2003: Starting with Foreign Trade

Chapter 942 "President Tan has made another move?"

Shanghai was bustling with people during the May Day holiday, displaying the prosperity expected of a Golden Week.

With over 2.5 million daily active users, Douyin has greatly boosted tourism in various regions. That said, while Douyin's promotions inevitably involve handsome men and beautiful women, its entry point is still more upscale compared to traditional internet companies.

Tencent's QQ, as well as the promotion of other social apps, have moved away from vulgar marketing. This also includes other apps under ByteDance. However, Douyin seems to have broken away from this model from the very beginning of its promotion.

Everyone loves handsome men and beautiful women, and it's understandable that small businesses might resort to such vulgar marketing tactics to survive. However, it's somewhat beneath large corporations to do this.

Especially WeChat, which was already heavily promoted by Tencent at the time.

Douyin's early promotion was quite refreshing and played a significant role in promoting local culture and boosting local tourism, which made it seem much more sophisticated.

"The night view is beautiful, but we don't have time to see it, let's go."

The Bund was beautiful, but they didn't have time to stop and appreciate it. Liu Fangyi didn't reject Tan Jincheng's offer, but said he needed to go back and think about it, which was a good sign.

The acquisition initiated by Inco Medical was planned from the beginning of the year. It seems a bit rushed, but the timing was just right. Two years ago, when Inco Medical went public on the A-share market, it was full of vigor and it would have been impossible to complete the acquisition.

Even earlier, before it went public, Inco wasn't short of money. When a company is not short of money, that's the most difficult time to make an acquisition; otherwise, it's a forced acquisition.

But things are different now. Although Inco Medical, which has been listed for two years, has experienced slow growth in performance and poor stock performance, it is quite healthy in terms of both debt and operating cash flow. As of the first quarter, Inco had more than 6000 million yuan in cash reserves, including cash and valuables.

This is quite remarkable for a company with an annual profit of only around 200 million yuan, which shows that Liu Fangyi's leadership has been very steady.

However, even the most stable companies need to develop, and this year is a year of development for Inco. At the beginning of the year, Liu Fangyi formulated an expansion plan to increase the company's total glove production capacity to 190 billion pieces.

Several glove projects have been launched in Anhui and Jiangxi provinces, and the Huaibei production base is scheduled to officially start production this year.

What expansion requires is money, and right now both Yingke itself and Liu Fangyi are in dire need of funds. Before Tan Jincheng contacted him, he had already raised funds by pledging shares to securities firms multiple times.

Unfortunately, apart from this method and loans, Liu Fangyi seems to have no other good way to raise funds. And equity pledging can't be done in large quantities; if the stock price doesn't perform well, it's easy to get liquidated.

Tan Jincheng's appearance gave him and Ying Ke more options.

The timing was also excellent, as it was three months before Yingke planned to issue convertible bonds to raise funds. At this time, Liu Fangyi was still hesitant about whether to issue convertible bonds because he didn't know if the market would accept it.

According to the planned expansion, Inco currently has a funding gap of about 5 million yuan. This amount is nothing to the wealthy Tan Jincheng, but it has stumped Liu Fangyi.

He has been working hard to cover this funding gap recently. He was naturally happy that Tan Jincheng approached him, but he was still very hesitant to hand over his position as the company's largest shareholder.

He has considered reducing his shareholding, but so far he has no such plans.

"Let's issue new shares. Issuing new shares is the best way. By issuing new shares and convertible bonds, and then subscribing to the convertible bonds, we can become the second largest shareholder in the early stages, and then become the largest shareholder after a certain period of time."

According to the general rules of company law, Liu Fangyi is allowed to transfer his shares. However, according to the usual post-listing agreement, founders generally do not transfer company shares within 36 months of listing.

The most feasible approach is to persuade Liu Fangyi to transfer his shares, grant him certain decision-making power over the company's future development or other forms of compensation, and promise to maintain the company's operational stability.

However, this approach requires approval from the China Securities Regulatory Commission (CSRC). There are too many restrictions on becoming the largest shareholder directly in one go, especially since Inco has been listed for less than 36 months and is likely to cause considerable controversy.

In addition, Tan Jincheng emphasized to Liu Fangyi that this investment was made in his personal name, meaning it was a personal investment and had little to do with ByteDance's advertising platform.

Tan Jincheng's reasoning was that investing in the healthcare industry was not ByteDance's main investment focus, but rather a supplementary project. Considering the company's interests, it was more appropriate for him to personally fund the majority of the acquisition.

However, in Liu Fangyi's view, there is not much difference between Tan Jincheng's investment and the huge amount of investment; it's still up to him to decide.

