2003: Starting with Foreign Trade

Chapter 956 The Influence Unique to Boss Tan
In the A-share market, there is a concept stock sector called "Mega Stock Concept," which refers to listed companies that ByteDance directly holds or invests in, or indirectly invests in.

Of course, some are just riding on the coattails of a concept. For example, if a company invested in by ByteDance's advertising platform holds shares in another company, that's just piggybacking on the hype.

Those stocks that ride the wave of a particular concept, if they happen to coincide with a major breakout in a certain sector, will have some chance to rise in a short period of time, and some stocks may even see very good gains.

Tan Jincheng's first demand of Sun Yingtong was to formally launch a takeover bid for National Technology and require the company to suspend trading as quickly as possible, preferably before the market opens on the 12th.

Sun Yingtong had to agree to this reason, both procedurally and in terms of saving face, especially since Guomin Technology's stock price was currently in a continuous decline, completely underperforming the overall market and sector performance.

The suspension was fine, but after holding an emergency board meeting on Friday, Sun Yingtong overruled objections and immediately submitted a suspension application to the Shenzhen Stock Exchange.

When the Shenzhen Stock Exchange saw that it was Tan Jincheng's ByteDance engine, they did not hesitate at all. They were eager for this guy to make some noise in the secondary market. As long as it was not a serious violation, they would be happy to give him the green light in terms of procedures.

Although both are listed on the A-share market, the Shenzhen Stock Exchange and the Shanghai Stock Exchange are in competition. Throughout 2019, the focus of the A-share market was on the Science and Technology Innovation Board (STAR ​​Market), which belongs to the Shanghai Stock Exchange. Recently, the opening of the STAR Market has brought the Shanghai Stock Exchange into the limelight.

On the opening day, due to the high level of interest, the trading volume of some stocks in the small and medium-sized enterprise (SME) and growth enterprise (GEM) sectors declined sharply. In fact, the establishment of the Science and Technology Innovation Board (STAR ​​Market) has made the status of the GEM somewhat awkward.

The biggest scandal the Shenzhen Stock Exchange made this year was the punishment it handed down a few months ago for Tan Jincheng's acquisition of shares in Inco Medical, something that even US stocks hadn't done.

Overnight, National Technology, which had already suspended trading, became the focus of the Shanghai and Shenzhen stock exchanges. This listed company, which had been defrauded in its investments for two consecutive years and whose mergers and acquisitions had also collapsed, was in a situation of rapidly deteriorating financial conditions. It is inexplicable why Tan Jincheng would choose it, which is completely contrary to common sense.

Looking at Tan Jincheng and ByteDance's investments in the secondary market, one obvious finding is that ByteDance is ruthless in its operations, but its style is quite stable. Apart from strategically important stocks, the stocks they hold that are truly used for financial investment are mostly blue-chip stocks with very good cash flow and fundamentals.

Even though Inco Medical didn't seem outstanding recently, it is still an excellent company in terms of cash flow, business development, and its position in the niche industry.

There's a saying among A-share investors and even fund managers: following ByteDance's lead in buying stocks might not make you money, but it certainly won't lead to a huge financial disaster. Even the LeEco stock they bought back then was like that.

During the period when LeEco received investment from ByteDance, it was not only a star company on the ChiNext board, but its business capabilities were also capable of outperforming Xiaomi, which made Lei Jun (Lei Jun's CEO) very nervous.

At that time, the stock price was in an upward phase, which was entirely in line with investment logic.

"There are two explanations. Boss Tan invested in this company not to make money, but because he was interested in their business. One is their current main business, and the other should be the lithium battery material company they acquired."

Everyone knows that the company's main business is automotive-grade chips, which aligns with the company's strategic goals. However, there are many different stories surrounding the lithium battery materials company that led to Guomin Technology's financial crisis after its acquisition.

National Technology acquired a 70% stake in Snow Industry for 13.36 billion yuan. Snow Industry is engaged in the business of lithium battery anode materials. Snow Industry's collapse was due to the collapse of its largest customer, which led to the collapse of its business and accounts receivable.

"Automotive-grade chips are definitely the most critical requirement, but as industry analysts have pointed out, Snow Industries is also very useful to Weilai Group."

