Winning the new financial era

Chapter 192 Stock and Debt Financing

"It's a little tricky!"

Faced with the gambling conditions proposed by the Softbank investment representative, Zhang Yida secretly said something in his heart.

From the standpoint of the management, it is understandable to put forward this condition.

Huimin travels with more than 100 million bicycles, which are put on the side of the road in the city, and the value is depreciated all the time due to the wind and rain.

On the other hand, they are fighting a subsidy war with competitors such as Baimo and Xiaolan. Riding for free is to lose money and make money.

When will this kind of days without income come to an end?

Well, you want a valuation of $30 billion, so you have to make a promise to me.

Either end this war and win the final victory;
Either achieve a balanced revenue, and the business model can be sustainable.

Is this condition too much?Very reasonable.

Huimin Travel is no better than Ruixiang Group, which burns too much money and has no other pillar income.

All the venture capitalists are smart people, and they have grasped three inches of Huimin's travel at once.

From Zhang Yida's point of view, the two conditions of the VAM are not easy to fulfill.

Let me talk about the first one, occupying 80% of the market share in the industry.

At present, there are no less than 300 million shared bicycles on the market, and daily orders are no less than 1000 million.

Huimin bicycles account for a little more than 50% of the number of bicycles, and the orders are similar, maintaining a level of 400-500 million orders per day.

It does not seem difficult to increase the market share from 50% to 80% in one year.

In fact, Huimin Bicycle can increase the production and launch of bicycles, and competitors can follow suit.

To get rid of many competitors and monopolize 80% of the market, the difficulty can be regarded as hell.

The second condition is revenue balance.

Nowadays, in order to grab users and ride orders, major bicycles use various marketing methods.

It's free for others, but for the benefit of the people, who will ride your bicycle?

The number of orders must have fallen off a cliff, which gave other bicycle brands a breathing space.

If the opponent seizes this opportunity, fight a few turnarounds and raise a few rounds.

With the change of offense and defense, Huimin Bicycle was really pushed to the edge of the cliff.

"I can promise to bet against each other."

Before Zhang Yida finished speaking, Xu Xiaoming dragged him under the table, and Shen Beipeng also shook his head slightly at him.

Zhang Yida felt a little relieved, these two big bosses were still thinking about themselves, and couldn't bear to jump into the "pit of fire" by themselves.

He nodded and smiled slightly to the two of them, signaling them to be calm, and continued to talk to several representatives of the management:
"But I have one condition. In addition to the 5 million equity financing, there will be another 10 billion US dollars in debt financing."

As soon as the voice fell, the management representatives headed by Softbank shook their heads repeatedly and objected:
"10 billion debt financing, too much!"

"Yes, what mortgage? Unless Mr. Zhang signed an unlimited joint liability guarantee."

"It's outrageous, we Warburg Pincus disagree!"

On behalf of you and me, several major employers disagree with this plan.

Zhang Yida raised his palm to signal everyone to be quiet, and he continued:

"After this round of financing, I will also hold a 38.85% stake in Huimin Bicycle, worth US$13.6 billion;
The option pool held by the management still has 4.57% of the stock price, worth $1.6 million.

The management and I took out all the equity we held in Yimin Travel as a guarantee for this debt financing. "

Zhang Yida's determination moved the management representatives present.

But from the perspective of the company's interests, this is not insurance.

If Yimin Travel collapsed, the equity would be worthless.

"Mr. Zhang, if you use all your personal property as a guarantee for this huge debt financing of 10 billion US dollars, Softbank can provide half of the debt financing share."

Representatives of SoftBank Investments offered what they thought was a safe bet.

"That's right, if Mr. Zhang uses all his personal property as a guarantee, Warburg Pincus will provide 2 million US dollars for this financing."

Warburg Pincus looked at the representative of Softbank appreciatively, and he liked the plan, which was good.

"GIC can pay $1.5 million!"

"Silver Lake Capital can offer 1.5 million US dollars!"

Representatives of GIC and Silver Lake Capital also expressed their views.

"It's Yimin Travel Group financing, why let Yida take care of it alone?
Yida only occupies 45.33% of the shares of Yimin Travel Group before financing, and he does not own the company alone. It is not fair to do so! "

Xu Xiaoming couldn't bear it any longer. Looking at these ugly management representatives, he jumped out to "speak for justice".