Since the other party didn't mind him spending more money, he naturally didn't care either. However, Liu Fangyi always felt that Tan Jincheng's involvement in this acquisition through personal investment was for some other purpose, but he couldn't figure out what that purpose was.

“There were indeed other intentions. My pursuit of acquiring Intco Medical would not affect the company’s sustainable development, but medical care is not our main business. The reasons I gave him were actually true.”

However, the conversation was definitely not over. Speaking in his personal capacity would make things easier in the future, and at the same time, his money would have been spent.

Tan Jincheng has always been known for his wealth, especially his immense wealth. This wealth is not only reflected in his personal fortune, but also in his abundant cash flow, which is the biggest indicator of his investment success.

This time, Weilai's comprehensive reforms in supply chain, logistics, human resources, production, and so on require a lot of capital and increase the company's operating costs. Shareholders, large and small, have their objections.

Although Tan Jincheng has the right to veto, such a change would still be fraught with difficulties if he weren't so wealthy and powerful, and if the shareholders didn't recognize his capabilities.

For example, when Ms. Dong wanted to acquire Yinlong, she was rejected by all the shareholders of Gree, big and small, forcing her to use her own funds to make the acquisition. Ms. Dong is also the one who has the final say in Gree, but there are some things she can't do as she pleases.

Tan Jincheng's strong personal abilities are the foundation of his success, but there is also a controversy surrounding him: he doesn't really spend much money.

With Tan Jincheng's current wealth, buying a car, a house, or other personal expenses can no longer be considered real spending for him. Even if he bought a building, most people would probably consider it "small change".

Money, once earned, must be spent, and investing is the best way to do that.

Spending hundreds of millions or even billions to acquire a company is the best way to demonstrate his spending power.

"You should follow up and communicate with the existing shareholders, big and small, to see who is willing to transfer their shares. We can discuss the price."

If you go through a share issuance, the cost will actually be less. Generally, listed companies issue new shares at 90% of the average number of shares over 20 trading days, and it is rare for them to issue shares at a premium.

Currently, approximately 50% of Inco Medical's shares are circulating in the secondary market, mainly held by funds and retail investors. Among them, early major investors such as Shenzhen Capital Group and Yunqi Capital hold a relatively high percentage of shares.

If he can secure these fund investors, he can obtain at least 5% to 10% of the shares, thus triggering the first takeover bid.

In reality, the acquisition of a listed company is relatively easy as long as the acquiring party and the acquired party reach a tacit understanding. After all, all transactions of a listed company are transparent, with one party willing to buy and the other willing to sell.

The A-share market imposes various restrictions on the reduction of holdings by original shareholders and directors, supervisors and senior executives of listed companies. This is not so much to prevent them from selling, but rather to prevent them from selling the company directly after it goes public.

Most companies that go public are actually aiming to sell the company.

During the May Day holiday, although Tan Jincheng did not meet with Liu Fangyi again, he maintained telephone communication with him to discuss the feasibility of the acquisition. After Tan Jincheng agreed to the acquisition, he could still retain most of the shares and management rights, and analyzed the benefits brought by the capital injection.

Liu Fangyi's attitude gradually softened.

Tan Jincheng was the largest shareholder of the former Yangtze Motors, and now Meizu mobile phones and Horizon Robotics. However, in actual operation, they follow the management style of professional managers.

Tan Jincheng doesn't interfere with the actual operation of the company, but he also gives managers a certain amount of equity and say, allowing them more autonomy in the business process. This can be seen as a cooperative model, which has enabled these companies to develop very smoothly.

In the medical device industry, if Tan Jincheng's funds are used well, whether he is the largest shareholder or the second largest shareholder, it will be a good thing for Inco.

Inco really needs this money right now.

However, the most important thing right now is to convince regulatory agencies, including the China Securities Regulatory Commission, that whether it is a direct transfer, a share issuance, or other methods, approval from the regulatory authorities is required.

"After the National Day holiday, your company may hold a board meeting or an extraordinary general meeting of shareholders. However, before that, I will acquire a portion of your company's shares on the secondary market. I hope Mr. Liu can understand this."

"I understand, I completely understand. Yingke welcomes Mr. Tan's investment."

After several days of conversation, Liu Fangyi also found that although the young tycoon spoke directly, he did not show an aggressive attitude, which reduced his psychological pressure a lot. After all, if the other party wanted to forcibly acquire Yingke, even if he had more than 40% of the shares, there were still many ways to do so.

May 6, 2019, the first trading day after the May Day holiday.

After rebounding to a high of 3288 points in early April, the A-share market underwent a nearly month-long correction, and on the first trading day of May, it delivered a wake-up call to investors, with all three major indices plummeting.

