2003: Starting with Foreign Trade

Chapter 959 Leibusi's Plea for Help
"What a marketing genius! He managed to pull off so much from acquiring a listed company. Is this some kind of advertisement for all his mainstream products? Is this even possible?"

"The key is that consumers recognize this advertisement. It's a real, tangible giveaway, and it's offered proactively. If they didn't give it to you, they wouldn't have anything to say, because it's not a necessary option in their acquisition process."

"This 2000 million yuan investment has yielded the effect of 2 million yuan, or even more. The key is that it has systematically showcased all of its products, allowing consumers to intuitively experience the consumer goods it produces."

From clothing to daily necessities, and even mobile phones and cars, the collective display of a highly anticipated privatization acquisition plan served as a powerful advertising tool in the current climate of sluggish consumption.

There's nothing new on the internet. Everyone knows Tan Jincheng's modus operandi, but so what? In short, about 20% of stock investors have indeed benefited, and the other 80% have made money. It's a win-win situation for everyone.

Secondly, the reimbursement of travel expenses was a pleasant surprise for the retail investors attending the shareholders' meeting, earning them considerable goodwill. These were all beyond expectations.

Even the notoriously shrewd investors were speechless at Tan Jincheng's actions. It was a simple takeover bid, yet he not only thought of advertising it, but the pricing and compensation methods left them all feeling helpless.

Following the conclusion of the shareholders' meeting, National Technology quickly issued an announcement regarding the extraordinary shareholders' meeting convened due to the tender offer, including the agreed acquisition price and the compensation method that ByteDance would cover for its shareholders.

The Securities Times gave high praise to this tender offer, believing that neither ByteDance nor Tan Jincheng himself used force, but rather negotiated and offered a high premium to satisfy the interests of the vast majority of small and medium-sized shareholders in order to complete this tender offer.

In the A-share market, there have been only two privatization tender offers so far, and both were completed between special companies with special backgrounds. They are not enough to form a model case, and there is not even a reference template.

This is why the National Technology tender offer has attracted so much attention.

The A-share market has always touted the protection of the interests of small and medium-sized shareholders, but everyone knows what the actual operation is like. In this acquisition of National Technology, almost 90% of the shareholders are retail investors.

Furthermore, with no demonstrative examples available, how to operate ByteDance's advertising platform has become a focal point.

"Retail investors cannot form an effective collective force, which is why many listed companies' major shareholders prefer to distribute shares to retail investors."

The market analysis is not without reason. If we follow the conventional way of thinking, how could a company like National Technology, which has not had a controlling shareholder for seven years, allow Sun Yingtong to exercise the rights of the actual controller with only 3% of the shares?

Haven't any retail investors thought about joining forces to take control of the company? For example, if the two shareholders holding more than 1% of the shares, along with the other top ten shareholders, formed a concerted action group, they could completely influence the decision-making level of National Technology.

Unfortunately, this probability is almost non-existent in the A-share market. Retail investors are inherently divided. No matter how successful a retail investor is, they are still just a retail investor. All they pursue is the profit they can get, and they simply cannot refuse the price offered by ByteDance's trading platform.

This is one of the reasons why Tan Jincheng and the acquisition team are confident.

Since retail investors cannot form an effective collective force, listed companies dare to distribute large amounts of stock with confidence. After cashing out, the company can simply walk away if it doesn't want the stock anymore, and if it still wants it, it can buy it back at the right time.

There's no need to worry about losing actual control of the company; of course, some have gone too far. To some extent, National Technology is one of those that went too far. Perhaps they didn't expect ByteDance to suddenly enter the market with a huge investment of 50 billion yuan.

After the shareholders' meeting, the acquisition accelerated significantly. The price was unbeatable, and it brought the timeline for breaking even back to January, before the conflict between the two parties began. Basically, anyone who bought in after mid-January 2018 made a profit.

If there's money to be made, then everything is good. Some retail investors who were initially trapped and later bought more shares decided to transfer their shares to Julang on the spot, which greatly facilitated the acquisition. Meanwhile, some who were not deeply trapped also decided to transfer their shares after careful consideration.

On the 18th, ByteDance completed the equity transfer agreement with the top 20 shareholders excluding Sun Yingtong, acquiring a total of 3.43% of the shares. In addition, with the approximately 0.746% of shares collected at the shareholders' meeting, ByteDance effectively holds 9.9% of the shares of National Technology.

He was just one step away from raising his paddle for the second time.

"The remaining shares are dispersed, and we will need securities firms to participate next. There is not much we can do anymore."

The number of retail investors in National Technology was truly beyond the expectations of the acquisition team. Among the 76,200 shareholders, one-third held less than 5000 shares and had a market value of less than 30,000 yuan.

