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Chapter 483 0473 [Tudou.com's IPO Price Drops on First Day of Trading]

From New Year's Day to the Lantern Festival in 2011, mobile phones from the HarmonyOS camp experienced a major explosion.

Of course, the main reason is the explosion in the number of brands and models. There are 13 brands and 16 models equipped with the HarmonyOS system.

While the app ecosystem is taking shape, it is also bringing very serious negative publicity.

Because most of the smartphones in the HarmonyOS camp are low-end products, and their quality varies greatly.

The worse the phone, the more it tries to piggyback on the fame of HarmonyOS and Chen Guiliang. Consumers buy the brand because of Chen Guiliang and HarmonyOS, and because they are attracted by the low price. Only after receiving the phone do they realize they have been scammed, and they are so angry that they curse Chen Guiliang online.

The most obvious example is Panda Phone. Ever since its actual controller went into the sewing machine business a few years ago, the brand has been leaderless. It even suspended production for two or three years and was already on the verge of bankruptcy. Now, it's joined the HarmonyOS camp and is making phones again. Absolutely awful!
Nokia, Samsung, Motorola, and other competitors took the opportunity to kick them while they were down, hiring online trolls to smear the entire HarmonyOS camp.

Chen Guiliang had no choice but to bear it. He had enjoyed the benefits of the applied ecosystem, so he had to accept the consequences brought about by the mixed effects of the problems.

Fortunately, the HarmonyOS camp still has several very competitive apps, each of which has already gathered a group of loyal users.

During the entire Spring Festival period, among the top ten smartphone brands in the Chinese market, Apple had the highest average price (5289 yuan) and Huawei had the lowest average price (1071 yuan).

In January and February, the market share of Chinese smartphones saw Nokia-dominated Symbian camps drop to less than 32%, while the market share of HarmonyOS and Android camps continued to rise!

Nokia's situation is similar not only in the Chinese market but also globally.

As a result, Nokia's CEO was fired, and the new CEO was Stephen Elop.

This guy was previously a Microsoft executive and led the development of Office 2010. After taking the helm at Nokia, he immediately implemented sweeping layoffs and began abandoning the Symbian system, making all new Nokia phones under development run on Microsoft operating systems.

It is rumored that he holds a large number of Microsoft shares...

His subsequent actions were particularly outrageous; two years later, he sold Nokia's mobile phone business to Microsoft. Furthermore, he received a $2540 million severance package from Nokia.

On the same day he left Nokia, he returned to Microsoft to lead the company's mobile phone and Xbox gaming businesses.

I really don't even want to act anymore.

If someone else had been in charge of Nokia, there might have been hope of turning the tide, or at least preventing its swift demise. But with the new CEO's approach, Nokia's survival seems almost inevitable.

……

As soon as Chen Guiliang returned to Beijing, Wang Wei called: "Mr. Chen, Tudou.com is confirmed to go public on March 1st. Can we ring the bell together then?"

“Okay, I’ll fly there on time,” Chen Guiliang said.

In this version of Tudou.com, although the founder's ex-wife didn't cause any trouble, a potential problem was still discovered during the financial compliance phase.

What kind of landmine?
When Tudou.com initially granted stock options to its employees, it did not create a rigorous and formal USD valuation document, habitually describing the value of these options verbally in USD. However, before its IPO, it registered a company in the Cayman Islands, where accounting was required to be in the local currency (RMB).

When it comes to financial compliance, the accounting team can only "retrospectively restate" and include those option expenses in "liabilities".

This results in the following situation: the higher Tudou.com's valuation, the greater the book value of this liability, the greater the loss in the current period's financial statements, which reflects the company's poorer profitability.

This is outrageous! Who knows how it happened? —This is a true story, not a fabrication.

Chen Guiliang is not a professional accountant. In his previous life, his attention to Tudou.com was focused on the founder's ex-wife.

Tudou.com went through several rounds of financing, and so many venture capital firms conducted due diligence, yet they all failed to discover this problem. It wasn't until the financial compliance process during the IPO preparation phase that this hidden problem was discovered.

Wang Wei said with difficulty, "At the time, I felt we should align with international standards, so the stock option incentives were expressed in US dollars. If it affects the stock price after the listing... I'm very sorry, it was my fault."

“It’s not just your problem, all venture capitalists have problems. It’s amazing that none of them noticed this ticking time bomb,” Chen Guiliang sighed.

The sighs were all feigned; Chen Guiliang was actually overjoyed inside.

His initial investment in Tudou.com wasn't for cashing out and leaving, but rather to refine his business strategy.

Wang Wei planted such a huge time bomb, which conveniently gave Chen Guiliang room to maneuver.

In the past two years, institutions such as Blackwater have been aggressively shorting Chinese concept stocks, and Tudou.com has certainly become their target.

Tudou.com's stock price is about to hit rock bottom, and none of the venture capital shareholders will be able to cash out smoothly. In this situation, the venture capital shareholders will be completely disappointed with Tudou.com and will only care about getting back as much of their initial investment as possible.

Chen Guiliang then took the opportunity to negotiate with the venture capital shareholders and acquire their shares at an extremely low price, thereby gaining control of Tudou.com.

Next, he negotiated with employees who had stock options to void the old options and reissue new ones. Although the exercise price of the new options was extremely low, the employees were happy to accept it because it would be more beneficial for them to drive up the stock price.