The reason, simply put, is that the old man across the Pacific is stirring up trouble again. During the May Day holiday, the old man, who works on Twitter, announced that tariffs on $200 billion worth of Chinese goods would be raised from 10% to 25% starting May 10th. The old man's unpredictability also made Li Shufu, who had previously had a close relationship with Tan Jincheng, admire the young man's keen insight. This explained Wei Lai's seemingly perplexing actions in April.

"We also plan to learn from you and establish two mechanisms to cope with future market changes."

"That's a good thing. On the other hand, if there's a need, our two companies can cooperate to deal with it. We are competitors in China, but in the international environment, we are completely partners, including other companies."

"No problem, your suggestion is excellent. How about we organize a meeting for companies in the industry that have gone global to discuss this? The environment is complex right now, and we should try to reach some understandings."

"Sure, let's pick a time when everyone is free to talk about this together."

Geely's batteries are produced in cooperation with WTI. Currently, most competitors in the new energy field are unwilling to cooperate, but cooperating with WTI is still their first choice. If they don't cooperate with Jinsheng New Energy, they will choose to cooperate with CATL.

In the minds of traditional enterprises, they are actually more afraid of BYD than of Wei.

However, this change is not static. After the Shanghai Auto Show in mid-April, the Chrysanthemum Factory officially stepped into the limelight. Previously, the Chrysanthemum Factory had been secretive about its car manufacturing business, and it has reached cooperation agreements with several state-owned enterprises.

This has taken away a lot of business from Weilai. For example, Dongfeng used to cooperate a lot with Weilai, but now they are cooperating with Chrysanthemum Factory. Chrysanthemum Factory's first self-driving car was built at Dongfeng's booth.

Currently, the automakers that have reached cooperation agreements with Chrysanthemum Factory include BAIC, Dongfeng, Sokon, Dongfeng Motor, as well as JAC and King Long Bus, which are rumored to have cooperation intentions. All of these companies have state-owned backgrounds.

This has created a new pattern, which is very interesting.

Originally, Weilai had a good relationship with state-owned companies such as BAIC, Dongfeng, and JAC, and the parties had been colluding and hyping up cooperation in the field of intelligent driving.

However, after the sanctions against Huawei last year, the hype shifted to Huawei. Although it still maintains some cooperation with these state-owned car companies, at least in the area of ​​intelligent driving, it has basically lost its cooperation.

Even Jianghuai, a company also under the Anhui provincial government, seems to prefer cooperating with Chrysanthemum.

"There's nothing we can do. Luzhou is full of Weilai and Aion cars now, so it's understandable that JAC is unwilling to cooperate with us."

Tan Jincheng could actually understand this change. Putting aside Chrysanthemum's technological strength and background, in terms of threat alone, Weilai, which was right under his nose, was obviously much more threatening than Chrysanthemum, which currently did not have a single mass-produced car.

Before the new energy vehicle industry in Weilai fully matures, the two sides can still share the market equally in Luzhou and Anhui Province by virtue of their respective relationships. In fact, JAC can even gain a slight advantage because it produces models that are cheaper than the Aion series.

However, the current new energy vehicle market has entered a market-oriented stage. Consumers don't care about personal connections or relationships. Compared to Weilai, JAC's new energy vehicles have no advantage in the context of marketization.

State-owned automakers primarily choose to cooperate with Huawei, while emerging electric vehicle companies, due to the background of multiple shareholders and Tan Jincheng's internet business, tend to follow Huawei's lead.

For traditional independent brands, the situation is much more complicated.

Geely, BYD, Chery, Great Wall, Weilai, and the long-overlooked Changan—these six companies have a basis for cooperation. However, regardless of which company it is or what the cooperation method is, they all seem to be somewhat wary of other manufacturers.

Each has its own advantages, and none of them are willing to concede to the others. As for other mid-to-lower-tier domestic brands, they basically have no chance of getting on the table anymore.

Haven't you seen that Xiaokang Motors has basically sided with Taiwan? It's difficult for them to support their future development on their own, so clinging to a powerful backer is their only option right now.

Traditional state-owned enterprises plus domestic automakers, emerging forces plus new players, and independent traditional brands operating independently—these three forces constitute the main camp of capital in the domestic auto industry. Joint venture brands such as Volkswagen, Mercedes-Benz, and BMW are also choosing their partners from these three sectors.

BMW has become the largest joint venture brand partner in Weilai. Mitsubishi Motors, which was once a major player, is now declining. Its stingy approach to importing new models has led to a gradual loss of market share in China as the environment changes.

Consumers used to have no choice, but things are different now.

"In terms of competing with state-owned car companies, I don't seem to have the advantage right now, but it's not like I don't have a chance."