A single stock can reflect the ecosystem of the A-share market.

"Okay, then let's keep the stock suspended. We still need to wait for the CSRC's approval."

The Shenzhen Stock Exchange's approval of the privatization is evident from the Securities Times' assessment of the deal. However, the necessary procedures still need to be followed, and the acquisition team cannot contact each and every retail investor with a small number of shares.

Retail investors can participate in tender offers through the stock exchange's trading system or by contacting their own securities brokers. If they participate through the trading system, they must follow the system prompts within the specified period, such as filling out a tender offer application form.

If you choose to contact a securities broker, you need to inform them of your willingness to accept the offer. The broker will then assist you in completing the relevant transaction procedures. Once a retail investor submits a tender offer application, the corresponding shares held will be temporarily frozen by the securities registration and settlement institution to ensure that these shares will not be traded again during the acquisition process.

"Let's take a month; suspending trading indefinitely isn't a solution."

According to the tender offer process, the stock can be suspended during the acquisition period. However, if the required stock demand is not met by the deadline, the stock can resume trading. ByteDance Engine has given a one-month period, which is until the 18th of the month.

If the transaction cannot be completed, then Guomin Technology will have to resume trading. However, even if the takeover bid fails, ByteDance will still be able to maintain control of Guomin Technology.

Following the announcement of the extraordinary general meeting of shareholders, many shareholders of National Technology have contacted the headquarters of ByteDance via phone and message, expressing their willingness to sell their shares. One reason is the travel time, and the other is that today is a holiday.

The shares collected so far will not be frozen until the official trading day, which is tomorrow. At this time, we are just signing a share transfer agreement with the other party.

After trading officially resumes tomorrow on the Shanghai and Shenzhen stock exchanges, ByteDance's acquisition of shares will definitely be more than 9.9%.

"Alright, the rest is up to your acquisition team. Complete the equity acquisition within a month, is that alright?"

"No problem, but there are some things that still require Mr. Sun's cooperation."

Sun Yingtong has been frequently meeting with the acquisition team of Juliang recently and has become accustomed to their direct and straightforward working style. Guomin Technology originated from ZTE Corporation and still retains some traces of state-owned enterprises in its administrative model.

"This is my duty, Mr. Cheng, you don't need to be so polite."

When they first met, Sun Yingtong was not a good fit for Tan Jincheng and the working style of ByteDance's advertising platform.

When a boss assigns a task, subordinates analyze its feasibility. No one thinks about being punished for failing to complete a task they've taken on. For example, in the previous scenario, the boss required the acquisition of equity to be completed within a month.

Cheng Linfeng agreed without hesitation, which was understandable since he was the person in charge. However, the fact that the other leaders in the acquisition team had the same expression was intriguing.

“Okay, let’s set a timeframe of one month. If there’s no privatization offer by the 18th of next month, then we can apply to the Securities and Futures Commission for resumption of trading.”

"Boss, are you going back?"

Tan Jincheng nodded: "I've been here for more than a week, it's really time to go back, or they'll raid my house."

Due to the reduction in subsidies in the second half of the year, major automakers have had a tough time, which is reflected in sales figures, with even the rapidly growing new energy vehicle sector experiencing a year-on-year decline.

"Boss, you're being too cautious. Low-price strategies are useless. Do you think their low-price strategy can beat Wuling?"

"We can't just ignore it. Alright, you guys go ahead and get busy. I still have a guest to attend to."

On July 26, Nezha, the birth of the demon child, was released in theaters and immediately became a huge hit, dominating the summer movie season. Hozon New Energy's brand Nezha Auto also benefited from the popularity.

The only new energy vehicle company with dual qualifications, starting at 5.98 yuan, it focuses on the third- and fourth-tier markets and B-end markets such as ride-hailing, following the same route as the Aion series.

The ride-hailing market, in particular, has brought a significant impact to Aion. Judging from the current order volume of Nezha, its price is already trending towards surpassing that of leading new energy vehicle brands such as WM Motor and Xiaopeng.

The Aion S has excellent performance, but it is also quite expensive compared to the Nezha NO1. One Aion S can buy two Nezha NO1s. The already limited C-end market for the Aion S is easily impacted by it.

Furthermore, Fang Yunzhou followed a similar approach to Wei Lai in recruiting sales personnel: he contacted BAIC New Energy's sales team. They had a proven track record of selling the EU series extremely well in the past few years and were highly experienced in B2B market promotion. BAIC's team truly has a natural advantage in the B2B market. Wei Lai secured a foothold in the B2B market by poaching people from BAIC, and Nezha is now following the same path.

The previous Nezha topped the sales charts for new energy vehicles in 2022. Although many problems arose afterward, the company remained highly competitive for a long time thanks to its low-price strategy.

