Rebirth 08: Rise from copycat phones

Chapter 362 Super Shit Mountain: Zhiyun
Xu Shenxue has many companies under his control, but so far only one of them is a listed company, Zhiyun Group, and many other companies are non-listed companies.

In addition, many companies are actually not suitable for listing, such as the many semiconductor equipment and consumables companies under Xiannvshan Holdings.

They are losing a lot of money one by one, it will be very miserable if they go public!
At the same time, there are also some companies that have great prospects, or have not yet reached the stage of realizing their potential. It would be a loss if they go public or sell a large number of shares now.

Such as HaiLan Automobile and Yihai Technology.

Therefore, there are actually not too many companies that can sell shares to cash out now.

After some consideration, Xu Shenxue decided that Weiku Industry and Weiku Electronics under his control were more suitable.

Xu Shenxue announced that he would start the listing process for the two companies, which immediately attracted the attention of a large number of investors.

Many people are interested in participating in strategic investments before listing.

After all, both companies are very high-quality assets with very stable revenue and profits, and are more suitable for long-term holding and dividend distribution.

It may not rise massively and quickly, but it’s also unlikely to fall too hard.

The news that these two companies are going to go public has also made the management and core technical personnel of the two companies very excited and expectant.

These management and core technical personnel have a lot of option stocks on hand and have been waiting to cash out through listing for a long time. Although the company previously had an option stock repurchase plan to recover option stocks from employees, the price is still relatively low, and many employees holding option stocks do not want to sell their shares at a low price.

Now that the company is going public, you can gradually sell your shares through the secondary market and become rich overnight.

As the second and third companies to be listed under Xu Shenxue's name, they have also attracted the attention of a large number of strategic investors, many of whom want to participate in the strategic investment of these two companies before they go public.

Xu Shenxue also prefers to introduce some strategic investment before listing to share profits and bind the company, and to cash out some shares at the same time.

As a major shareholder of the company, Xu Shenxue is unable to sell his shares in a short period of time once the company goes public due to restrictions in securities laws. Therefore, he needs to cash out on a large scale by transferring part of the shares to strategic investors before the listing.

At the same time, it is also necessary to divide the shares in hand, transfer part of the shares to some secret offshore shell companies, and then use the offshore shell companies to cash out the shares in the secondary market.

Although there are still various restrictions, as long as the company is listed, Xu Shenxue will have enough ways to cash out his shares and obtain a large amount of funds.

At the same time, because of the existence of AB equity institutions, there is no need to worry about the company's management rights falling into other people's hands.

It is worth mentioning that not all stock exchanges accept companies with AB equity structure for listing.

This was also one of the main reasons why Zhiyun Group went to the US stock market when it first went public, because at that time neither A-shares nor Hong Kong stocks accepted the listing of companies with AB equity structures.

However, for Xu Shenxue, he can have fewer shares, but he must control the management rights of the company. Therefore, most of the companies under Xu Shenxue that accept external investment adopt the AB equity structure to firmly control the management rights.

However, the Hong Kong stock market did not accept companies with AB equity structures to be listed before, but later it was changed for Zhiyun Group!
In order to attract Zhiyun Group to list on the Hong Kong stock market, the Hong Kong Stock Exchange specifically changed the relevant rules for Zhiyun Group: companies with AB equity structure are allowed to be listed on the Hong Kong stock market under certain conditions.

This change has also attracted a number of domestic high-tech companies with AB equity structures to list on the Hong Kong Stock Exchange in the past two years, making the Hong Kong Stock Exchange more dynamic, attracting more funds from global investors, and significantly increasing the Hong Kong Stock Exchange's capital capacity.

At the same time, when Xu Shenxue started to list his company this time, he still chose the Hong Kong Stock Exchange as the preferred listing institution.

As for the domestic situation... the domestic company law stipulates that all shares have equal rights. In other words, it does not recognize the AB equity structure... Therefore, the companies that use the AB equity structure that can be seen in China are all companies that use the VIE structure.

The VIE structure is relatively complex. In short, it is through asset restructuring, an offshore holding company is established, the offshore holding company then establishes a Hong Kong-funded company, and the Hong Kong-funded company then invests wholly in a foreign-funded company established in the mainland.

Then this foreign company binds the operating entity through a special agreement!

This business entity is the various high-tech companies that people are familiar with...but this high-tech company itself is not actually listed.

What is listed is the offshore holding company behind it!

Offshore holding companies can adopt an AB equity structure in accordance with foreign laws.

In fact, Zhiyun Holdings owns not only Zhiyun Group, but also more than 20 overseas companies with the prefix of Zhiyun, including Zhiyun Hong Kong, Zhiyun USA, Zhiyun Europe, Zhiyun Hong Kong, and Zhiyun America.

As an operating entity, Zhiyun Group, from a legal perspective, actually only has a domestic part... The overseas Zhiyun companies do not belong to Zhiyun Group, but to "Zhiyun Holdings".