Since Guomin Technology had already suspended trading, there was nothing left to hide. After arranging a time with their management, Tan Jincheng took his acquisition team to Shenzhen on the morning of the 12th, accompanied by staff from the Beicang District government.

Besides helping Tan Jincheng coordinate the relationship between the two local governments and regulatory departments, they also wanted to know Tan Jincheng's specific intentions for this acquisition. The district was excited all night last night.

The chip town in Beicang District has been planned and developed for several years and has already reached a certain scale. At this time, Tan Jincheng's acquisition of a chip company is undoubtedly the greatest support and affirmation for their work. Therefore, they took the initiative to join the acquisition team to provide assistance.

Tan Jincheng, who has always preferred to use blitzkrieg tactics in acquisition battles, would naturally not reveal too much information to the outside world beforehand. The Beicang District also needs to take this opportunity to understand Tan Jincheng's true intentions so that it can provide more support in the future.

Everyone knows that Tan Jincheng is financially powerful, but developing chips is not something that can be accomplished solely with personal wealth. Beicang District needs to know whether Tan Jincheng has the determination to truly pursue this path.

Tan Jincheng, who had just celebrated his 34th birthday, was acquiring a financially struggling chip company amidst the booming success of Weilai Auto. No one knew whether it was for hype or a genuine investment.

"Snow Industries? That certainly has some strategic significance for Wei Lai."

In terms of negative electrode battery materials, there are currently two major tiers in China, which can be roughly divided into "three major and five minor" groups.

The "Big Three" refers to the three leading companies, including Shanshan, while the "Big Five" is the second tier. Snow Industry is one of the "Big Five," and Shanshan is currently the anode material supplier for Jinshidai.

If a negative electrode material manufacturer wants to be included in the battery manufacturer's supply list, it generally has to go through sample testing, small-scale testing, pilot testing, and large-scale testing. Only those that meet the requirements will be approved and certified by the battery manufacturer.

After certification, the supplier still needs to go through several stages, such as small-batch supply and stable batch supply, to verify the overall delivery capability of the negative electrode mast supplier, which takes a very long time.

Generally speaking, it takes at least one to three years for a negative electrode material supplier to be included in a battery manufacturer's supply list. Because of this strict procedure, the bond between battery manufacturers and negative electrode material suppliers is quite strong, and battery manufacturers will not switch suppliers casually.

The negative electrode is the first stage that flows out during battery discharge, and its performance directly affects safety and stability. According to IATF 16949 requirements, once the raw materials enter the supply system of the car manufacturer through the battery manufacturer, the materials cannot be replaced without the consent of the car manufacturer.

This means that if Jinshidai wants to replace Shanshan, it must obtain the consent of Weilai Auto. The same applies to other companies, including CATL, and the procedures are quite strict.

"Wei Lai has no intention of replacing Shanshan, but adding our own anode material supplier shouldn't be a big problem, right? That way we can save a lot on costs."

Tan Jincheng naturally knew what these people were thinking. Weilai had always claimed to be building a complete industrial chain, and Shanshan was also a company in Ningbo. Although it did not belong to Beicang, it still needed to be coordinated.

"In addition, through this acquisition, we can expand our industrial base more comprehensively."

Although Snow Industries has gone bankrupt and lost its major clients, as a legitimate materials supplier, they cannot simply wait to die. In the past two years, they have been actively developing new clients, and the progress has been quite good.

For example, BAK Battery and Wanxiang 123 have entered into substantive business negotiations, while the products of three companies, including Beijing Guoneng, Jinshidai, and Ningde Times, have entered the sample testing and inspection stage.

CATL is expected to enter the substantive business negotiation stage by the end of this year, while Tianjin New Energy is entering the integration stage.

Although there is still a long time before formal supply and mass production, it proves that the company has not given up but has actively saved itself. From this point of view alone, Snow Industries is very suitable for Weilai Automobile.

Of course, most importantly, both Snow Industries and National Technology have a large number of factories in Guangdong Province, Shenzhen, Jiangxi Province, and Inner Mongolia Province, especially in Shenzhen, Guangdong Province, where National Technology's headquarters are located.

Due to its relationship with BYD, Tan Jincheng has always had relatively few factory resources in Guangdong Province, with only Dexian Electronics in Shenzhen and a parts company in Huizhou.

If it weren't for the acquisition of the small factory in Zhushi, Tan Jincheng's resource layout in Guangdong Province would be almost negligible.

