Huayu: Starting from joining the mainstream entertainment industry in 96

Chapter 392 (390): Taking a Gamble

After a brief silence, a suppressed murmur arose in the conference room.

Although the representatives of international investment banks maintained a professional composure, the glint in their eyes and their slightly forward-leaning posture betrayed the intense turmoil within them.

Hu Zuliu from Goldman Sachs leaned back slightly in his chair, his fingers unconsciously tapping lightly on the smooth tabletop.

Although his refined face maintained a professional calm, his heart was already in turmoil.

He quickly calculated the plan proposed by Wang Sheng in his mind, with the pre-IPO valuation implied in the description of the financing amount and equity dilution.

Raising 30 billion yuan and diluting approximately 20% of its shares implies that Wang Sheng expects Shengying Media to be valued at at least 150 billion yuan.

This figure far exceeds their previous conservative model (50-60 billion) based on publicly available data and industry comparisons.

He turned his gaze to Wu Changgen across from him, and the two exchanged a meaningful look.

Wu Changgen of Morgan Stanley, a banker known for his aggressive style, has also toned down his sharp edge at this moment.

He placed his hands on the table, his brows slightly furrowed.

Wang Sheng's assertiveness and clear bottom line were beyond his expectations.

With A-shares as the mainstay, control that cannot be challenged, and a huge amount of financing available... this completely disrupted his plan to package Shengying as "China's Disney" and promote it overseas.

He was well aware that, given Shengying's current profitability and asset size, supporting a valuation of 150 billion or even higher in the A-share market would be extremely challenging.

Are A-share investors willing to pay such a high premium for a cultural media company that combines "light assets" and "heavy assets" and carries ideological overtones?

Representatives from overseas institutions such as IDG Capital and SoftBank Asia were more concerned about the reserved "equity incentive pool" held on behalf of Wang Sheng.

This is both a strategy Wang Sheng uses to bind core talent and a potential further dilution of the equity of all shareholders in the future.

As venture capitalists, they are more accustomed to protecting their interests through complex terms such as preferred shares under overseas structures. Under the A-share framework, these operational options are greatly limited.

UBS representatives spoke quickly and quietly in English with their colleagues, focusing on the uncertain timeline of the "QFII" program and the liquidity risks in the A-share market.

In contrast, representatives from domestic securities firms such as Southern Securities and Huaxia Securities, while also shocked by the amount of 30 billion yuan, showed more excitement.

Leading the completion of such a landmark IPO would greatly enhance its brand and industry standing.

However, they also know that such a huge amount of financing requires mobilizing a large amount of domestic capital, and may even require the introduction of "national team" level investors such as insurance funds and social security funds, which makes the approval process and coordination extremely difficult.

"Mr. Wang,"

Goldman Sachs' Hu Zuliu finally spoke again, his tone more serious than before, "Your ambition is admirable. The $30 billion financing amount clearly demonstrates Shengying's determination to expand in the future."

However, this figure, and the corresponding valuation expectation, presents an unprecedented challenge in the current market environment, especially in the A-share market. We need some time to discuss this internally.

“Of course.” Wang Sheng nodded slightly and gestured for them to proceed. “Li Tingting, please take the gentlemen to the prepared reception room to rest. Tea and refreshments have been prepared.”

Representatives from various capital groups stood up and followed Li Tingting out of the main conference room with serious expressions.

They need to urgently assess the feasibility of Wang Sheng's plan, recalculate the risks and benefits, and communicate with their respective decision-making bodies.

The huge conference room suddenly emptied, leaving only Wang Sheng and his core assistant, as well as—the general manager of CICC, Mr. Zhu, who did not get up.

Mr. Zhu slowly took a sip of the slightly cooled tea, looked at Wang Sheng, and gave him a complex smile with a hint of admiration: "Mr. Wang, this is truly groundbreaking."

30 billion in A-shares. Do you know what that means?

Wang Sheng relaxed his body, leaned back in his chair, and showed a tired yet sharp look on his face: "President Zhu, of course I know. This means that we are going to make history, and we will also face unprecedented scrutiny. But this is the path we must take."

"Yes, we have to go."