"That's right, the old shareholders of Yimin Travel Group should also bear part of the responsibility.

Fair and just, very reasonable! "

The representative of Softbank management laughed, he was laughing at the other party's overreach.

Isn’t it good that the founders and management team shoulder their responsibilities?If you, a venture capital institution, want to jump out and join in the fun, then it happens to be arranged together.

Xu Xiaoming stopped talking. It is common for the founding management team and venture capital institutions to gamble on performance.

Venture capital investors who entered early generally do not get involved in this kind of betting, because venture capital institutions are only fund managers, and they have to explain to the investors behind them.

"Let's do this! After this round of equity financing, don't Yida and the option pool have a total of 15.2 billion US dollars worth of shares?
Mortgage at a 5% discount, debt financing of 7.6 million US dollars!

There is no need and no right to involve other companies in the matter of Yimin Travel Group. "

Shen Beipeng wanted to help Zhang Yida find a way out, so he suggested this.

"5% off, it's a bit high! I think 3% off is more reasonable.

Mr. Zhang, do you want to raise 4.5 million US dollars?The equity of Yimin Travel Group will be used as collateral. "

The representative of Softbank Investment was not moved by Shen Beipeng's words, and offered his own price.

At this point in the financing process, everyone knows that there is no way to improve.

Of course, if Zhang Yida reined in the precipice, the representatives of the major capitals would not persecute him too much.

"That's good. The share of US$10 billion in debt financing remains unchanged, of which US$4.5 million is guaranteed by me and the company's management with the equity of Yimin Travel;

The other $5.5 million, I pledged with personal property. "

Representatives of several employers thought about it and expressed their views one after another:

"Okay! Just follow this plan!"

"Good idea, this plan is acceptable!"

"Okay, so we can accept it from all parties."

Zhang Yida saw all the representatives of the major capitals smiling, and there was no wave in his heart: the world is bustling and bustling, and it is all for profit.

At this moment, isn't it the most vivid scene?

Most of the venture capital institutions are icing on the cake, but few give charcoal in the snow.

"Since the management and the investors of the B+ round are betting against each other, let's talk about the incentives for the management to complete the betting!

Within one year, after completing the performance-to-performance bet, investors in this round will give half of the equity to the management as a reward for performance completion. "

Zhang Yida opened his fangs, and it was not his style not to fight back when he was beaten.

“That’s a lot! Half that’s $2.5 million in equity, which could be more given the rising valuation.

Equity incentives up to $2000 million. "

The people who invested in Softbank were very shrewd. If Zhang Yida had completed the bet, the shares would have shrunk by half.

He definitely couldn't agree to Zhang Yida's conditions and was desperately lowering the price.

"Yes, 2000 million US dollars in equity incentives is quite a lot. In China, you can have wealth and freedom."

Warburg Pincus representatives also objected.

"The management can't take all the benefits? It's hard for me to do things with this little money!

There is an old saying in China, which is: If you are reluctant to let a child catch a wolf.

With sufficient equity incentives, I think the management team will be more motivated to achieve performance goals.

If Huimin Bicycle establishes its absolute dominance, I think it will be beneficial to everyone here. "

There is nothing wrong with Zhang Yida's words. The venture capital organization actually does not want Huimin Bicycle to fail.

Failure does no one any good.Including the shares in the hands of venture capital institutions will be worthless.

Debt financing has Zhang Yida's backing, but it will not be in vain.

The equity financing part is miserable. There is no bottom line, and the risk is at your own risk.

"Then add some more! $3000 million!"

The representative of Softbank Investment, after thinking about it, raised the price a bit.

It's just that little, Zhang Yida doesn't agree.

For the development of the company, Zhang Yida personally guaranteed USD 5.5 million in debt financing.

In the future, if Huimin's development does not go smoothly and the loan is not repaid, Zhang Yida will be responsible for the loan.

"Then just forget about the debt financing of 4.5 million U.S. dollars, and I will not personally guarantee the company."

The income is not directly proportional to the effort, Zhang Yida is going to retreat to advance.

