2003: Starting with Foreign Trade

Chapter 953 Filling the Gaps in Wei Lai's Skills

What can you do in 259 days?
Tesla's Shanghai Gigafactory, hailed as a miracle of architectural history, could not be completed in 259 days.

A company's regular IPO process may not even be complete, or even a private placement financing process may not be finished. In less than nine months, some boys may not even have won over their "slow-burning" girlfriends.

But it was during these 259 days that the Science and Technology Innovation Board went from nothing to its formal establishment and began to sell like hotcakes.

Bafang Electric's IPO is scheduled for November, and even though it's a component company indirectly controlled by Tan Jincheng, it won't cause much of a stir in the capital market. In contrast, the A-share capital market in July was incredibly lively.

The Science and Technology Innovation Board (STAR ​​Market) was officially established in less than a year. A large number of public and private funds participated in the IPOs and listing plans of the first batch of 25 STAR Market companies through fund issuance and offline subscription.

Adopting a registration-based system, with information disclosure as the core and de-emphasizing mechanisms such as profitability, the listed companies are mainly concentrated in the technology sector. The establishment of the Science and Technology Innovation Board has been called the domestic version of Nasdaq.

The semiconductor industry's predicament and the launch of the Science and Technology Innovation Board have been portrayed by the media as a powerful tool to counter the other side of the Pacific in the chip and semiconductor fields. But is this really the case?

"You guys, keep your movements down, don't make it look too messy."

"Don't worry, boss, we'll be careful about the impact."

July 22nd was the official opening day of the Science and Technology Innovation Board. In his previous life, he hadn't been trading stocks in 2019, but the performance of the Science and Technology Innovation Board on that day was still very clear. The institutions were behaving in a very ugly way.

ByteDance is a professional investment company. Its investment in the secondary market has become a large-scale fund institution, ranking among the top in the world. Unlike public funds and private funds that prey on retail investors, ByteDance has not launched any new funds targeting the Science and Technology Innovation Board.

However, there are still some offline IPO participants. For the first batch of 25 companies, whether strategic or non-strategic, ByteDance's advertising platform holds a certain number of shares. ByteDance's advertising platform plans to sell some non-strategic stocks after they are listed.

The 50 yuan threshold means that retail investors in the secondary market can only watch the excitement. However, if retail investors want to make money from the Science and Technology Innovation Board, there are ways to participate indirectly, such as through public fund subscriptions and ETFs.

Subscriptions to STAR Market funds have been extremely popular. Driven by investment enthusiasm, almost all of the first batch of publicly offered STAR Market funds have been oversubscribed, which has given major fund companies a lot of room for maneuver.

Investment funds with a three-year lock-up period are commonplace. Goodness, each bull market in A-shares lasts at most a year and a half, and at most two years. What are these funds thinking with a three-year lock-up period?

Referring to the performance of the ChiNext board on its opening day, the performance of the STAR Market this time will only be more exaggerated. According to publicly available data, among the more than 20 listed companies, the investment from private equity funds alone reached as high as 123 billion yuan.

This doesn't even include public funds and state-owned funds actively participating in IPOs. ByteDance's investment in this round of offline and online IPOs is close to 10 billion yuan. Today is destined to be a crazy day.

"If you're going to sell, be careful about the timing. It's a game of institutional investors, so we won't hold back. But we also can't get caught by the regulators. After all, it's the first day of trading, and we can't cause a ruckus, right?"

"You all heard that, right? The boss is right. We can make money, but we can't break the rules."

Cheng Linfeng, who rushed over, overheard the boss reprimanding the traders.

Both inside and outside the market, all eyes are on the STAR Market today. The STAR Market, which is extremely popular, has not disappointed. Like the heat of summer, the 25 stocks that opened at 9:30 am saw an average increase of 153%!

"Anji Technology's stock price surged 287.85% at the opening. Wow, that's really aggressive. Those who subscribed to the IPO really made a fortune."

Anji Technology, with an issue price of 39.19 yuan, opened at 152 yuan. Based on 500 shares, selling at this price would have yielded a profit of over 5.6 yuan for a single winning bid, which greatly stimulated all stock investors.

"That's ruthless, haha. Everyone get ready to sell in an orderly manner. Don't touch those marked stocks."

Now that the boss has arrived, Cheng Linfeng has taken over the command of the trading room, as Tan Jincheng rarely appears there.

Anji Technology, which saw a surge in its share price at the opening, is undoubtedly the brightest star of the day. This technology company, which is engaged in the research and development of semiconductor materials, actually raised only 4.75 million yuan, and its IPO market value was only 20.81 billion yuan.