After acquiring National Technology and Snow Industries, he was able to quickly fill the gaps in these areas. For an entrepreneur, money is not the most important thing; factories and machines are what he values ​​most.

After completing this acquisition, he will be able to quickly enter the Guangdong market and achieve a higher level of penetration in this major car-consuming region.

Every car company and every model has a different sales strategy for different regions due to their different positioning, and they also have different focuses for different provinces. However, no matter which car company it is, it is impossible for them to ignore the South China market, especially the new energy vehicle market, with Guangdong Province as its main province.

"If that's the case, then I understand. Don't worry, Mr. Tan, the district will fully support this acquisition. Please feel free to let us know if there's anything we can do to help."

"For the time being, we hope the district can provide some assistance with bank loans."

"Haha, that's easy to handle; don't worry, we started coordinating when we set off."

ByteDance's cash flow is something that even small banks envy. Their few seats make Zhongtai's branch in Beicang comparable to a major city. In addition, with high credit lines, which bank would block their loans?
Putting aside everything else, the fact that they are one of the top ten shareholders of Yongcheng Bank is enough to guarantee the safety of the loans.

"Based on the average premium for privatization in the US and Hong Kong stock markets, we still need to set the price higher this time. Otherwise, it will be disadvantageous for us if the process drags on for too long."

On the plane, Tan Jincheng held a brief meeting with the acquisition team.

As of 2019, only two companies in the A-share market have been privatized and delisted: one is a subsidiary of Sinopec, which completed its privatization and delisting in 2006, and the other is Jinma Group, which was acquired by Shenhua Group in 2013.

Both of these companies have unique backgrounds, so there's not much to refer to. Therefore, this acquisition plan by ByteDance is more based on the privatization process of Hong Kong and US stocks.

“When acquiring Hong Kong stocks with cash, the average premium is around 29%, while for US stocks, the average premium is between 15% and 20%.”

After Cheng Linfeng, representing the acquisition team, finished speaking, he waited quietly. A cash acquisition would definitely require a premium, and the exact amount would depend on the boss's opinion.

According to privatization rules, there are two conditions for a tender offer for listed stocks. The first is the highest price paid by the acquirer for the shares of the target company within six months prior to the date of the announcement.

The second requirement is that the arithmetic average of the daily weighted average price of the acquired company's stock over the 30 trading days prior to the announcement must be 90%, which can be completely ruled out.

National Technology currently has a total share capital of 5.58 million shares. Its highest price in the past six months was 11.38 yuan, and its current closing price is 6.34 yuan, which is almost half of its previous value. According to the latest news, National Technology currently has 7.62 shareholders.

There are undoubtedly countless investors who are deeply trapped in this situation. If the price is not right, many people may not be willing to sell due to the valuation. However, if calculated based on the highest price of 11.38 yuan, the privatization and delisting of ByteDance's ByteDance engine would require a maximum investment of 63.5 billion yuan. This is significantly different from their previous calculations.

“We definitely cannot accept a price of 63.5 billion yuan. The price I can accept is a premium of no more than 30%. Let’s take the average price of Hong Kong stocks plus one point.”

"Mr. Tan, are you always this direct?"

Tan Jincheng's assertiveness is well-known in the industry. After agreeing with the team to land in Shenzhen and arrive at the headquarters of National Technology, Tan Jincheng quickly asked Sun Yingtong to convene a closed-door meeting of the board members to discuss the case.

From the moment Tan Jincheng landed in Shenzhen until his appearance at the headquarters of National Technology, photos of his itinerary were immediately leaked online. Today, the semiconductor sector performed well, just as retail investors had predicted last night.

What's rather amusing is that after the market opened, Shanshan's stock price quickly dropped by nearly two points, and continued to fluctuate below the opening price throughout the day. The cause was Snow Industry. Once Weilai acquired its own negative electrode material supplier, Shanshan's position was bound to be affected.

There are even rumors that Weilai may change its supplier of negative electrode materials. The stock price of another of the three companies, Putailai, was also affected today. That is, the other company is not listed, otherwise it would have been affected as well.

As the saying goes, money doesn't lie. It's clear that the market values ​​Weilai's acquisition of Yingke Medical very much. This is a major event that will affect the landscape of both industries, unlike the last time when they couldn't understand Tan Jincheng's acquisition of Yingke Medical.

