Those Years When I Was Forced to Top the Forbes List

Chapter 393 Newsletter: Retreat from the US to Hong Kong

Half an hour later, the Air Force returned to the city.

On the way, Chen Xuebing suddenly received a Starlink message from Xin Mengzhen's account.

The boss left, and it seems like things went wrong. [Feeling wronged] [Crying]

Chen Xuebing was stunned.

? ?
Mr. Xin rarely makes this kind of expression.

If she really messed things up, she should have just called.

After hesitating for a moment, he dialed Wu Ping's number.

It was quite lively on the other end when the call connected.

"How was the inspection by the leaders?" he asked.

"Haha, great! The leader is very satisfied with our technological development! We just saw the leader off!"

Has the phone been delivered?

"It's delivered! Mr. Xin happened to be here and shared his mobile internet experience in Shanghai from a user's perspective! He also introduced his company to the leadership!"

"So, Mr. Xin said it was a bit of a surprise? Is it this?"

"Oh, oh! Hahaha!" Wu Ping laughed again, then fell silent, seemingly having moved away from the noise, before saying, "I accidentally opened my phone's photo album during the demonstration! The first photo was a picture of you and President Xin! But it's okay, I scrolled past it immediately. Only the leader saw it briefly, and we've already spoken to the reporters. They'll cut it out and it won't be circulated! Haha, President Chen, you're quite the ladies' man."

Chen Xuebing's lips twitched, and then he remembered that he and Xin Mengzhen had taken a photo together a few days ago. It was taken at their home in Shanghai, with them holding a cat. It was a pretty normal everyday photo, except that their faces were quite close together and the angle was rather unconventional.

It's obvious they're a couple at a glance.

This is not a big deal.

He changed the subject, saying, "What else did the leader say? Any suggestions for improvement?"

"No, no, they just asked about our team and our listing situation. We have a lot of foreign staff, but I explained that Gintoki is our largest shareholder. We are now a Chinese-controlled company. Oh, the leader also asked why we are not listed in Hong Kong. I explained that the Hong Kong Main Board requires companies to have three consecutive years of profit records, with cumulative profits of no less than HK$5000 million, in order to facilitate financing."

Chen Xuebing remained silent for a long time after hearing this.

"President Wu, Spreadtrum's cumulative profits over the past three years must be at least 10 billion, right? It's not good to lie to the boss."

"."

"I'm not lying, this is the situation when we were preparing for the IPO! We really didn't have 5000 million back then!"

"."

"Mr. Wu, have you considered listing in Hong Kong?" Chen Xuebing suddenly asked.

This unexpected turn of events surprised the other side.

"Mr. Chen, you promised us that you wouldn't interfere with Spreadtrum's listing plan. Spreadtrum can list wherever it wants (see Chapter 286). Now the listing is just a few months away, and the queue is already full. The shareholders are very much looking forward to it. Please don't joke like this!"

“I’m not joking.” Chen Xuebing said seriously, “The financial environment in the United States next year will not be good, no, it will be very bad. We have already noticed the signs and have a series of short-selling plans. Nasdaq listings will be subject to a 180-day lock-up period, and there will be a one-year restriction on large-scale stock sales by company insiders and early major shareholders. Spreadtrum’s exit period will coincide with the major bear market in the US stock market. At that time, there will be a lot of complaints at the shareholders’ meeting. You have to trust my judgment.”

"Mr. Chen, the average price-to-sales ratio (PS) for the Nasdaq semiconductor sector is 5.8, while that for Hong Kong stocks is only 3.2. Our sales in the year before our IPO are likely to reach $10 billion, and will be even higher thereafter. The difference between listing in Hong Kong and on Nasdaq is at least $26 billion! You hold 51% of the shares, and even with a 25% dilution, you still have 38%! For you, that's a billion-dollar difference in net worth! Don't you care?"