The hot topic and extremely low market value gave it a lot of room for speculation. Its market value soared to 80 billion yuan in just one opening day. During the morning session, it even surged to 243.20 yuan, an increase of more than 520%, and its market value approached 130 billion yuan.

On the first day of the registration system, many rules were unclear to retail investors. This scenario of no price limits on the first day of listing will become commonplace a few years later, but it is a spectacle for most stock investors today.

Most of the stock market investors who are still in the market today are actually from the 2015 bull market. Since entering the A-share market, they have faced the 10% limit on price increases.

Frequent trading halts have become the norm on the STAR Market today. 23 stocks triggered the temporary suspension mechanism due to intraday fluctuations. For example, Hangke Technology was suspended just one minute after the market opened, and the interval between two suspensions of the star stock Anji Technology was less than 10 minutes.

"The market will eventually sift through the sands of time. There will definitely be some good stocks among the first batch of these stocks, but the most of them will probably only have their moment of glory today. Their behavior is really too ugly."

AMEC's ​​price-to-earnings ratio once soared to 678 times, and ZG CRSC's market value exceeded 1600 billion yuan. It was simply insane. Tan Jincheng is not familiar with other companies, but ZG CRSC's peak is definitely today.

This company, which is engaged in railway traffic control system-related businesses, is an excellent company in terms of both its corporate structure and profitability. Its revenue is very stable, basically remaining at around 400 billion yuan.

Without any hot themes like semiconductors, chips, or lithium batteries, the price was artificially inflated solely by its low issue price of 5.85 yuan, which perfectly aligns with the typical A-share market's tendency to speculate on low-priced stocks.

"That's right, they all want to finish it all in one day. Some stocks may be facing a liquidity crisis soon."

Even Cheng Linfeng, who had been accustomed to this for a long time and understood the character of his peers very well, couldn't help but sigh that the A-share market hadn't been this crazy in a long time.

"I won't be looking at it this afternoon. Like I said, be careful when you're selling off, don't let small gains lead to big losses."

The frenzy this morning is practically an open secret. There's no doubt that regulatory agencies will release relevant measures to strengthen oversight, and may even restrict some non-compliant private equity products from participating in IPOs.

If you are penalized by the Securities Association of China and subsequently barred from participating in IPOs, that would be a huge loss. However, with the subsequent changes to the registration system for the Science and Technology Innovation Board and the ChiNext Board, there is still room to make money in the process of new share allocation.

Most importantly, the IPO process presents a great opportunity for ByteDance's advertising platform to participate in industry investments. Some companies cannot find investment institutions in the primary market, but ByteDance's advertising platform can get involved during the IPO process.

Take Anji Technology as an example. Its valuation at the time of its IPO was only 20 billion yuan. Before that, it was not much higher. ByteDance had little opportunity to get involved in the investment. Only by going with the National Integrated Circuit Industry Investment Fund during the IPO process could it get more shares allocated.

Through the IPO, the fund under ByteDance's advertising platform holds 2.03% of Anji Technology's shares, ranking as the sixth largest shareholder after the controlling shareholder, the National Integrated Circuit Industry Investment Fund, and other institutions such as the National Social Security Fund.

ByteDance does not intend to sell this portion of its shares.

Shares held through IPOs like ZG Tonghao are not closely related to Weilai's industries and are intended to be sold during the listing process to recoup funds.

"Okay, we've made a fortune today. You can arrange some perks for everyone later. I'm leaving now that I've finished eating."

Even if some of it cannot be sold, today is still a very profitable day for ByteDance. At least it should be able to recover its costs. This speed of making money is rare even in the US stock market.

"Haha, that's quite a profit, and we should definitely celebrate; but boss, wait a minute. I've finished the data you asked me to collect last time, and I'll go get it for you now."

Tan Jincheng, who had just stood up, exclaimed upon hearing this, "So fast?"

"Hey, isn't this what you wanted?"

"There's no rush. You finish your meal first, I'll wait for you."

"We'll eat the same thing in the office."

The primary market is not as easy to navigate as the secondary market now. Since becoming the second largest shareholder of Inco Medical, Mr. Tan has started targeting some domestic technology companies in the A-share market that are engaged in automotive-grade chips, looking for investment and acquisition opportunities in these companies.

Cheng Linfeng is considered one of Tan Jincheng's confidants. Compared to Yingke Medical, he understands better what a semiconductor company means to Weilai Motors. Weilai Motors, which has always wanted to pursue a full-stack self-developed route and catch up with BYD, is currently missing the semiconductor link.