Inco Medical's stock price has been stable recently. Even after completing the private placement, the share capital is not large, and the major shareholder's shares are relatively concentrated, so there is not much room for speculation. In addition, the capital market really can't understand Tan Jincheng's nonsensical operations regarding Inco Medical.

In fact, even within ByteDance's advertising platform, including Cheng Linfeng, no one understood why the boss wanted to buy Inco Medical. Even now, they still hold this view. However, they don't care. They just do whatever the boss says. Besides, Inco Medical is funded by him, so it won't affect ByteDance.

"Everyone is under a lot of time, and stocks can't be suspended from trading forever, so there's no need to make too much of a fuss about the price. Let's just settle the price and move on to the next step."

The National Technology Management Team, including Sun Yingtong, was very surprised by Tan Jincheng's direct offer. In addition, his insistence on holding a meeting as soon as he arrived created a strong sense of pressure on them.

This young man, who had just turned 34, even though he had no connection with National Technology yet, for a moment, they all felt that he was their boss.

Strong and direct were the first impressions Tan Jincheng gave to the management of National Technology.

“That makes some sense. The price issue is actually the least problematic. How about this, Mr. Tan, could you please step aside for a moment and we can have a brief meeting to reach a consensus with the board of directors? After that, we can immediately arrange an extraordinary general meeting of shareholders?”

Tan Jincheng looked at them and smiled, "Okay, no problem, but I will also attend the extraordinary shareholders' meeting."

After speaking mysteriously and leaving behind this statement, Tan Jincheng cooperated by leading his entourage to rest in the adjacent conference room, leaving Sun Yingtong and the others completely bewildered.

"What does President Tan mean by that? How many shares of our company did he buy? Send someone to investigate immediately."

It must be said that Tan Jincheng's blitzkrieg tactics are really effective. They overwhelm the opponent with their momentum and are extremely efficient, giving the opponent very little time to react.

National Technology currently has 76,200 shareholders. For a listed company with a total share capital of only 5.58 million shares, having 76,200 shareholders is quite a lot. The average number of shares held is only about 7000. At the current price, the market value is no more than 50,000 yuan, which is really quite dispersed.

Certainly, some shareholders are unwilling to accept ByteDance's 30% premium acquisition offer because of their own interests, but so what?

In the A-share market, although there is no explicit rule that a company can be delisted if its circulating shares fall below a certain percentage, which has led to the emergence of some manipulated stocks, regulations concerning share distribution or the number of shareholders can still have some impact on a company's listing and delisting.

According to relevant regulations, if a company's total share capital exceeds 4 million, the proportion of shares held by the general public shall not be less than 10% of the total shares; if it does not exceed 4 million, the proportion shall not be less than 25%.

If a company's shareholding structure or number of shareholders fails to meet the above requirements for 20 consecutive trading days, and the issue remains unresolved within one month of the trading suspension, it may face the risk of delisting.

National Technology, which already faced delisting risks after two consecutive years of huge losses and financial scandals, faces an even greater risk if this new circumstance is added to its list.

If some people are unhappy, then there must be others who are very happy.

According to relevant regulations, if ByteDance wants to privatize National Technology, it only needs to acquire 90% of the shares, which is 5.022 million shares. This 10% margin gives the acquisition team a lot of PR leeway.

Once ByteDance completes the acquisition of 90% of the shares, it can simply ignore the remaining 10% and delist it. Tan Jincheng cannot allow these 10% holders to leech off him, so he will inevitably dilute their shareholding through capital increases and share expansions.

This is standard business practice; there's nothing ruthless about it.

Nobody wants to be one of the unlucky 10%.

Before and after making the acquisition decision, as a professional team with countless M&A experiences, how could Cheng Linfeng not make some moves in the secondary market and bulk transaction market?

Acquiring a portion of the equity beforehand is a standard practice, regardless of whether an acquisition is made.

By the time trading was suspended, ByteDance Engine had already become one of the major shareholders of National Technology.

According to the first quarter report, all of the top ten shareholders of National Technology are natural persons. It is unlikely that a large fund would build up a large position in such a poorly performing company. Apart from individual investors who want to speculate, it seems unlikely that there are any better financial investors.