"The low-price strategy, although it doesn't create a high moat, still has a strong impact in the short term."

It was already the 21st when I returned to Ningbo from Shenzhen. On the 19th and 20th, the guest that Tan Jincheng was supposed to meet was actually Lei Jun. Since June, Xiaomi's major and minor shareholders have cumulatively reduced their holdings by 18 billion shares, cashing out more than HK$250 billion.

The most controversial event was the reduction of shares by Lin Bing, who is known as the number two person at Xiaomi, in the past few days, which has sparked great controversy in the market.

Over three consecutive trading days, Lin Bing sold a total of 4130.7 million shares, cashing out approximately HK$3.7 million, equivalent to approximately RMB3.4 million. Investors in the Hong Kong stock market have raised strong questions about this.

Xiaomi's stock price also fell below HK$2000 billion (approximately US$255 billion) due to Lin Bing's reduction of holdings, which is far from the target price when Xiaomi went public.

Lin Bing's reduction of holdings was undoubtedly the straw that broke the camel's back. Even though Xiaomi launched a second round of share buybacks totaling HK$4.5 million in June, it still could not stop the stock price from falling.

Most importantly, ByteDance, Xiaomi's second-largest shareholder, has yet to indicate whether it will reduce its holdings, which is a Damocles' sword hanging over Xiaomi's head.

By September, all 41.17 billion shares of ByteDance Engine would be released from lock-up, and based on the closing price of HK$8.92 on August 16, they would be worth HK$367.24 billion.

ByteDance's advertising platform, Ocean Engine, is currently involved in the privatization of National Technology on the A-share market. This is also known in Hong Kong. With an initial acquisition cost of over 50 billion yuan, no one can guarantee that Ocean Engine will not try to extract funds from Xiaomi Group, whose stock performance has been poor.

Lei Jun had the same idea. What he feared most was that Tan Jincheng would hit Xiaomi's stock again at this time. Moreover, compared to Lin Bing's use of the so-called public welfare and charity purpose to reduce his holdings, ByteDance's request was reasonable.

The acquisition alone would require more than 50 billion yuan. In addition, with the subsequent investment and R&D in automotive-grade chips, ByteDance's report to the China Securities Regulatory Commission stated that the investment would start at least at 200 billion yuan.

Otherwise, how could it have gone so smoothly?

"Lin Bing has promised not to reduce his holdings within 12 months. I wonder what Mr. Tan's opinion is on his Xiaomi shares?"

Lei Jun is really having a headache. To be honest, he's not afraid of ByteDance reducing its holdings in ByteDance Engine or even selling off all its shares. What he fears most is the current situation, where ByteDance Engine is slow to make a statement, but according to the rules, there is indeed no requirement for company shareholders to make a statement.

Compared to A-shares, Hong Kong stock trading rules are more flexible for major shareholders. Shareholders holding more than 5% of shares do not need to make an announcement before reducing their holdings, but only need to explain the situation within three trading days after the reduction.

"What does 'older brother' mean? Does he want me to reduce my holdings or not?"

With its share price falling below HK$9, Xiaomi, which claims to be the Chinese version of Apple, has a market value of just over US$250 billion, while Apple's market value was US$1.2 trillion during the same period. 2019 was a very difficult year for Lei Jun.

In terms of core business, Redmi is an independent sub-brand, focusing on the cost-effective market. While this has alleviated some competitive pressure, it has also led to internal product positioning conflicts. The Xiaomi brand does not yet have the capability to compete in the high-end market and still has to compete with Redmi for market share.

Moreover, there's Honor ahead of them. In 2019, Huawei's mobile phone business was absolutely dominant, with brands like Meizu relentlessly pursuing them. Meizu had a new owner with deep pockets, offering top-of-the-line configurations at highly competitive prices, and had already become the leader among second-tier brands.

In addition, the Redmi Note 7 experienced a wave of returns due to battery overheating issues. While Lei Jun publicly apologized and promised to strengthen quality control, he also restored trust but exposed Xiaomi's quality control problems.

Secondly, the public dispute with Royole Technology over foldable screen technology exposed its weakness of insufficient technological reserves.

The collapse of trust in the capital market, the slowdown in the growth of the mobile phone business, the shortcomings in supply chain management, and the ambiguity of brand positioning, despite highlights such as strong growth in the IoT business, global expansion, and the deployment of 5G technology, all seem to be of little use at present.

Nearly a year after the company went public, Lei Jun has not had a good time.

All of this is closely related to Tan Jincheng. As one of Xiaomi Group's most steadfast strategic investors in its early stages, Tan Jincheng and his ByteDance platform have publicly supported Lei Jun on numerous occasions.