[Price-to-Sales Ratio (P/S): Total market capitalization ÷ Annual revenue. For every dollar of revenue generated, the market assigns a valuation of x dollars. Semiconductor companies often operate at a loss, and the price-to-earnings ratio (P/E) is a better indicator of technological sophistication than the price-to-sales ratio (P/S).]

The entire Spreadtrum board watched as sales grew larger day by day, and the Nasdaq underwriting team kept bringing good news, as if watching their own wealth grow exponentially.

Spreadtrum's IPO team was more complete than Alibaba's: Morgan Stanley led the effort, with Goldman Sachs and Merrill Lynch as joint underwriters, and three of the five major U.S. securities firms were involved.

Moreover, its listing target is twice as high as Alibaba's HK$200 billion, with a target total market value of nearly US$60 billion and a fundraising target of 25%, or US$15 billion.

Although Singularity often compares itself to Spreadtrum, Wu Ping sees Huawei as its true rival.

Huawei almost sold itself for 500 billion yuan a few years ago, and he also wanted to make it a company with a market value of 500 billion yuan.

Chen Xuebing chuckled and said, “I’m a stock trader. Market capitalization is meaningless to me, especially as a major shareholder. I only care about the true value of a company. Even if Spreadtrum reaches 50 billion, it will never sell for more than 30 billion. In fact, in my eyes, its actual technological value is less than 10 billion. Relatively speaking, the valuation of Hong Kong stocks is a more accurate reflection of its actual value. Spreadtrum’s current value is what I gave it, right? When I invested, I remember your listing target was 400 million US dollars, raising 100 million US dollars. And that was just a target. You were very wise to invite me in, and that’s why everything changed.”

His tone did not follow Wu Ping's enthusiasm, and he poured cold water on the other party's enthusiasm.

Spreadtrum's price-to-sales ratio is actually quite inflated compared to its competitors, because the sales channels are not in Spreadtrum's control.

In his hands.

If he wanted to support a similar chip company, he could drain Spreadtrum dry in no time.

Moreover, this market used to be a counterfeit market, and because it was illegal, it was very unstable.

However, Chen Xuebing is working to develop this market into a more professional and stable one, gradually strengthening Spreadtrum's foundation.

"President Wu, you should pay more attention to the underlying technological value rather than the sales value. The core value of a technology company is technological monopoly. Have you achieved that? You are far behind Huawei and cannot compete with European and American companies. So don't care about these empty titles. If you still can't see this after my influence, then I'm a little disappointed. The stock market will soon disappoint you as well."

Turnkey and 3GTD are short-term values. If Spreadtrum's path cannot connect to the future, its market value will soon vanish like smoke.

Spreadtrum Technologies is currently new and proud, but it has been exposed as nothing in the face of Chen Xuebing's cold words.

"Mr. Chen, Huawei focuses on WCDMA, while we are on TD. We can't compete with Huawei. If you want us to compete with European telecommunications companies, we'd have to be on the same track as them!"

"The world will eventually be united. After LTE, we will all be on the same path. The performance gap between time division duplex and frequency division duplex will disappear. It will only be a difference in how the spectrum is used. Key technologies such as MIMO and beamforming have a greater advantage in the reciprocity of uplink and downlink channels in time division duplex and in achieving precise air interface control. Don't say that they can't be compared. Whoever runs faster in the future will be the main road."

In the 3G era, WCDMA was like an eight-lane highway with both directions open to traffic simultaneously, resulting in smooth traffic flow. TD-SCDMA, on the other hand, was like a four-lane ordinary road with traffic flowing in and out in turn, which was slow. Traffic police were slow to direct traffic, and congestion naturally occurred when there were many cars.

However, with the advent of 4G, LTE shortened the time of time division switching to the millisecond level, so users no longer felt any difference in the time it took to clear traffic. Multi-carrier technology further split a main road into dozens of smaller roads for parallel traffic, greatly reducing the probability of traffic jams. MIMO technology allows multiple antennas to be installed on the roadside, enabling intelligent traffic police to simultaneously command multiple convoys, doubling the transport capacity.