Mr. Zhu sighed, putting down his teacup and becoming serious. “From a policy perspective, supporting Shengying’s listing on the A-share market aligns with the strategic direction of ‘making the local cultural industry bigger and stronger’ and ‘mastering the cultural discourse power’.”

Especially in the context of China's accession to the WTO, establishing a successful, market-oriented benchmark for local cultural enterprises has political significance that even surpasses its economic significance.

I've already communicated with the Publicity Department, the State Administration of Radio and Television, and the Ministry of Culture, and they've basically given it the green light. As for the China Securities Regulatory Commission (CSRC), although they may have questions about the amount and valuation, as long as the performance is genuine and the business is compliant, the obstacles to pushing for listing will be much smaller as it's a reform pilot program.

He then shifted his focus to the core issue: "But the key lies in the window of opportunity and the market's capacity to absorb it. In 2002, the A-share market had experienced the turmoil of state-owned share reduction in 2001, and market confidence had not yet fully recovered, resulting in an overall weak trend."

The first half of the year, especially March and April, is not an ideal window for IPOs.

Large state-owned enterprises and banks are queuing up for restructuring and listing, and the capital market is not in a loose monetary environment.

"Investing that 30 billion requires an extremely strong underwriting syndicate and investor relations network."

Wang Sheng tapped his fingers lightly on the table: "Considering the mandatory one-year tutoring period, I can wait in terms of time. But I won't wait indefinitely."

The post-production of "Night at the Museum" will take more than half a year. I hope to complete the IPO after the company's most sensational work is released.

This is both building hype and realizing value. I predict that "The Museum" will be released during the Lunar New Year holiday this year, and its market launch should ideally be completed next year.

After a moment's thought, Mr. Zhu said, "Next year... if the market recovers by then, coupled with the success of 'Night at the Museum,' it could be a possible opportunity."

However, regarding valuation, Mr. Wang, with a market capitalization of 150 billion, and based on a financing amount of 30 billion, the issuance price-to-earnings ratio will be very high.

We need to convince investors with high growth expectations for the next few years. Shengying's financial reports, especially those for businesses like film studios and special effects—which require large investments and have long payback periods—need a clearer picture of their profit model and future prospects.

"Please rest assured about that."

Wang Sheng confidently stated, "'Jackie Chan Happy Park' is not only a filming location, but also a model of cultural and tourism integration."

Its revenue will come from tickets, merchandise, hotels, and catering, making it a platform that continuously generates cash flow.

Although the special effects company has invested heavily, the success of "The Legend of Zu" and "Kung Fu Soccer" has proven the market's thirst for high-quality visual effects. In the future, it can not only use them for its own purposes, but also undertake external projects.

These are stories we can tell, and we must tell them well.

While Wang Sheng and General Manager Zhu were discussing in depth the details of the listing timetable, valuation basis, and future growth points, a tense struggle and game of capital was taking place in the next few meeting rooms.

...The atmosphere was heavy in the room where Goldman Sachs and Morgan Stanley were located.

“A valuation of 150 billion, 30 billion in financing, A-shares…” Wu Changgen paced back and forth, “Where does his confidence come from?”

Hu Zuliu remained relatively calm. Standing by the window, he said, "President Wu, we can't just look at Shengying using traditional valuation models. It monopolizes the best commercial directors and producers in China, has tied up the most influential international stars, controls the rapidly growing core cinema channels, and is trying to transform film IPs into physical tourism economy."

Prior to this, he had already built the Chuangguandong Film and Television City, which generated annual profits of over 100 million yuan.

This is a model that only Disney and Universal Studios have mastered in the United States.

China has 1.3 billion people. If even a small fraction of them were to pay for this kind of entertainment consumption, the market would be astronomical.

Wang Sheng saw this; he was betting on the nation's future and on the enormous potential of China's consumption upgrade.

“But what about political risks? Cultural censorship? Policy changes?” Wu Changgen asked rhetorically.

“Of course, risks exist.” Hu Zuliu turned around, “but joining the WTO is an irreversible process, and China needs to present an open and modern cultural image to the world.”

Sheng Ying is the business card they chose.

To some extent, investing in Shengying is investing in the future of China's cultural industry opening up.

I believe we can accept the A-share proposal, but we must strive to maximize our interests regarding underwriting fees, the greenshoe option (over-allotment option), and priority for future overseas cooperation.