Some other overseas smart cloud companies actually have special model organizations of one kind or another... They are still in order to comply with the many legal restrictions of various countries.

As a world-class multinational company, Zhiyun's organizational structure is actually very complex in order to circumvent the many restrictions of laws in various countries. There are many messy models, which is actually very different from what people imagine Zhiyun Group to be.

This company also has the most complex organizational structure under Xu Shenxue. It is so complex that even if Xu Shenxue got carried away one day and sold the entire domestic "Zhiyun Group", he would still be able to control a large number of Zhiyun companies... He is still the actual controller of the entire Zhiyun company.

In today's world, when people talk about the organizational structure of a company, especially the complexity of the equity structure, the first thing that comes to mind is usually Sixing, and the second thing that comes to mind is Zhiyun...

Zhiyun’s equity structure and organizational system were initially designed by a joint team from several of the world’s top law firms.

As Zhiyun Group continued to develop, in order to meet the legal requirements of different countries or regions, various messy equity structures continued to be added... In the end, the entire organizational structure and equity system became more complicated than Four Stars!
Legal elites in many countries have described Zhiyun Group’s equity and organizational structure as a huge mountain of shit!

There are so many twists and turns in the story that even the legal elites are confused.

Sometimes, if the legal talents of some small countries are not very capable, they don’t know who to contact if they want to ask Zhiyun to fine them… You ask Zhiyun Group? Zhiyun Group will reply you seriously: What a joke, our Zhiyun Group has never done business in your country, you want to fine me? Get out of here!

Of course, only Zhiyun Group, which has extensive global business and is extremely large in scale, would do this. Other companies have neither the need nor the ability to do so.

In other words, Zhiyun Group is strong enough to make things so complicated and directly "play with the law" with the judicial systems of various countries...

Try it with an ordinary enterprise? You will die if you try!

Do you think you are Zhiyun too? Are you qualified to play the law with me? I will slap you to death... See this big slap? This is the fucking law!

The legal game is an exclusive game for world-class companies like Zhiyun Group and judicial elites from various countries. It has nothing to do with ordinary companies...

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Compared with Zhiyun Group, the equity structure of Wecoo Electronics and Wecoo Industrial is much simpler.

Liuhe Holdings, an offshore company under Xu Shenxue's personal name, holds 51% of the shares of Weiku Electronics. Offshore companies under the names of Xu's mother and Xu Weiwei also hold 2% and 3% respectively.

The option stocks of Bai Qiwen and other management members together account for about 10%. These option stocks are held by offshore companies, and Xu Shenxue is the actual controller of the company.

Blue Mountain Investment holds 4% of the shares. Then there is Zhiyun Group... not Zhiyun Holdings, but Zhiyun Group holds 30% of the shares of Weiku Electronics.

At the same time, the 15% shares held by Liuhe Holdings under Xu Shenxue are all B shares with 1 voting rights, while the other shares are A shares with only voting right.

The shareholding structure of Weiku Industrial is similar, also adopting an offshore company control model and an AB share structure.

The company's equity is held by Liuhe Holdings, an offshore company under Xu Shenxue's personal name, with 15% of the shares being B shares with 1% voting rights, and the rest being A shares with voting right.

For A shares, Zhiyun Group holds 26%, Wecoo Electronics holds 12%, Blue Mountain Investment holds 8%, Central City Investment holds 3%, and Southern Insurance holds 2%.

The listing time of these two companies will not be close together. Instead, Weiku Electronics will be listed first this year, and Weiku Industrial will be listed next year.

After Xu Shenxue finalized the listing, he quickly received a group of strategic investors and held a strategic investment meeting on Wecoo Electronics.

In addition to Xu Shenxue, representatives of other shareholders of Wecoo Electronics and strategic investment institutions also attended the strategic investment meeting of Wecoo Electronics.

The purpose of this meeting is mainly to determine the market value and strategic investment share of Weiku Electronics.

Regarding market value, there are still relatively large differences among them. For example, in the recognition of the price-to-earnings ratio, some recognize a price-to-earnings ratio of thirty times, while others recognize a price-to-earnings ratio of twenty-five times.

Others believe that as a high-tech company, Weiku Electronics can be overvalued at forty times or even fifty times.

Depending on the price-to-earnings ratio, the valuation of WeCool Electronics will also vary greatly.

Last year, Vico Electronics' revenue reached more than 50 billion US dollars and its net profit was 4.5 billion US dollars.

This year, revenue may reach around 60 billion US dollars, and net profit may exceed 5 billion US dollars.

Based on a net profit of US$5 billion, if calculated at a price-to-earnings ratio of 40 times, it would reach US$200 billion.

If calculated based on a price-to-earnings ratio of 30, the market value would reach 150 billion US dollars.

