2003: Starting with Foreign Trade

Where does Tan Jincheng's confidence come from? (Chapter 960)

There's a saying in business: there are no permanent friends, only permanent interests.

Regardless of their personal relationship, in business, whether it's Tan Jincheng or Lei Jun, their primary consideration is the company's interests, because it's no longer just a matter for them alone.

"Just kidding, you're overthinking it. I have absolutely no interest in controlling Xiaomi, and it's impossible for me to gain control of Xiaomi. At most, I'll only be able to play a role similar to Tencent in Xiaomi."

"Furthermore, you don't need to worry about my high shareholding affecting Xiaomi. To put it bluntly, my shareholding is a kind of reassurance. Besides, ByteDance doesn't have much money right now, and more funds will be invested in automotive-grade chips."

Due to factors such as proxy voting rights, ByteDance's voting power in Xiaomi is only 10.43%, while Lei Jun's voting power is as high as 55.7%, which is considered very high among many internet companies.

As long as he has the voting rights, he doesn't need to worry about controlling the company at all. What he fears is Tan Jincheng's personal influence.

Lei Jun smiled somewhat awkwardly: "I didn't mean that. I just knew you were going to make chips, so I came to ask if you would reduce your holdings."

In fact, Lei Jun had another concern: if the second largest shareholder's shareholding ratio was too high, even if it did not affect control, it would affect the company's subsequent financing. However, Tan Jincheng's point was also valid; the participation of ByteDance's advertising platform was indeed a good thing for Xiaomi.

At least it can be recognized by the most popular and highly profitable investment institutions in China, which proves that Xiaomi has not been completely abandoned by the capital market. In addition, there is a curse in the A-share market, that is, the stocks that are cleared out by ByteDance's stock engine will basically end up failing.

"I will not reduce my holdings. As for your request to increase your holdings, I can personally contribute 100 million US dollars like Brother Xiaopeng did, but that's all I can do."

From a financial investment perspective, ByteDance's advertising platform, Ocean Engine, certainly won't reduce its stake in Xiaomi right now. If it were to increase its stake, it would be better to do so in its own name, since personal interests are actually separate from the company's interests.

In fact, from the moment of acquiring National Technology, the role of ByteDance Engine in Tan Jincheng's business changed, just like when senior capital took over Gree.

The moment ByteDance decided to manufacture chips and prepare to take over National Technology, it evolved from a financial investment company into an industrial investment company, even though ByteDance has always been engaged in industrial investment.

Whether investing in A-shares, Hong Kong stocks, or US stocks, the ultimate goal is to serve the industry. Acquiring National Technology to manufacture chips is simply putting this matter on the table.

ByteDance will continue to make some investments in the secondary market, but certainly not on the same scale as before. Its holdings in companies like Apple, Nvidia, Tesla, Tencent, and in the future, Xiaomi and ByteDance, are enough for Tan Jincheng to make a name for himself in the chip industry.

"The moment I decided to make chips, you should have known I was serious. I rarely play the fool when it comes to such big things. But what do we have to make chips? Right now, all we have is money. So most of our funds will be invested in heavy investment industries such as automobiles and automotive-grade chips."

Developing automotive-grade chips in 2019 was definitely a bit late, but it wasn't absolutely impossible. Before deciding to do this, Tan Jincheng must have thought about what advantages he had. At present, it seems that he has no advantages other than having money.

Having money at the start is enough; having money doesn't guarantee you'll get the chips, but not having money is definitely not an option.

Taking advantage of this acquisition, Tan Jincheng also roughly sorted out the realizable value of the shares currently held by ByteDance Engine. After so many years of changes, to be honest, Tan Jincheng really doesn't know how much money ByteDance Engine is worth now.

ByteDance's current financial structure is mainly divided into three parts. The first part is the equity of listed and unlisted companies, such as Flashpoint, Orange, Weilai, ByteDance, Meizu, Horizon Robotics, etc.