The company then issued another public announcement, frankly acknowledging that the historical issues had caused trouble for investors, and that the company had now completely resolved this legacy problem.

At that time, the other venture capital shareholders will be ousted, Chen Guiliang will control Tudou.com, and its subsequent development will be entirely in accordance with his own wishes.

Moreover, he won't be investing too much money to achieve this goal. Because whether dealing with venture capitalists or Tudou.com employees, Chen Guiliang is essentially buying at rock-bottom prices.

Everyone should thank him for saving the day!
……

March 1, Nasdaq.

Chen Guiliang was not the only shareholder invited to ring the bell.

Everyone appeared cheerful, but apart from Chen Guiliang, everyone else was filled with worry. After the bell-ringing ended, Zhang Suyang asked Chen Guiliang, "Have you thought about what to do next?"

Zhang Suyang is an investment partner at IDG and also served as a director of ByteDance for three years. IDG has now completely withdrawn from ByteDance, earning approximately twenty times its initial investment. Had they waited longer to cash out, they could have earned even more.

"What's going on?" Chen Guiliang feigned ignorance.

Zhang Suyang asked, "Does ByteDance have any plans to increase its shareholding?"

Chen Guiliang said, "ByteDance is also facing a tight cash flow situation."

Don’t be nervous!

Zhang Suyang cursed inwardly.

With ByteDance's series of moves over the past two years, it's clear to everyone that Chen Guiliang is building a complete business empire.

Although Chen Guiliang acquired AcFun, AcFun's positioning is different from Tudou.com.

Will ByteDance abandon Tudou.com?

Tudou.com owns the copyrights to a huge number of popular TV dramas!

If Chen Guiliang doesn't step in to take over, the venture capital shareholders will think of other ways, such as facilitating the merger of Tudou and Youku.

Chen Guiliang and Zhang Suyang chatted idly for a while, and finally the market opened.

The price fell below the issue price immediately upon opening.

The opening price was 12.6% lower than the offering price.

Wang Wei finally couldn't hold back anymore, and his face turned extremely ugly.

The other shareholder representatives who came to ring the bell also had serious expressions and remained silent.

In this situation, Chen Guiliang had to fit in, so he quickly put on a sour face.

Fortunately, by the close of trading that day, the price had recovered slightly.

The atmosphere was very somber during the evening dinner gathering.

The following day, the stock price continued to fall, and all the shareholder representatives left.

I don't want to watch anymore.

Wang Wei became distraught and remained in a daze for half a month after returning to China.

……

After returning to China, Chen Guiliang discussed with Lü Zhihui when to make a move.

Lu Zhihui recounted recent news: "The US government has reached its debt ceiling, and the Republicans refuse to raise it, demanding that the US president cut spending. The president has refused, and the two parties are now deadlocked."

"Just give me the result," Chen Guiliang said.

Lu Zhihui said, "If the two parties in the United States continue to fail to reach an agreement, it may cause turmoil in the financial markets this year. Given Tudou.com's current situation, if it encounters a US debt crisis, some institutions may take the opportunity to short the stock, causing it to plummet. At that time, we can make our move."

Many people are paying close attention to the US debt crisis.

Everyone has been waiting for the results, and the general attitude is pessimistic.

When the US debt crisis fully erupts, not only will Tudou's stock price plummet, but most Chinese concept stocks will also suffer heavy losses. Only a few well-performing Chinese concept stocks, such as Baidu, will be exceptions.

Chen Guiliang opened a financial website and found many news reports about Tudou.com's stock price falling below its initial offering price.

In particular, the huge problem with Tudou.com is unbelievable to experts: after several rounds of financing, no venture capital firm discovered the issue, which is the main reason why Tudou.com's stock price fell below its issue price.

To put it simply, Wang Wei's outrageous and bizarre actions resulted in Tudou.com's stock option incentive expenditure being a full ten times that of Youku!
Chen Guiliang returned to his office and, having nothing to do, started a live stream.

Looking at the live stream chat, he said, "Don't ask me about the potato situation. It's not convenient to comment on it right now. Let's talk about it in a few months. The National City Championship of Oracle Era has entered the Spring Group Stage. I hope everyone can pay more attention to the live stream of the event."

"By the way, Youke has already partnered with multiple esports events, including WCG, both domestically and internationally. Not only 'Oracle Era,' but also 'Three Kingdoms Kill' and 'Future Era' will be included in the official tournaments."

"Foreigners don't play 'Three Kingdoms Kill'? I never said that 'Three Kingdoms Kill' would be included in international competitions. For now, it has only been included in official domestic competitions."

"Is there anything else you want to ask? The earthquake, tsunami, and Fukushima nuclear power plant leak in Japan? Of course, we feel grief for the people in the disaster-stricken areas of Japan. Let's all observe a moment of silence for them..."

"Holy crap, what's with all the 'hahaha' comments? We can't gloat over natural disasters; it's a shared tragedy for all humanity. However, I still hope Japan can resolve the nuclear power plant leak as soon as possible. This can't be delayed; the longer it drags on, the harder it is to deal with..."

"Brothers, stop talking about hoarding salt. It's really hard to keep this up. My hometown is YC City. I called my dad yesterday, and people in Longdu are actually hoarding salt. Damn it, Longdu has well salt, they can't even sell it all, what does it have to do with the Fukushima nuclear leak?"

"I advise everyone to be rational, otherwise the salt you stockpiled this time will be enough to last you for several years..."

(End of this chapter)