Among the top ten shareholders, Sun Yingtong is the largest shareholder with 3% of the shares, while the second largest shareholder is the famous individual investor known for playing with chicken cups, with a shareholding ratio of 1.61%, and the third largest shareholder is another individual investor with a shareholding ratio of 1.04%.

In the first half of July, ByteDance's subsidiary, Ocean Engine, through its funds, acquired 510 million shares of National Technology, representing 0.914% of the company's shares and making it the fourth largest shareholder. However, since the interim report has not yet been released and Ocean Engine's shareholding does not exceed 5%, no announcement is required, so the public is unaware of this yet.

ByteDance only needs to buy another 4.512 million shares to complete the acquisition.

It's funny to think that among the top ten shareholders of National Technology in the first quarter, only Sun Yingtong is a member of the management team, and the total shareholding ratio of the top ten shareholders in the first quarter was only 9.01%, which shows how little people have confidence in this company.

It really was all distributed to retail investors; their contribution was partly to the fact that Juliang was able to successfully collect 510 million shares.
Wednesday, September 8th.

National Technology, which had been suspended from trading, issued another announcement in the early hours of the morning, stating that it would hold an extraordinary general meeting of shareholders this Sunday. Immediately, retail investors holding National Technology shares near Shenzhen flocked to the event, all wanting to witness it in person.

Meanwhile, Sun Yingtong and the management of Guomin Technology had already found out the specific number of shares held by ByteDance Engine. At this point, Sun Yingtong was somewhat relieved that Guomin Technology had suspended trading, otherwise, at this rate, it wouldn't be long before ByteDance Engine would have to make a takeover bid.

While waiting for the shareholders' meeting, Tan Jincheng stayed in Shenzhen. After making a brief appearance at the Shenzhen Stock Exchange, he visited his old friends, while the acquisition team continued their work.

The benefits of releasing the news of convening an extraordinary general meeting of shareholders are obvious: it brings all the shareholders together in Shenzhen, so the acquisition team doesn't need to engage in public relations or operate in the secondary market to cause stock price fluctuations.

This allows for a more efficient completion of the acquisition agreement.

"That's about right, bro. The average price over 20 trading days is 7.04 yuan. If we give a 30% premium, that's 9.15 yuan. Go check the trend yourself. Anyone who entered in the second half of April should have made some money."

ByteDance's primary target for public relations efforts is these top-tier individual investors. Given Cheng Linfeng's status, the fact that he personally came to negotiate with them is already a sign of respect.

With a negotiated acquisition price of 9.15 yuan, the minimum profit is 9.5% starting from April 26th. However, if calculated based on the closing price before the trading halt, the profit is as high as 44.32%!

If you're still not satisfied with this price, then you might as well just let it rot in your hands.

As for the cost of the individual investors, Cheng Linfeng didn't care at all. In any case, the original top ten shareholders only accounted for 9.01% of the total shares. After deducting Sun Yingtong's 3%, which is only 6% of the shares, how could they possibly want a say?

Moreover, from any perspective, the agreement price offered by ByteDance's advertising platform is quite fair. The agreement acquisition price of 9.15 yuan is equivalent to raising the market value of National Technology to 51.06 billion yuan.

In other words, the boss didn't want to waste time; otherwise, he would have continued to push for a lower price. In his words, it had to be fast, and it would be best if the acquisition of shares could be completed within a month.

While Cheng Linfeng was leading the negotiations, Tan Jincheng leisurely arrived at BYD's headquarters.

"You little rascal, every time you come to Shenzhen it's nothing good. You're here to stir up trouble again."

A second-rate chip company and a second-rate lithium battery materials company are insignificant in the market. Even if other companies acquire them, they won't be of much use and will only be dragged down by their poor finances. But in Tan Jincheng's hands, everything seems to be different.

On August 12, semiconductor and lithium battery material-related stocks were among the top gainers in the A-share market. On August 13, these two sectors also performed exceptionally well. The significant gains over the past two trading days are the best response to Tan Jincheng's entry into the market.

This is the unique influence that belongs to Tan Jincheng.

"What do you mean I'm stirring up trouble again? If you keep saying that, I'll have to go visit your research institute."

Tan Jincheng was not polite at all. He sat down and immediately told the boatman's assistant to get him a bottle of ice water, as August in Shenzhen was simply too hot.

(End of this chapter)