What's wrong with me being a rich man?

Chapter 585 The Road to Listing
Lingang maintains a leading passion for deep learning in China.

Regarding this point, Yu Xing quoted Bill Gates at a company conference of Carbon Silicon Data: "We always overestimate what will happen in the next two years and underestimate what will happen in the next ten years."

This is Gates' reflection on the speed of internet development in his 1996 book "The Road Ahead," and it is also very applicable to deep learning at this stage.

Lingang, or rather Yu Xing, has the capability to invest more resources in the field of deep learning, but development in this area obviously cannot be completed within a few years as Musk has described, and he must also consider the practical applications of this investment.

This brings us back to the perspective of systems engineering, since software, hardware, and theory are all indispensable.

Based on these considerations, after multiple closed-door discussions on autonomous driving, Yu Xing also held a closed-door meeting at Silicon Carbon Data to discuss his ideas and explore the possibility of the company going public.

Silicon Carbon Group has already been in contact with Goldman Sachs and is determined to start its IPO process as soon as possible. However, the uncertainty surrounding Silicon Carbon Data is relatively high. In previous communications, Goldman Sachs representatives also inquired about Yu Xing's considerations regarding Silicon Carbon Data.

Zhong Zhiling generally agrees with his senior's enthusiasm for deep learning, but believes that the company's revenue growth is excellent and that it will be able to make room for growth in the next two or three years. He also generally agrees with his senior's discussion on going public, but believes that there is no need to rush into an IPO like Bai Xiaosheng did back then. Douyin has not yet been acquired by the company, and MusVid can also have new possibilities as carbon silicon data develops.

Of course, he expressed principles in meetings and his opinions privately.

“Brother Xing, we have already taken the lead in the short video market, and the potential of the latest hot topics is still huge. We can invest in some deep learning research and development, but we don’t need to look for a direction that can go all in like Baidu does.”

“Our development in the domestic market is significantly faster than that overseas. If we seek to go public now, we may face some operational constraints later.”

Although Chung Chih-ling holds stock options in Silicon Carbon Data, he does not actually expect the company to go public at this stage.

After listening to the remarks made after the meeting, Yu Xing pondered for a moment and then said, "Zhi Ling, you could have said that in the meeting."

Zhong Zhiling explained, "Brother Xing, I just need to think more about what you said. My thoughts are sometimes one-sided, and I'm afraid that saying them in a meeting might have an impact."

“You’re a nice person in front of me, but I hear from others that you’re quite cold-hearted at the company.” Yu Xing took a sip of tea. “If you’re not going to say it in the meeting, then you can talk to everyone about the enthusiasm that’s welling up in private.”

Zhong Zhiling emphasized, "Brother Xing, I'm not cold-hearted, I'm rational."

Yu Xing nodded: "It was originally just a discussion. Since you are so rational, then you should lead the communication on Douyin's return."

Zhong Zhiling knew that he needed to shoulder the pressure...

The listing of Silicon Carbon Data Company can be further discussed. Silicon Carbon Group has already embarked on its listing journey. If it receives support from capital operations, it can also play a leading role in technology research and development, and is relatively more inclined towards the implementation of specific scenarios.

This is not Yu Xing's first time taking his company public. This time, he has once again used the Goldman Sachs and Morgan Stanley combination from Bai Xiaosheng. He has already set up a VIE structure suitable for overseas listing and is about to submit an application to the China Securities Regulatory Commission for listing in the United States.

From this month to next month, the company will be engaged in pre-IPO preparations, mainly focusing on compliance procedures. Around September, it will submit its registration documents and enter the SEC's review process.

Yu Xing had discussed the company's IPO with Goldman Sachs last year. At that time, the plan was to use the emerging growth company designation under the SEC to shorten the listing time, and Goldman Sachs felt there was no problem with that.

However, with the booming sales of Kyushu silicon carbon products, an obvious problem has emerged.

The standard for emerging growth companies is annual revenue of less than $1 billion. Corresponding to the price of Silicon Carbon Group's models, this is about 25,000 cars sold per year. However, Silicon Carbon achieved a breakthrough of 25,000 cars rolling off the production line on June 2.5, which made it impossible to go through the simplified process.

Huang Guobin, the Goldman Sachs executive in charge of the project, couldn't hide his bewilderment after taking over and comparing the assessments before and after. He communicated internally, saying, "How exactly did silicon carbide manage to sell cars so well? The sales have at least doubled from 2.5 to this year."

My colleague laughed and replied, "If you sell at a loss like Mr. Yu, you can still sell well."

Huang Guobin shook his head. This was clearly a radical breakthrough factor, but it couldn't be simply attributed to this one point.

And, more importantly, whether the success of the Silicon Carbon Group in new energy can be replicated—this kind of thinking and judgment will be beneficial to our future work.

Huang Guobin hoped to gain more insights in subsequent communications with President Yu, but there was a huge difference between the two sides regarding the valuation of the carbon silicon group.

He was immediately interrupted on the phone when he mentioned that Goldman Sachs believed silicon carbon was worth around $80 billion.