Once this weakness is addressed, Weilai will have no fear of competing with BYD, Tesla, or even Huawei. In terms of chip and communication technologies, Weilai certainly cannot compete with Huawei, which has decades of experience.

However, Weilai is not without its own advantages, namely, its car manufacturing capabilities are definitely much stronger than those of Xiaokang Motors.

Currently, some of the more well-known domestic companies producing automotive-grade chips include ChipON, BYD Semiconductor, SemiDrive Technology, and GigaDevice, as well as subsidiaries of NavInfo such as Jiefa Technology. Aside from ChipON, which presents investment opportunities, GigaDevice is a listed company and a partner of Weilai, while SemiDrive Technology, whose team originated from NXP, was founded last year with substantial funding and technology.

Like BYD Semiconductor, Weilai couldn't find a suitable opportunity to get involved with SemiDrive Technology. However, some smaller companies could be considered, as they could at least provide Weilai Auto with a breakthrough.

"National Technology? Isn't that the company that had two consecutive financial crises? Is there a possibility they'll acquire it?"

Cheng Linfeng smiled and said, "Boss, you've heard of this company too? That's right, this company has gone bankrupt for two consecutive years. However, they do have what we need in automotive-grade chips. From an investment perspective, this company is definitely not a good fit."

"But if we were to acquire this company outright to fill our gaps in chip technology, this company would be a perfect fit."

National Technology lost nearly 5 million yuan in 2017. With operating revenue of 6.95 million yuan, it directly suffered a loss of 4.87 million yuan, which was a landmine in the annual report. However, compared with 2018, the 2017 annual report can only be regarded as an appetizer.

Throughout 2018, National Technology suffered a loss of 16.14 billion yuan, while its operating revenue plummeted to 6.02 million yuan, ranking 13th among A-share companies in terms of losses. Along with ZTE, which was ruined by its founder, it made a big splash in the tech industry.

However, ZTE's loss of 70 billion yuan in 2018 was due to external factors, which damaged the company's fundamentals and operations, while National Technology's losses were purely due to its own internal reasons.

As for the reasons, they are nothing more than the old tricks of A-share companies in recent years: disorderly mergers and acquisitions, the poor performance of acquired subsidiaries, and broken capital chains.

Like Gree, these listed companies, in order to capitalize on the booming lithium battery market, have made various acquisitions of lithium battery-related companies. However, they have not properly vetted these acquisitions. Furthermore, Guomin Technology is not as large and powerful as Gree.

With a net worth of 40 billion yuan, how can it withstand a loss of more than 16 billion yuan? That said, if the financial performance cannot turn positive this year, then Guomin Technology will be designated as a special treatment stock (ST) and face the risk of delisting.

Once a company is delisted from the Growth Enterprise Market (GEM), it cannot be relisted. As Cheng Linfeng said, acquiring Guomin Technology and directly privatizing and delisting it is indeed a good idea.

“Besides its business connection with Weilai Motors, Guomin Technology has another advantage: it has no actual controller, which will make the acquisition much less troublesome for us.”

Since 2013, National Technology has had no actual controller.

"From this perspective, it's only natural that they've suffered losses for two consecutive years due to reckless actions."

It would be a miracle if a private enterprise, without a controlling shareholder, relied solely on its management team to operate, had good performance. Tan Jincheng could easily imagine that if Weilai Auto were to lose its controlling shareholder, the management team would definitely find ways to benefit themselves.

Giving yourself a raise or stock options is just child's play; this kind of acquisition is the real ruthless move.

"Another point is that they acquired a lithium battery materials company, which is a burden for Guomin Technology, which doesn't understand business operations, but it's not necessarily the case for us."

Opportunities often arise from crises. National Technology has already experienced two consecutive years of financial troubles, and most of the risks that needed to be exposed have already been exposed. If they try to pull the same stunt as last year by reversing their performance this year, they will have completely messed up.

To be honest, this company is really a rip-off. In the first three quarters of last year, their losses were 1470 million, 230 million, and 3687 million yuan respectively. Given the environment last year, and the fact that it's a technology company that needs to invest, these losses are actually quite normal.

Who knew they would have such a dramatic turnaround in the fourth quarter, racking up a loss of 15.9 billion yuan in a single quarter, which truly dazzled investors.

"We can investigate and see. After conducting due diligence, we will evaluate whether it is possible to acquire it."

After reviewing the specific business, Tan Jincheng was somewhat tempted. National Technology mainly deals with integrated circuits and key components, as well as anode materials and chip-related businesses.

These three revenue streams account for over 90% of the company's business volume. Although 600 million yuan in revenue is negligible, production capacity is a mess, and they've even ventured into e-commerce, which is truly outrageous.