When everyone can drive at a similar speed, the actual traffic efficiency becomes the same. The only difference between the two is the management mode. TD is actually more flexible in traffic jams, as it can allocate more lanes to the side that is downloading or uploading.

The key to comparing technologies lies in who first masters the more mature LTE, who has mastered the technology of more carriers, and who has mastered better MIMO.

When discussing technology, Mr. Chen's thinking became increasingly fluent, while Wu Ping began to get a little stuck.

Because he couldn't find a reason.

The collaboration between Spreadtrum and Huawei aims for a world of harmony.

Once that day comes, and the cost of acquiring spectrum for TD is reduced by 50%, then TD will become the mainstream.

If he doesn't even have confidence in this, how can Chen Xuebing, the biggest investor, trust him? How can he provide him with market opportunities and profits?
"But Spreadtrum needs to conduct technological research and development, and when it goes public, you have to let us raise more funds, right?"

A high valuation naturally leads to higher financing costs.

“A Hong Kong listing will raise just as much capital as the Nasdaq,” Chen Xuebing said decisively. “Remember what I said about the telecom operator concept? If we list as originally planned in three months, given Spreadtrum’s current control over base station construction orders, can the telecom operator concept really be hyped up? Leave the Hong Kong listing to me. Give me six to seven months, and you can secure telecom orders and build your own infrastructure. I’ll help you win more base station orders and reorganize Spreadtrum’s Hong Kong listing. The market capitalization will be at least 400 billion, and possibly 500 billion.”

President Chen was unusually confident, but Wu Ping felt as if he were listening to gibberish.

"Mr. Chen, the Hang Seng Index is not the same as the A-shares! The Hong Kong stock market doesn't have a bull market like the A-shares!"

The A-shares market rose two to three times last year, while the Hang Seng Index only rose from 15000 points to 20000 points, and has recently fallen quite a bit to 19600!
The A-share market is semi-closed, and without the checks and balances of foreign capital, it can cash out in large quantities, allowing for extreme frenzy. Hong Kong, on the other hand, is a dual market dominated by foreign capital. Once a bull market occurs, foreign capital will not hesitate to cash out and leave, leaving behind a mess.

"And according to your logic, if US stocks fall, and given the strong correlation between Hong Kong and US stocks, won't they be affected?"

Wu Ping racked his brains and used all his financial knowledge to fight against Chen Xuebing.

“If you don’t believe me, let’s bet again, this time on equity,” Chen Xuebing said calmly.

He was well aware of the Hang Seng's trend. Although his reaction was a bit slower, he knew that when the A-shares market reached its peak, the Hang Seng would also peak at 30,000. The Hang Seng was indeed affected by the US stock market, but he could accurately enter the market at high levels.

Spreadtrum's listing documents for the US stock market are ready, and international investment banks are optimistic about its prospects. It plans to list in Hong Kong, and six months is enough time for it.

Changzheng will also gain experience from this listing process, and may even be able to establish a Hong Kong securities firm as a result.

Since the leadership has given the order, and Spreadtrum has obediently withdrawn from Nasdaq and returned to list on the Hong Kong Stock Exchange, some financial obstacles may be relaxed for Long March to handle this matter.

He actually owns a mainland securities firm, and it would be easy for him to take it over. However, to apply for Hong Kong securities firm qualifications through this, he would need a crucial opportunity.

This opportunity is extremely important. If Changzheng doesn't even have the qualifications to be a Hong Kong stock brokerage firm, it's like it's missing a leg. How can we talk about improving the Chinese stock market?

We can't expect all high-quality companies to choose A-shares and the ChiNext board, can we? Some technology companies are invested in by dollar funds, which require delisting from the dollar market when they invest. Only Hong Kong stocks can meet the alternative conditions, and we can't make things difficult for them on this point.