If calculated based on a price-to-earnings ratio of 20, the market value would be only US$100 billion.

Different price-to-earnings ratios will result in huge differences in the company's market value.

At present, the major shareholders of Wecoo Electronics, including Xu Shenxue personally, Zhiyun Group and Blue Mountain Investment, all believe that Wecoo Electronics is a high-tech company, and a light-asset high-tech company at that. Its price-to-earnings ratio cannot be evaluated based on the traditional manufacturing industry, but should be calculated based on the price-to-earnings ratio of high-tech companies, or even Internet companies.

Twenty times valuation is bullshit!
A valuation of 40 times the price-to-earnings ratio is the starting point, and it would be best if it could reach 50 times or more...which means that the market value must reach at least US$200 billion.

But a large number of strategic investment institutions are not stupid. They only need to find industry insiders to conduct a careful investigation and they will find that Weiku Electronics has nothing... It is just a pure design and assembly company and it does not have any core technology of its own.

The most valuable parts of this company are the two brands "Xiaolan" and "Weiku", as well as some patent technology licenses from Zhiyun Group and a relatively mature supply chain system.

Then it was gone...

You can’t claim that a chip is yours just because you are the first to launch the W906 chip from Zhiyun Semiconductor. You can’t claim that a screen is yours just because you use a screen from Huaxing Technology!

An assembly company must have the awareness of being an assembly company... Don’t think of yourself as a high-tech company. We are all an elite group. Don’t fool me as if I were a netizen!

For this type of design, assembly and sales company, the R&D investment is only over one billion US dollars per year, and most of it is used for technical support.

Many investment institutions believe that giving a P/E ratio of 20 times is already a courtesy to Xu Shenxue. If the company changes its boss, they will at most only give a P/E ratio of more than ten times!

This kind of design and assembly company has no core technology or even moat. If it weren't for the boss Xu Shenxue, it might have collapsed next year...

You know, the smart terminal industry is very competitive. A large number of vibrant domestic smart terminal manufacturers are developing rapidly and trying to seize the market share of Weiku Electronics.

In the eyes of many people, in this year's smart terminal market, except for Zhiyun which continues to dominate, the competition among other companies is very fierce.

Weiku Electronics is no exception!

Today, Weiku Electronics faces a lot of competition!

Warwick is continuing to impact the mid-to-high-end market, and has achieved very good results in the second half of this year. While taking over part of the four-star market share, it has also had a significant impact on Weiku Electronics' mid-to-high-end models, such as the Xiaolan MAX series.

OV is holding high the banner of the offline market and competing with Weiku Electronics in the offline market. Now the two sides are fighting fiercely in the offline market...

In a commercial street in a small county town, there is often a Xiaolan/Weiku mobile phone store on this side, and a V/O mobile phone store not far away... The offline sales staff of both sides are fighting each other to win customers.

There is also Dami. Their Black Rice series and Little Blue M series are direct competitors. The Dami digital series also follows a similar path to the Little Blue digital series. On the Internet, they often criticize each other and the competition is quite fierce.

Last year, WeCool Electronics officially withdrew from the low-end market below 1,000 yuan. A big part of the reason was that this market was dominated by Heimi, a brand under Dami Technology, in terms of price/performance ratio... This made WeCool Electronics' low-end mobile phones unprofitable, and they couldn't be sold because of their average price/performance ratio, so they simply withdrew from the market below 1,000 yuan.

It can be said that Weiku Electronics is now facing a three-way siege, as a large number of domestic mobile phone manufacturers want to bite off a piece of meat from Weiku Electronics.

Under such circumstances, some investment institutions are still willing to give a price-to-earnings ratio of 20 times, and that is already out of consideration for Xu Shenxue's face: after all, it is Xu Shenxue's industry, and Xu Shenxue will not sit idly by and watch Weicoo Electronics get into trouble... By then, just a little bit of money that sticks out from between Xu Shenxue's fingers will be enough for Weicoo Electronics to make a living.

Some investment institutions also believe that the stable cooperative relationship between Vico Electronics and Zhiyun Group will continue, and Vico Electronics can go further and even replace Sixin to become the world's third largest mobile phone company.

In addition to Xu Shenxue's special circumstances, we are willing to give a price-to-earnings ratio between thirty and thirty-five times.

But forty times... no investment institution is willing to give it for now... the risk is a bit too high.

Xu Shenxue is not in a hurry about this. He will just talk slowly and try his best to get a valuation that both parties can agree on, then start strategic investment and go public.

There is no need to rush... Those investment institutions are all very cautious when facing such a large investment case.

As it involves a corporate valuation of around US$200 billion and its subsequent listing, the financing may reach a scale of US$30 to 40 billion, and the scale of Xu Shenxue's cashing out will also reach several billion dollars.

These investment institutions are actually very cautious about strategic financing and listing operations of this scale.

So, don’t be impatient, take your time!

(End of this chapter)