However, the management team has not been idle. Over the years, they have made considerable investments in research and development, and have also acquired stakes in several semiconductor companies. They have done some serious work.

"Losses are not scary, what's scary is that there's no hope."

Mr. Tan has never been afraid to take over loss-making companies. When he took over companies like Yangzi Automobile and Meizu Mobile, both were losing money. The key is whether there is any hope for saving them. In his opinion, Guomin Technology is still salvageable.

With the intervention of strong capital, privatization and delisting, a complete change of management, the elimination of some messy businesses, the divestiture of non-performing assets, and a focus on the core business followed by increased investment, there is still potential for success.

In the automotive-grade chip sector, Weilai doesn't plan to expand or strengthen its business. Being able to supply its own needs, or even partially supply them, is sufficient. Weilai doesn't lack suppliers in this area, but the prerequisite is that it needs to have some of its own technology to negotiate with suppliers.

Just like BYD, they don't completely ignore other companies. They use whichever company is cheaper and has lower costs. But as long as the boatman has the goods, he's not afraid of others running out of stock. He can simply increase production capacity when necessary.

"Okay, then we'll conduct due diligence before making an assessment."

“Okay, keep an eye on this matter. Also, keep an eye on the equity transfer with Mr. Liu of Yingke. When the time comes, we will quickly transfer the shares. Afterwards, we can do what we did with Mr. Wang of Bafang, and Mr. Liu and I can sign a concerted action agreement.”

The Science and Technology Innovation Board is too hot. Today, he was worried that some young traders might get carried away. He had already been punished once during the acquisition of Inco. If he were punished again, it would really ruin things.

If it is confirmed that an acquisition can be launched, then the dispersed shareholding structure of National Technology is the most advantageous aspect of the acquisition, because it allows for a cash acquisition to be conducted directly with each shareholder.

The simplified transaction process and improved acquisition efficiency meant that, for the shareholders of National Technology, large and small, who had no control over the company, they had no way to manage the management team and were powerless to do whatever the management team wanted.

In two years, they lost more than 20 billion yuan. National Technology has never earned that much money since its establishment. Not to mention dividends, the value of their shares is constantly depreciating.

From the third quarter of 2016 to now, over the past three years, National Technology's stock price has plummeted by 80%. With no hope in sight, it would be incredibly fortunate if someone could take over their shares.

"It's really interesting that out of 860 employees, only 359 are covered by social insurance. However, the proportion of technical staff is not too bad."

National Technology's technical staff accounts for 24.53% of its workforce. As a high-tech company, this percentage is barely acceptable, but still somewhat insufficient. Normally, it should be around 40%.

However, what's most frustrating is that even in 2019, more than half of the company's fewer than 900 employees still don't have social security contributions paid. And this is a tech company!

As an automotive-grade chip company with a gross profit margin of 35%, it only generated 600 million yuan in output value. The average output value per person is less than 700,000 yuan, which is extremely inefficient.

"This is a good thing for us; there's a lot of room for improvement."

"Yeah, hehe, so we've managed to ride the wave of the semiconductor craze, haven't we?"

Both Juling and Weilai have substantial financial resources, so transforming such a company wouldn't be particularly difficult. However, if the transformation were to be completed, the difficulty would be far greater than that of Meizu, and the investment would be even greater.

BYD Semiconductor's investment budget for this year alone is nearly 40 billion yuan. If it can successfully acquire National Technology, according to Tan Jincheng's current estimate, it will take at least tens of billions of yuan to make a splash in the initial stage.

This does not include the funds used for acquisitions and integrations.

Acquiring a business is easy, but saving it is difficult.

However, for him right now, the most important thing is the launch of the Weilai sub-brand and its new structure. Today is July 22nd, and there is less than a week left until the Weilai launch.

The news of Wei Lai's press conference has been widely disseminated through the media, and Tan Jincheng himself has also promoted it on social media.

In addition, this press conference will once again be broadcast live online, allowing more people to learn about Weilai's sub-brand. Furthermore, the design of Exeed brand models is being carried out with extra effort.

In Tan Jincheng's view, whether Xingtu can achieve instant success depends heavily on its design.

In the segment priced below 15 yuan, the top 20 best-selling models are all gasoline-powered vehicles, with no new energy vehicles among them. The current automotive market is still dominated by gasoline-powered cars.

Therefore, Exeed, which has not yet been launched, faces competition not only from new energy vehicles, but also from gasoline-powered models such as the Lavida, Sylphy, and Corolla.

This battle is not going to be easy.

(End of this chapter)