year," it was stipulated that if CDRs are issued in China, they can be placed in stocks to strategic investors. Zheng Jisha, an analyst of China Merchants Securities, explained that strategic placement is similar to the “basestone investor” concept of “stone cornerstone” in the Hong Kong market, and strategic investors are not involved in the offline inquiry and sales restriction period in exchange for priority allocation rights. .

The six strategic placement funds were approved on June 6 and began selling to individual investors from June 11. According to the original design, the maximum size of each strategic placement fund was 50 billion, totaling 300 billion.

According to the requirements of the China Securities Regulatory Commission, the CDR issuer and its lead underwriter will design a distribution plan based on the company's individual situation and establish an incentive and restraint mechanism for the participation of institutional investors in the inquiry to promote the active participation and prudent pricing of professional institutional investors.

However, as funds, brokerages and banks start selling aggressively, they are accompanied by "national strategies", "policy dividends", coupled with "unprecedented", "limited time limit" and other attractive appeals. Propaganda, investors are enthusiastically participating in "Doubt and doubt".

According to the agency's general forecast, there will be two categories of related pilot targets in the future. One is red-chip companies that have been listed overseas and meet the market demand of 200 billion yuan, including Baidu, Tencent, Ali, NetEase and Jingdong; Companies listed overseas and meeting the market revenue of RMB 20 billion with a market value of RMB 3 billion, including Huawei, Didi, Alibaba Cloud, US Mission, today’s headlines, rookie network, DJI, reputation, hungry, Weima, Weilai, Beiqi New Energy and so on.

"The strategic placement fund is an innovation that gives retail investors the opportunity to participate in sharing the growth and benefits of technologically-innovated companies." However, similar cases have not been seen in the areas of ADR and HDR. "The aforementioned fund personage told reporters that the investment problem should use the investment method to find out the answer, and ultimately a price issue.

There are three kinds of analysis in the industry for how CDRs are priced. One view is that the supervisor will conduct a window guidance and guide the company to issue a reference 23 times P/E to issue CDR. The reason is that the A-share market has a new culture of speculation. After the initial public offering, it will continuously stir up. If investors can participate in the secondary market, if the price-earnings ratio is not limited, the CDR premium will be significantly higher than the positive stock. The other view is that CDR is essentially a depository receipt for basic securities listed in different places. It only needs to convert according to the stock price.


There is also another view that the CDR is issued in China after being discounted slightly based on the price of the underlying stock. The reason is that companies such as BAT have been listed on the U.S. market for many years. Market pricing has been tested over a long period of time and is a relatively reasonable level of valuation. On this basis, it is more reasonable to hit a little discount issue.

Zheng Jisha also believes that the price of the CDRs that have been subject to international pricing will be basically the same as the existing overseas prices or will be slightly discounted.

However, in the view of the aforementioned fund person, even if it is issued at a discount, it is difficult for the domestic investors to assess the risk. "I think that once the CDRs are listed on the A-shares, they will definitely rise one thing, or even have a higher premium than the US stocks. However, if you ask me if I want to buy a placing fund, I can only say that I will consider it. "The aforementioned fund personage said that for different targets, the price level is high and the risk difference is very big. For instance, Alibaba is 10% discounted and may be willing to buy a lot of people, but if it is Baidu, that may be another problem." The key is how the placement fund will invest in each CDR, which investors cannot confirm at the moment.

In his opinion, US stocks may currently be standing at the tail of the 9-year-old cattle, and the strategic placement fund will be closed for three years. Even if the current discount price is issued, whether or not the stock price will fall sharply after three years is currently unclear.

"Of course, funds and enterprises will conduct games during the inquiry stage and will also take into account the possibility of future declines, but prices are still hard to reflect risks." "The person said that the technical difficulty of pricing out, there are more important factors." The shareholders of US stocks will be able to carry out checks and balances on the dilution of the interests that may be brought about by the issuance of CDR. This is not controlled by regulatory intervention.

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