National Technology will be added later. This type of asset belongs to the strategic products of ByteDance's advertising platform. The company will not easily sell this part of the equity unless it is a matter of life and death. As for the equity being diluted during the financing process, it doesn't matter, because the value is still there.

These assets cannot be measured by a specific monetary value. If there is a real need, they will only be used for short-term equity pledges or bond issuances, etc.

The second part consists of financial investment products, such as Tencent, Tesla, Nvidia, Apple, and Xiaomi stock, which has been downgraded to a financial investment. These types of equity are not non-saleable, but they will not be sold easily either. ByteDance's goal is to maximize profits, and profits include more than just money.

Do not check, I don’t know, I’m scared.

In the Hong Kong stock market, ByteDance currently holds the largest number of shares in four companies: Tencent (4250 million shares after a 1-for-5 stock split, with a market value of approximately HK$155 billion), Xiaomi (with a market value of HK$367 billion), and its peer BYD (1200 million shares, worth approximately HK$6 million).

Another company is Shenzhou, a leading enterprise in the Beicang District, also known as the Foxconn of the textile industry. This company can be said to be the one with the greatest investment returns for Tan Jincheng in Hong Kong stocks. A long time ago, when Shenzhou shares were still in the range of HK$1.2 to HK$1.5, Tan Jincheng spent HK$100 million to acquire Shenzhou shares.

Currently, the value of these shares is approximately HK$80 billion, which far surpasses Tencent in terms of return on investment. It's safe to say they've made a killing. Of the four companies, BYD's stock performance is the worst. Including some companies with smaller holdings, ByteDance's total market capitalization in Hong Kong is close to HK$620 billion, or approximately RMB555 billion.

The second part of the assets also includes investments in several major US tech companies. Apple shares, which are frequently split, have been sold off in increasing numbers, and the company currently still holds 1820 million shares, worth nearly $39 billion. Nvidia shares are worth approximately $18 billion, and Tesla shares have been doubled to 400 million, currently worth approximately $10 billion.

Including other tech company stocks, this portion is worth approximately $75 billion, or about 510 billion yuan. These two parts combined exceed 1000 billion yuan.

When it comes to making money, you have to look to early-stage, globally renowned tech companies. Take Apple, for example. Buying Apple early on was practically a guaranteed win. In 2012, ByteDance sold off a large portion of its Apple stock, recovering over $17 billion. Apple then split the remaining shares into seven separate transactions in 2014.

With the changes in the mobile phone market, Apple is no longer an independent company. Although the stock price trend after the 1-to-7 split is not as exaggerated as before 2014, the number of shares held has increased. Tan Jincheng has almost fully benefited from the growth process of the trillion-dollar market value.

This portion of assets is ByteDance's most important cash flow asset and also Tan Jincheng's biggest asset. Apart from Xiaomi, none of the other companies are shareholders with more than 5% of the shares. If ByteDance wants to reduce its holdings, it doesn't even need to issue an announcement.

If a company runs into problems, Tan Jincheng can liquidate these assets at any time. For example, Apple, Shenzhou, and Tencent all have plans to reduce their holdings in the past two years. These companies have basically passed their high-growth period, and it is no longer meaningful to hold them.

The third part is relatively simple; it consists of stocks listed in the A-share market in the form of funds. Compared to the first two parts, this part is less valuable, but that's only relative to the first two parts; it's still in the tens of billions of yuan.

The revenue from these three main sources ensures the health of ByteDance's cash flow, supports Tan Jincheng's major acquisitions over the years, and provides financial support and ongoing operations for ByteDance after the acquisitions.

In addition, both ByteDance's advertising platform and Tan Jincheng personally have assets overseas, such as gold. These assets are mainly held through family trust funds, which essentially provide a guarantee for their families.

Holding hundreds of billions in cash and equivalent assets is quite terrifying, and it is also the source of Tan Jincheng's confidence to make chips.