Tan Jincheng himself has appeared at Xiaomi's new product launches several times. According to statistics, Tan Jincheng's public appearances have the highest rate of being seen with Lei Jun.

In addition, Tan Jincheng had tens of thousands of employees back then, and whether it was Flash or Weilai, the most common benefit they received was Xiaomi phones. This undoubtedly brought Xiaomi a lot of sales and promoted the Xiaomi brand.

However, everything changed after the acquisition at the end of 2017. The companies in the ByteDance group stopped supporting Xiaomi and instead supported Meizu, which is in the same group. With the support of ByteDance's resources, Meizu has stabilized its market share and currently maintains a market share of around 5%.

This 5% market share was partly taken from other second-tier brands, but more importantly, it was taken from Xiaomi. With its total number of employees growing to over 10, Meizu releases one Meizu phone every year, which translates to sales of over 10 units.

Don't question the variables generated by these hundreds of thousands of people. Even if the employees don't use them themselves, they will give them to their families. As long as the phone quality is good and a certain reputation is established, Meizu's sales will definitely be boosted.

After changing owners, Meizu has become the company that places the most emphasis on phone quality. In terms of supply chain, Meizu benchmarks itself against Huawei, and its quality control is definitely better than Xiaomi's.

Although the share is not high, the boss is willing to pay and pays readily. No supply chain company would be unwilling to accept such a high-quality order.

Despite successfully going public, Xiaomi lost the support of ByteDance, but ByteDance immediately announced that it would change from a strategic investor to a financial investor. The first drop in Xiaomi's stock price also began when ByteDance announced its change of identity.

"Of course I hope that ByteDance will not sell its shares. We have been friends for so many years, and I believe that Xiaomi will give Mr. Tan more than just this in return."

The situation is beyond human control. With more than 17% of the shares, although the voting rights are not many and are all given to him, Lei Jun is afraid of having such a powerful figure here. Most importantly, Meizu phones under his brand are the real competitors of Redmi.

In today's market, for the Redmi brand, Lei Jun's most feared competitors are Honor and Meizu.

Honor needs no introduction. Huawei's technological reserves have been transferred to Honor, which is a game-changer for other brands. If it weren't for the occasional shady tactics of Honor and attacks from competitors, its market share would be even higher.

As for Meizu Blue, it doesn't really pose a threat to Redmi right now, with a limited market share. But everyone knows that Meizu Blue has a wealthy and charismatic boss behind it.

Tan Jincheng is too good at creating miracles and has a very strong influence. Just look at the capital market turmoil caused by his acquisition of National Technology.

"In addition, if possible, I would like Mr. Tan to increase his holdings of Xiaomi shares. We will also launch a more aggressive shareholding increase plan in the future, which will help stabilize Xiaomi's stock price."

Xiaomi has an internal plan that if the stock price cannot stabilize in the last few trading days of this month, Xiaomi will launch a large-scale share buyback program of up to HK$120 billion in September to stabilize the stock price.

However, HK$120 billion is only one-third of the shares held by ByteDance's Engine Holdings, which is about to be fully released from lock-up. If the other party dumps the shares, then all HK$120 billion will be lost.

What Lei Jun needs to do now is to keep Tan Jincheng in check, ideally by getting him to issue an announcement that he will not reduce his holdings within 12 months, so that the buyback will be effective.

It would be even better if the other party could increase their holdings, as this would boost market confidence. Lei Jun admitted that Tan Jincheng's influence was much greater than his in Hong Kong and even in the Wall Street capital market.

There's nothing we can do about it; Orange Group's stock performance is excellent. Currently, Orange Group's market value is approaching 350 billion US dollars, only less than 20 billion US dollars away from Baidu, and less than 40 billion US dollars away from the currently popular Pinduoduo.

Having been listed for many years, undergone three transformations, and succeeded twice, Orange Cloud has gained a small reputation in the field of artificial intelligence thanks to the addition of Lu Qi and the investment in data centers. It can be said that it is on the road to success again.

Most importantly, the stock price has maintained an upward trend over the years, and it is now almost catching up with Baidu. The capital market highly recognizes Tan Jincheng.

"ByteDance's ByteDance platform can choose not to reduce its holdings or issue an announcement. As for increasing its holdings, that's not out of the question either. In my opinion, Xiaomi's stock price is currently severely undervalued. But the question is, how much does my brother want me to increase my holdings?"

Upon hearing this, Lei Jun looked constipated and pointed at Tan Jincheng, saying, "You brat, can't you give your brother some face?"

That's true. He wanted Tan Jincheng's support, but he didn't want the latter to increase his holdings of Xiaomi shares too much.

(End of this chapter)