At least for now, SAIC is still cooperating with WILTER. Since the financing of Horizon Robotics, SAIC has chosen to work closely with WILTER, and so far there has been no sign of it turning to CSTO. Tan Jincheng is quite pleased about this.

In fact, besides the underlying factors, a major reason why these established automakers are cooperating with Huawei is that Huawei is currently enjoying immense popularity, and even traditional automakers are happy to ride on that popularity.

The current market environment is such that once a cooperative relationship is announced with Chrysanthemum Factory, it can attract huge traffic and praise. Even if Tan Jincheng is famous enough, it can't compare to this kind of traffic.

Tan Jincheng's popularity has been gradually accumulated over time, and people have become accustomed to his amazing performance. However, the short-term explosive popularity of the Chrysanthemum Factory is based on an emotional outburst, which no one can compare to.

"Let's maintain our cooperation with emerging forces; we won't try to take over those with state-owned backgrounds."

Tan Jincheng felt somewhat helpless as his market share was significantly eroded. However, this was due to the market environment. With the new energy vehicle market gradually maturing, even without Huawei, other manufacturers would have entered the market.

Especially in the area of ​​intelligent driving, it's incredibly easy for large companies with an internet background to get involved.

When it comes to promoting technology, this is a strength of internet and mobile phone companies. They can hype up anything they want, leaving consumers confused.

Besides the three major camps in the domestic automobile industry and the wait-and-see attitude of joint venture brands, there is another major player: Tesla.

Tan Jincheng has been closely monitoring the construction progress of Tesla's Shanghai Gigafactory. The nickname "infrastructure powerhouse" is well-deserved. Aerial videos show that by the end of April, the main roof structure of the Tesla factory was basically completed.

The east wall is now fully completed, the west wall is nearing completion, and while some construction work remains on the two taller buildings at the north and south ends, their main structures are essentially finished.

This means that the overall framework of the factory is nearing completion, bringing it one step closer to the goal of starting trial production. According to Tesla's public announcement, the Shanghai Gigafactory will begin trial production in September.

This also means that the Shanghai factory's plan to mass-produce this year can be achieved. Recently, it has been reported that the domestically produced Maodou 3 will soon be available for pre-order. The specific time is unknown, but Tan Jincheng is very much looking forward to the pricing of the domestically produced Maodou 3.

The emergence of the ET5, the starting price of the domestic version at 21.98 yuan, and its performance in the European market have put considerable pressure on Tesla. In the first four months of this year, Tesla's stock price has fallen by more than 28%.

Bilateral trade frictions have an impact, but given the major positive news that the Shanghai Gigafactory will be able to start mass production this year, the stock price has performed so poorly. Changes in market share in Europe are also one of Wall Street's concerns about Tesla.

According to research reports from Wall Street institutions, this bilateral friction is, to some extent, a form of protection for Tesla.

Against the backdrop of trade frictions, the young boss of Weilai was unwilling to invest in building a factory in North America, nor was he willing to import his high-quality products into the North American market. This provided Tesla with an opportunity to ease tensions.

To date, North America remains Tesla's most important market, and there are virtually no new energy vehicle companies in North America that can compete with Tesla.

"Wow, it's dropped quite a bit today. How much did you buy?"

Tan Jincheng grinned. Although it was a bit unethical, the old man's eccentric behavior actually made his acquisition plan more convenient. Inco Medical almost hit its daily limit down today.

"The market's trading volume is limited, so we mainly focus on large-scale transactions."

"Okay, take your time buying them, no rush."

Inco Medical's total share capital is 1.96 million shares. Without considering additional share issuance, Tan Jincheng would need to purchase approximately 6000 million shares to acquire more than 30% of the shares.

Based on the current stock price, these 6000 million shares would be worth approximately 10 billion yuan, even with a discount.

In the first week of trading in May, Inco Medical's A-share market fell by 7.25%, closing at 17.58 yuan, with a market value of 34.45 billion yuan. Compared with the high point in April, its market value evaporated by 15.8%.

This unremarkable company saw a series of large transactions in the block trading market this week. Over five trading days, a total of 2000 million shares were traded through the block trading platform, accounting for 10.2% of its total share capital.

The selling seats were different, but the buying seats were all the Beicang Hengshan Road branch of Zhongtai Securities, which had been renamed.

We're just waiting for the announcement this weekend!

"Holy crap, this looks like a reserved seat on ByteDance's advertising platform. Has Boss Tan made another move?"

With 2000 million shares traded, totaling over 3.2 million yuan, it's hard not to associate this with Tan Jincheng. It's been a long time since we've seen such a large-scale transaction from Mr. Tan in the secondary market.

(End of this chapter)