After roughly agreeing on the terms with Lei Jun, Tan Jincheng returned to Ningbo. Lei Jun, relieved to receive Tan Jincheng's promise, knew that for at least 12 months, he would no longer have to face widespread criticism of Xiaomi's stock price.

Monday, April 9th.

On the first official trading day of September, Xiaomi's stock price fell for the third consecutive trading day, hitting a low of HK$8.28 before closing at HK$8.35. Both the lowest price and the closing price were new lows since the company's listing.

The closing price of HK$8.35 was a record low, a drop of more than 60% from its highest point after listing, and this was just over a year after Xiaomi's listing.

Xiaomi Group, whose stock price was performing so poorly, issued an announcement after the Hong Kong stock market closed that day, announcing that it would launch a large-scale share buyback program of up to HK$120 million in order to boost the stock price.

HK$120 billion is 10 times the total amount of Xiaomi's share buybacks in the first half of the year, which can be described as a huge investment; of course, this also represents a significant drain on Xiaomi's cash flow.

Following Xiaomi's announcement, ByteDance, Xiaomi's second-largest shareholder and currently the first truly privatized acquisition company in the A-share market, also released its own announcement.

The announcement stated that ByteDance's advertising platform and its actual controller, Mr. Tan Jincheng, are firmly optimistic about Xiaomi's future. ByteDance has no intention of reducing its holdings of Xiaomi shares within the next 12 months. In addition, Mr. Tan Jincheng plans to increase his holdings of Xiaomi shares in Hong Kong by no more than US$100 million.

Based on Xiaomi's closing price that day, Tan Jincheng's increased holdings would exceed 9000 million shares.

Known for stirring up trouble, and with headlines even more UC-like than UC itself, the Hong Kong-listed company used the main headline "The man behind Lei Jun has made his move!" and the subtitle "The sword of Damocles hanging over Xiaomi has finally been removed." to describe ByteDance's announcement.

"Thank you!"

In the dead of night in the capital, an exhausted Lei Jun sent a message to Tan Jincheng after finishing a day's work. Over the years, this young man, who was more than ten years younger than him, had indeed helped him a lot.

Even though their relationship isn't as close as it used to be, he still provides assistance whenever needed, and his words remain as trustworthy as ever. Less than five minutes after Xiaomi issued its buyback announcement, ByteDance's advertising platform released its own announcement.

In reality, the relationship between Lei Jun and Tan Jincheng is somewhat delicate now. Juhua Group's full acquisition of Meizu has created a certain competitive relationship with Xiaomi, which has had a certain impact on Xiaomi's business volume.

Xiaomi, or Lei Jun, after seeing the success of Huawei's foray into the automotive industry, also harbors a desire to build cars.

He knew this himself, and Tan Jincheng knew it too; they all understood each other without saying a word. In today's mobile phone market, Meizu has a certain impact on Xiaomi, and in the future car market, Xiaomi cars will also bring a certain impact to Wei.

"You're welcome, I plan to buy it tomorrow."

Tan Jincheng was still awake, but compared to Lei Jun, he was much more relaxed, currently having a late-night snack with his wife in his yard.

One good thing about the weather in Beicang is that no matter how hot it is during the day, there is a gentle sea breeze at night that blows away the heat of the day.

Lei Jun smiled upon receiving the message but did not reply. Tan Jincheng has always been a decisive person; once he decides to increase his holdings, he will do so immediately, just like any other action he takes. On the 3rd, stimulated by two major positive factors, Xiaomi opened higher and rebounded by 4.19%, with trading volume exceeding the previous trading day by HK$10 billion.

In the three trading days that followed, Xiaomi's stock price rebounded continuously, driven by increased trading volume, achieving an 8.74% rebound over four trading days, and the stock price returned to above HK$9.

As he predicted, Tan Jincheng increased his holdings over the four trading days, purchasing a total of 8.9 million shares at a cost between HK$8.8 and HK$8900, for a total cost of HK$7.9 million.

"I'm a little short on cash lately, otherwise I would have bought more."