“It’s too low, Mr. Huang. Silicon Carbon is the first listed new energy company in China. This market capitalization severely undervalues ​​Silicon Carbon,” Yu Xing objected without hesitation. Huang Guobin explained Goldman Sachs’ various reasons, such as Tesla’s current market capitalization being only around $300 billion, which has a wider reach, while Silicon Carbon Group is highly dependent on subsidies.

"No matter what, this is not a fair value," Yu Xing said coldly on the phone. "I know that Goldman Sachs uses the method of setting low prices. If Goldman Sachs doesn't work, then find another one."

Silicon Carbon Group's last Series C valuation was $40 billion. Given its current strong sales, doubling its market value is unreasonable. Even considering Tesla's stock price, domestic market subsidies, range-extended vehicles, and potential competition, the story should be even better.

Silicon Carbon hopes to achieve a market capitalization of at least $100-120 billion.

Huang Guobin said, "President Yu... this is questioning our professionalism. It's not that we want to set a low price. The greenshoe option is a normal tool for everyone to work together to maintain stock price stability. The current market situation is roughly like this, regarding carbon..."

He was hung up on before he could finish speaking.

Huang Guobin had long known that President Yu had a strong personality, and he was not intolerant of the other party's anger.

However, just two days later, news broke that silicon carbide was in contact with other organizations, which was unacceptable to many.

After being spoken to by his superiors, Huang Guobin, after repeated reflection, suddenly realized that there were indeed some unprofessional aspects to his work. He could only go to Lingang to express his apologies in person and say that it was not yet time to price carbon silicon, and that a more accurate valuation could only be obtained during the roadshow.

While Silicon Carbon Group has begun its IPO process, Silicon Carbon Data has also put the acquisition of Douyin on its agenda and has conducted preliminary communication with its shareholders.

The five institutions in the first round remained tacitly in favor, but the five that came in during the B round were less willing. Matrix Partners, GGV Capital, and China Renaissance Capital all believed that Douyin was fully capable of operating independently.

When the two sides communicated further, the five Series B investors immediately expressed their firm and strong opposition when they heard that Silicon Carbon Company offered a repurchase price of $15 billion. Douyin's Series B valuation was $13 billion, and now that it has achieved market leadership, it is only offered a 15% increase. This is absolutely unacceptable!
I didn't invest in Douyin for such a small profit!
Zhong Zhiling was met with fierce criticism from institutional investors, who believed that the valuation of the silicon carbon company was unprofessional and a serious undervaluation of Douyin!
“Back then you said Douyin’s valuation was too high, and now that valuation has increased further, you think it’s too low,” Zhong Zhiling responded to Du Yuchen of Matrix Partners China. “Douyin’s shares can be transferred to Carbon Silicon Data. Letting them develop together is the most beneficial situation for everyone.”

Du Yuchen said firmly, "No, this valuation is impossible. I need to see President Yu!"

“Mr. Du, you are welcome to come to Lin Hong Kong, but the repurchase of Douyin has been discussed by the board of directors,” Zhong Zhiling said. “Mr. Yu also approves of it.”

Du Yuchen couldn't accept such a price so easily, so before even arriving in Lingang, he first contacted General Manager Yu by phone.

Yu Xing listened for a while and said, "Zhong Zhiling's words make sense. We talked about the valuation for a long time before, and it was indeed quite high. This time it's a share conversion, and Douyin's valuation will be transferred to Carbon Silicon Data Company. If your valuation increases, Carbon Silicon Data will also have to be inflated. Why don't we just talk about it based on 13 billion?"

Du Yuchen paused for three seconds, then said only one sentence: "President Yu, how can you convince the public if you do it this way?"

Yu Xing asked, "What does it mean to win people's hearts? Does it mean that everyone sits down together to vote? Does it mean that if everyone agrees, you agree too?"

Du Yuchen's mind raced through the list of institutional shareholders, but he stubbornly insisted, "No matter what others say, I refuse to accept this!"

Yu Xing asked again: "Is it that after everyone voted and it passed, you had no choice but to sign it, but you were still unwilling and dissatisfied?"

Du Yuchen understood that President Yu was dismantling the roof so that President Zhong could open the windows.

After a few seconds of silence, he said, "President Yu, this valuation is unreasonable."

Yu Xing sighed, "President Du, I understand your feelings and position, but we should think long-term. It's a fact that Douyin can only develop by relying on silicon carbon data."

Du Yuchen said, "President Yu, then why did you split Douyin off in the first place? Wasn't it to get everyone to help you with this? You can't just turn your back on it like that."

“Yes, we acknowledge it, but helping out didn’t delay everyone from signing contracts. We’re still doing things according to the rules, aren’t we?” Yu Xing said. “The overall development of Carbon Silicon Data Company will be better, and its subsequent valuation will also be better.”

After another period of silence, Du Yuchen uttered three words: "I'm not convinced."

Yu Xing replied with four words: "Dissent is permitted."

(End of this chapter)