"How can that work? Mr. Zhang, didn't we talk about it well? $10 billion in debt financing.

Why are you retreating now?No, no, you can't keep your word. "

The representative of SoftBank Investment somewhat guessed Zhang Yida's intentions, equity + debt financing, a total of 15 billion US dollars of funds.

Such a large amount of funds is enough to defeat all opponents.

Of course, Softbank is happy to see the success. What if the business is not completed due to a lack of 5.5 million US dollars?
SoftBank didn't want to lose money on the VAM, but also wanted Zhang Yida to complete the VAM smoothly.

"Then you can increase the equity incentive further, I want 2.4 million US dollars."

Zhang Yida also took a step back and asked for 1000 million US dollars less.

Several parties debated for a long time, one party reduced, the other increased, and several major venture capitalists went to ask their superiors for instructions.

Finally, the equity incentive for the completion of the VAM was determined - 1.2 million US dollars.

About 3.43% of the company's total shares.

It is equivalent to the fact that Zhang Yida and the management have completed the bet within one year, and the B+ round investors have to transfer 24% of their equity to Zhang Yida and the management for free.

If the gambling conditions are not fulfilled, the founders and management team will compensate the investors of the B+ round according to the pre-investment valuation of US$20 billion in this round of financing.

About 5.71% of the company's total shares.

Regarding this point, Zhang Yida did not argue too much.

It is the uncle who paid the money, and it is impossible to want absolute fairness.

Then several parties launched a heated debate on the interest rate, term and repayment method of debt financing.

"Three-year loan period, one-time repayment of principal and interest at maturity, 4% annual interest rate.

This is my bottom line! "

Zhang Yida did not give an inch. He has learned a lot about debt financing. An interest rate of one point is equivalent to 1000 million US dollars in interest a year.

The repayment method is also learned, and the original intention is repaid at one time when it is due, so that the utilization rate of funds is the largest.

"Equivalent principal and interest" and "monthly payment of interest, repayment of principal at maturity" will put a lot of pressure on business operations.

"We agree in principle to the three-year loan period. However, the repayment method cannot be a one-time repayment of principal and interest, but a monthly interest payment, and the principal will be repaid at maturity.

The interest rate is also too low, and the maximum annualized interest rate for Yimin Travel is 8%. "

The investment representative of Softbank also refused to let go of his mouth, because the interests involved are huge, and he has to be responsible for the company.

Negotiations were deadlocked for a long time, and in the end they all backed down a step. The employer lowered the annualized loan interest rate to 6%, and Zhang Yida agreed to the loan method of "paying interest on a monthly basis and repaying the principal at maturity."

After all the agreements were drafted, several parties signed the "Yimin Travel B+ Round Equity Financing Agreement", "Yimin Travel's USD 10 Billion Debt Financing Agreement", "Performance VS Gambling Agreement", "Debt Financing Guarantee Agreement"...etc. There are more than a dozen agreements, large and small.

In this round of financing, Yimin Travel will receive an equity financing of US$5 million, a financing of US$10 billion, and joint equity and debt financing of US$15 billion.

Among them, Softbank invested US$2.5 million in equity investment and US$5 million in debt loans;
Warburg Pincus invested US$1 million in equity and US$2 million in debt;
Silver Lake Capital invested USD 7500 million in equity and USD 1.5 million in debt;
GIC invested USD 7500 million in equity and borrowed USD 1.5 million in debt.

Equity changed to:
Zhang Yida: 38.85%
Option pool: 4.57%
Huayi Capital: 2.29%
Blackshirt Capital: 11.43%
Zhenke Fund: 2.85%
Jinshahe Venture Capital: 5.72%
Matrix Global: 5.72%
Penguin Industry Fund: 4.77%
Gaoling Capital: 2.37%
Qiming Venture Partners: 2.37%
GGV Capital: 2.37%
Didi Travel: 2.37%
SoftBank Investment: 7.14%
Warburg Pincus: 2.86%
Silver Lake: 2.14%
GIC sovereign wealth fund: 2.14%
Because Zhang Yida holds all B shares, and one share has 1 voting rights, he still holds 10% of the company's voting rights.

(End of this chapter)