When asked by Hong Kong media why he was optimistic about Xiaomi, Tan Jincheng did not give a specific explanation, but responded to the Hong Kong media with the assertive answer of "lack of money".

He is indeed "short of money." The acquisition of National Technology was funded by ByteDance's investment platform, which has nothing to do with him personally. But don't forget, he also has a company called Inco Medical that he personally funded.

Inco Medical, which completed a private placement, increasing its total share capital to 2.36 million shares, has seen little change in its share price over the past few months, with its market capitalization fluctuating around 38 billion yuan.

Unfortunately, the A-share market is currently focused on speculating on technology stocks and large-cap stocks. After the hype dies down, Inco Medical will eventually return to normal. Low trading volume and a relatively stable stock price over a long period of time is already the best performance for a small-cap stock at present.

Currently, Tan Jincheng holds 25.42% of the shares in Inco Medical, while Liu Fangyi, the founder of Inco Medical, holds 34.52%. Together, they control nearly 60% of the shares in Inco Medical.

With a highly concentrated shareholding by major shareholders, Inco Medical should theoretically be a stock that would be subject to speculation. However, due to the limitations on mutual funds buying such small-cap stocks, private equity firms and individual investors dare not speculate on it easily, given that it is not a hot topic and they do not know Tan Jincheng's attitude towards Inco Medical.

With the purchase period over, no one knows whether Tan Jincheng will continue to acquire shares of Inco Medical. If another privatization takeover bid like that of National Technology were to occur, directly suspending the stock trading, they would be truly at a loss.

Based on the current stock price, Tan Jincheng's shareholding cost is actually more than 9% lower, with a loss exceeding 8500 million yuan.

"Is there such a thing?"

When Cheng Linfeng was reporting on his work, he mentioned this rumor, which amused Tan Jincheng. He had previously thought that Cheng Linfeng's actions might lead to a series of speculations by private equity firms and individual investors in Yingke Medical.

After waiting for several months, Inco Medical returned to normal. It's one thing that it's no longer in the spotlight, but it's a bit strange that it hasn't made any moves at all. Unexpectedly, his actions had a deterrent effect.

"It's just a rumor, I don't know if it's true or not, but I estimate it's probably true. Of course, it's also possible that they're still in the accumulation phase."

Cheng Linfeng heard about it from Liu Yiqian and other well-known individual investors. He has been busy with the acquisition of National Technology recently, and he has had some contact with these people. These are just casual conversations among everyone.

Whether it's true or not, nobody cares.

The first week of September had already passed, and Cheng Linfeng rushed over to report to his boss on the progress of the acquisition over the weekend.

Last weekend, there were only eight working days left before the official closing date of the tender offer.

"The completion rate is pretty good, and it seems like there's enough time left."

Tan Jincheng browsed through the reports page by page. Currently, ByteDance's holdings, including the frozen shares, have exceeded 85%, meaning they are less than 5% away from meeting the minimum requirement for a formal takeover bid.

"Yes, after all, we offered a very good price and had a compensation plan, so retail investors were quite enthusiastic. In addition, Mr. Sun's shares will be officially frozen next Monday, so we are less than two percentage points away from our 90% target."

"Completing the acquisition of these two shares within eight working days should not be a problem."

You can earn up to 40 points, and even if you lose, you won't lose much. Retail investors are quite enthusiastic. As for the remaining shares, it sounds easy, but it's actually the most difficult.

There is a group of elderly stock investors in the A-share market who almost never think about selling their stocks. Tan Jincheng has even seen such elderly investors who have held their stocks for decades without ever selling.

Some people have even forgotten about their stock accounts and have no recollection of ever having such an account.

As a stock that went public in 2010, it has been listed for 10 years, and there are quite a few shareholders like this. Due to the long time that has passed, some of them have lost contact with the securities brokerage.

Some of them have even passed away, and their families are unaware of their existence. This kind of thing is actually quite common in the A-share market.