"Moreover," Chen Xuebing said quietly, "President Wu, Spreadtrum is still playing the Chinese 3G game. Once it goes public on NASDAQ, CFIUS will start to intervene in Spreadtrum's technical review. Do you think this question is just a formality? Spreadtrum is gaining an increasingly important position in China's telecommunications industry, and political risks will gradually take precedence over financing needs. No matter how well you isolate your technology, it will still be a foreign-listed company. Foreign countries will not recognize Spreadtrum just because it is listed on NASDAQ. They can issue policies to exclude Spreadtrum at any time when needed. It is also difficult to trust it domestically. Rather than pleasing neither side, why don't we learn from ZTE, list on the Hong Kong Stock Exchange, issue ADRs on the US OTC market, and make them over-the-counter instruments? Wouldn't that be better?"

Hong Kong has the US OTC market as a backup channel, which still allows the sale of shares to US investors, although the liquidity is slightly lower. It can serve as a supplement to the overseas liquidity of Hong Kong stocks.

There was no way to argue with him on any front, and Wu Ping was no match for Chen Xuebing in the financial field. Wu Ping could only sigh and say:
“Mr. Chen, if you insist on doing this, I can’t convince the other shareholders. Why don’t you convene a shareholders’ meeting, talk to the shareholders, and then we can vote?”

Chen Xuebing chuckled: "Are you sure you want me to get involved in direct negotiations with other shareholders? I haven't contacted other shareholders because I've always trusted your management team, not because I lack the ability."

Wu Ping felt a chill run down his spine upon hearing this.

MediaTek's Tsai Ming-kai was defeated by Chen Hsueh-bing last time.

If the two of them cooperate, they will have a combined 60% stake.

It's not far from absolute control.

Their management owns 20%, and the other 20% is held by other shareholders.

The other shareholders trust them, but Chen Xuebing may still have a chance to win over some of them.

If it comes to a fight over equity, Spreadtrum's previously harmonious and unified approach will be disrupted.

"Mr. Chen, what I mean is that everyone needs to be respected. You can't make such a big decision all by yourself."

“I have always respected shareholders, and I respect you even more. However, investors and shareholders seek profits. As long as I am confident that they can make a profit, that is enough for them. They don’t need to care about anything else. I will only discuss the development direction with your management team. How about this, you consult with Mr. Chen and give me an answer.”

Chen Datong was the one who truly convened the original shareholders' meeting of Spreadtrum. At that time, Wu Ping was just a technician and was not qualified to call for overseas investment.

"Mr. Chen, I'm at Spreadtrum." Chen Datong's laughter suddenly came from the other end of the phone. "I heard the leaders were inspecting the area, so I came over."

"Oh." Chen Xuebing laughed as well. "Teacher Chen, did you hear what I was saying to General Wu just now?"

“I heard roughly what you said. I know you have other considerations. Is the new leader's opinion important to you?” Chen Datong hit the nail on the head.

"It is important," Chen Xuebing readily admitted, "but I won't gamble with Spreadtrum's future."

Chen Datong continued, "Listing in Hong Kong carries risks. It's not as stable as Nasdaq. If we withdraw from the US and go to Hong Kong, we'll have to pay the brokerage firm over $100 million in public relations fees."

“I will take responsibility. I have already assessed the risks of Hong Kong stocks, and they will not be greater than those of US stocks.”

At this moment, Chen Datong hesitated for a moment: "What aspect of the risks in the US stock market are you referring to?"

"The housing market and MBS securities are about to explode. The $13 trillion stock market is an unbearable burden," Chen Xuebing bluntly stated. "The ABX index plummeted by 15% in February, but miraculously recovered in March. This month, the LIBOR-OIS spread is 40 basis points, a harbinger of the collapse of interbank trust. The repurchase agreement collateral discount rate is 50%, far below the normal range, signaling the critical point of liquidity depletion. Once the off-balance-sheet risks of banks are exposed, the market will completely stop moving, leading to a total collapse."