Regarding valuation, negotiations are possible, but Wang Sheng's stance is unlikely to change.

……

In the room with IDG and SoftBank, the discussion focused more on exit mechanisms.

“Listing on the A-share market comes with a long lock-up period, and exiting is not as flexible as overseas. However, the advantage is that if Shengying can truly become a leader in the cultural sector, its valuation premium on the A-share market could be astonishing,” an IDG representative analyzed.

"The key is to believe in Wang Sheng as a person," a SoftBank representative said. "Every step he has taken in the past has been both unexpected and incredibly precise."

From wedding videography to dominating the Lunar New Year film season, from establishing cinema chains to international collaborations, his strategic vision and execution capabilities have been repeatedly proven.

Betting on his continued success is more important than simply analyzing financial statements.

I believe we can follow suit, but we need to clarify the investment and exit strategies for Enlight Media and other related businesses.

……

Domestic securities firms gathered in another room, their excitement tinged with pressure.

"30 billion! If we can lead the way in this, we can establish ourselves as a top investment bank in China!"

"But we can't handle this on our own; we need to unite with more securities firms, and even bring in insurance and trust funds. We need to report to headquarters immediately and mobilize all resources!"

“Valuation is key. To convince domestic investors to accept this price, we need to carefully prepare roadshow materials and thoroughly explain Shengying’s ‘channel + content + cultural tourism’ ecosystem story.”

……

Time passed by minute by minute.

More than an hour later, under Li Tingting's guidance, the representatives of various capital groups returned to the main conference room.

Each person's face bore the mark of a well-thought-out decision.

Wang Sheng remained seated in the main seat, calm and composed.

Mr. Zhu sat next to him, his expression calm.

Hu Zuliu, representing Goldman Sachs as an international investment bank, spoke first, his tone regaining its previous composure and confidence: "Mr. Wang, after careful internal discussion, Goldman Sachs recognizes the long-term value and strategic direction of Shengying Media."

We are willing to accept the proposal of listing primarily on the A-share market and will fully assist Shengying in achieving this milestone financing.

Regarding valuation and financing amount, we understand and respect your expectations. In subsequent detailed negotiations, based on more detailed financial forecasts and roadshow feedback, we will seek a balance that can meet the company's development needs and be accepted by the market.

We hope to serve as joint lead underwriters in the underwriting syndicate and have priority in cooperating with Shengying in its future international business expansion and potential overseas financing.

Morgan Stanley's Wu Changgen followed suit, his tone less aggressive but still firm: "Morgan Stanley also supports the A-share listing plan. We bring not only capital, but also a global perspective and resources."

We requested to be listed as a joint lead underwriter alongside Goldman Sachs and to play a leading role in bringing in high-quality international long-term investment institutions (through a possible future QFII channel).

The statements from the two giants have essentially set the tone for this round of financing.

Seeing this, other international investment banks and venture capital firms also expressed their willingness to follow suit, but each put forward its own requirements regarding specific roles and profit distribution.

At this moment, Mr. Zhu from CICC smiled and said, "As a local investment bank, CICC will give full play to our policy understanding and local resource advantages, take the lead in coordinating communication with regulatory agencies, and lead the discovery and connection of domestic investors."

We are delighted to partner with top international institutions such as Goldman Sachs and Morgan Stanley to jointly develop Shengying Media into a flagship company in the A-share cultural and media sector.

Other domestic securities firms have also expressed their willingness to join the underwriting syndicate and share this unprecedented issuance burden.

Wang Sheng's gaze swept across the room, and he saw faces that, although still calculating, had basically reached a consensus.

He knew that these people were determined to gamble at the table.

In short, he won the first step.

"very good."

Wang Sheng smiled broadly: "Thank you all for your trust and support of Shengying. My team will work with you in detail on the specific underwriting agreement, fee allocation, and timetable. I hope to see a feasible and efficient work plan as soon as possible."

He raised his teacup, using tea instead of wine, and said, "Then, I wish us a successful collaboration, and that we may jointly usher in a new era for the Chinese film industry!"

Everyone raised their glasses, and the atmosphere in the meeting room transformed from tense to enthusiastic and expectant, based on shared interests and goals.

(End of this chapter)