Shareholders who know the news will naturally not mind selling their shares to them, but those who don't know the information are enough to give Lin Feng a headache. However, in any case, the progress of this acquisition is quite good.

Next Monday, with the addition of Sun Yingtong's shares, ByteDance's takeover bid will acquire more than 88% of the shares. If forced delisting is to be carried out, it is actually not impossible.

Most of the shares are concentrated in the hands of a single shareholder, and the remaining shareholders are practically non-existent. Even after trading resumes, there is no trading volume. Why wait for such a stock not to be delisted?
"Try to persuade those who are not willing to buy at the moment. As for those who really can't be contacted, we can slowly contact them after the product is delisted."

In the era of big data, it's not impossible for a large investment company to find a missing person, but it takes time and effort to invest manpower and energy, as well as to convince them and not be afraid that they will think it's a scam.

With only eight business days to complete the freeze, instead of blindly searching for this group, it would be better to persuade those who are not yet willing to sell.

Some groups that have suffered huge losses are still taking a wait-and-see approach. It's like the process of demolition and relocation. No matter how good the conditions are, there will always be some people who are unwilling to move. You can't say they are wrong. From their perspective, they would still lose money if they sold, so why should they sell?

What ByteDance's engine needs to do is try its best to persuade them, and provide some compensation in other ways. If necessary, it can even increase the acquisition price.

As for those who have gone missing, there's no need to worry too much. We can find them slowly after the delisting. In a few months, we'll be able to find anyone.

There are only three months left.

"You don't need to report to me about the follow-up matters. Once the shares are almost settled, you can apply to the regulatory authorities for delisting. I'll be quite busy in the next few months."

After thinking for a moment, Tan Jincheng added, "After completing this acquisition, you should stay in Beicang and recuperate for a while. Also, take the opportunity to sort out the equity matters of Guomin Technology."

Cheng Linfeng was taken aback: "Does the boss mean that I will temporarily take over the management of National Technology?"

Tan Jincheng nodded and said, "That's roughly the idea. As you can see from the current situation, senior capital is all going to invest in Gree. Shifting towards industrial capital is what we large investment institutions need to do this year."

“We have been doing these things, and we will definitely reduce our investment in the secondary market in the future, so you should also try to get more involved in the operation of industrial capital.”

For entrepreneurs, being politically correct is extremely important. Tan Jincheng is successful precisely because of this. If someone in finance gets obsessed with money, they will most likely end up giving it all back.

The combination of finance and industry is the future path for ByteDance's growth engine. For example, Tan Jincheng previously used ByteDance to invest in many local industries in Beicang, such as schools. These industries, which did not make any money at all, were used to enhance ByteDance's image.

With assets worth hundreds of billions and cash flow in the hundreds of billions, the more invincible assets one has, the more secure they become. Now, with the addition of the hottest and most heavily invested chip industry, that would make their massive assets completely safe.

"Um, am I capable?"

Cheng Linfeng was somewhat surprised by Tan Jincheng's decision. He had always positioned himself as someone who purely made money from ByteDance's stock market. In the past two years, the quality of stocks in the secondary market has been getting worse and worse, and it has become increasingly difficult to make money.

And the investment in ByteDance's advertising platform has indeed been reduced; to be honest, he's even considering retiring.

"What's wrong with it? It's not like you're going to be making chips by hand. Leave the professional stuff to the professionals. You're just here to help with the operations."

"Water that is too clear has no fish." Although I don't approve of the methods used by these listed company executives, they are, after all, professionals in their existing businesses.

After privatization, National Technology will still need to rely on the existing management team for at least a year. In addition, Tan Jincheng wants to continue to hire Sun Yingtong as the general manager of National Technology.

Unlike Meizu, Tan Jincheng, who is unfamiliar with the chip industry, does not plan to make sweeping reforms to National Technology for the time being.

"I understand, then I'll give it a try. After all, a man can't say no."

With a new role and new challenges, Cheng Linfeng felt he could do it again.

(End of this chapter)