Chen Datong seemed to realize something: "I've heard some things, but the Federal Reserve has already..."

"The Fed's successful bailout depends on Wall Street's willingness to listen and reduce leverage. But will they listen? And can they actually do it? Moreover, this is not just a liquidity crisis, but also a solvency crisis. When the underlying borrowers can't repay their loans, all the magic of securitization will fail. Mr. Chen, I consider you one of my own. Pay more attention to the crisis beyond the positive news. You will find more signals. You should withdraw your investments in the US as soon as possible."

Chen Xuebing felt a little smug when he said this.

He can now calmly transform his prophetic insights into professional judgments. Although he cannot draw definitive conclusions, his analyses are already quite reasonable and persuasive to professionals.

This is all the result of his long-term study and constant attempts to question his own prophetic abilities.

I knew this would happen, but why did it happen?

This is a question he often reviews.

By combining the answer with the deduction process, and finding the key points in the development of events, this is a shortcut for reborn learners.

"Thank you for the reminder, Mr. Chen. I agree with your idea. However, we also have something that requires your support."

"You said."

"Um... it's harder to adjust the option pool after the company goes public. If we were listed on the US stock market, we've already submitted the documents, so it's difficult to change anything. But if we relist on the Hong Kong stock market, is it possible?"

"How much do you want?" Chen Xuebing asked directly.

"Dilute the existing equity and add 10%."

"I agree."

There is no business deal that cannot be made.

Chen Xuebing owns the majority stake of 51%. Diluting his shares and increasing the option pool will result in the biggest loss for him. If the option pool is to increase by 10%, he will have to contribute 5.1%.

The allocation of the option pool is decided by management, giving Chen Datong and Wu Ping more say.

“I have no objection to you wanting to strengthen your management and control. Giving up these shares has already demonstrated my trust in your management team. However, I have already set the incentive terms. Do not indiscriminately incentivize them in the short term. Use them sparingly.”

Chen Xuebing adopted the most amiable and earnest tone, stating that if the other party continued to issue shares to seize power, he would take back shares and seize control during next year's stock market crash.

For him, when he wants to completely seize control of a listed company is simply a matter of money.

"Okay, Mr. Chen, I'll try to persuade the shareholders. If anyone disagrees, we'll hold a vote."

Chen Datong has completely changed his stance. The management team plus Chen Xuebing now holds absolute control, and the opinions of others are no longer important.

“Mr. Chen, you are a seasoned investor and a tech expert. Let’s focus on long-term development and not be short-sighted,” Chen Xuebing reminded him again.

"Of course. By the way, have you looked at the few tech companies I found for you?"

“I’ve seen it, it’s fantastic. Wang Kai’s team, the former CTO of Motorola China, is very good. I’m going to send someone to make contact with them. It would be best if they could be directly incorporated into ARM China’s team.”

"No problem, I'm quite familiar with these people. Whichever one you like, I'll talk to them for you."

"Then trouble you."

Thousands of miles away, Chen Datong smiled and put down the phone.

Wu Ping stared wide-eyed in disbelief.

"Mr. Chen, you initially set listing on the US stock market as your primary goal for starting a business after returning to China. You said it was the key to entering the international supply chain. Are you really going to give it up for just 10% stock options?"

He could never forget the passionate words Chen Datong spoke when he led them back to China.

"Do you have any other ideas?" Chen Datong asked in return.

Wu Ping's voice became hoarse.

Chen Datong patted Wu Ping on the shoulder: "You've always wanted to learn from me how to be an investor. When you know something is impossible, don't dwell on past goals and vacant costs. Instead, propose the most favorable terms for yourself at the right time. Don't miss the opportunity and put yourself in a completely passive position. These are the basic qualities of an investor."

(End of this chapter)