Author | Wu Lijuan
Source | Unicorn Finance
On January 7, according to Caixin, Wang Chaoyong (real name Wang Chaoyong), the actual controller of Beijing Xinli Investment Co., Ltd. (hereinafter referred to as "Xinli"), was criminally detained by the Chaoyang Branch of the Beijing Municipal Public Security Bureau on November 30 last year, and was released on bail pending further investigation on January 6, 2022, after the expiration of the 37-day detention period.
Coincidentally, Wang Chaoyong's "old friend" Lan Shili, chairman of the board of directors of China Dongxing Group Co., Ltd. and founder of Dongxing Airlines, appeared in Wuhan on January 6 after disappearing for a long time, held a briefing meeting, disclosed to the media that he had been sued for contract fraud due to an M&A dispute, and thus became a "red notice criminal".
According to Lan Shili, he and Wang Chaoyong have been contacted by phone. He also forwarded the news of Wang Chao's emergence in the circle of friends, saying that it was "gratifying and congratulatory."
As fellow Hubei compatriots, Wang Chaoyong and Lan Shili are old acquaintances, and almost became the "white knight" of East Star Airlines.
The acquisition of Thai Eastern Airlines 7 years ago involved a number of business figures, including Wang Chaoyong, Dai Zhikang and other bigwigs.
According to Lan Shili's self-report in the Criminal Judgment, from July 2015 to March 2, 2016, he borrowed a total of more than 300 million yuan from many people. Creditors include a number of well-known entrepreneurs: Shen Ya, chairman of Vipshop, Wang Chaoyong, founder of Xinli, Ye Guofu, founder of Mingchuang Premium, etc.
However, the information that can be found is that Wang Chaoyong invested in Hubei Caixia Tourism Company, which is controlled by Lan Shili, in 2014. Legally speaking, it is through a company that indirectly holds part of the equity of Siam Airlines, and he personally did not lend money to Lan Shili.
Xinli is one of the earliest established VC/PE institutions in China, and was officially listed on the New Third Board in October 2015, becoming the "first share of China's returnee venture capital", mainly engaged in new industry investment business (including venture capital fund management business, venture capital and incubation business), holding industrial operation business, investment value-added service business.
Speaking of the "star" of China's PE industry, Wang Chaoyong is a well-deserved one. "Wall Street prodigy", "venture capital godfather", "China's most playful rich man"... A lot of aura is concentrated on this representative of the venture capital industry. In 2013, Xinli invested in British luxury sports car manufacturer Aston Martin, and a series of investment cases have been talked about by the industry.
Once was the star company of the New Third Board, and in recent years the performance of a big loss, the road to capital operation is not smooth, the letter of Li took the initiative to apply for delisting of the New Third Board for 3 years without success, after the letter of Li actual controller Wang Chaoyong was detained for 37 days, what happened to this old investment institution?
1
Appearing 37 days later, the letter said:
"Wang Chaoyong has performed his duties normally"
On January 7, Wang Chaoyong, who was released on guarantee pending further investigation, sent out several messages in a row in the circle of friends, all of which were articles related to the investment enterprises of the company in the letter.
In this regard, the latest announcement of the letter said that the company contacted the actual controller Wang Chaoyong to confirm that he cooperated with the public security organs in the investigation during the period of his disappearance. As of the date of the announcement disclosure, Wang Chaoyong has performed his duties normally and the company's operation is normal.
On December 16, Wang Chaoyong was summoned for detention, and on the same day, the letter Said in an interview with the Science and Technology Innovation Board Daily that he had not received any relevant notice from the public prosecutor's office and could not determine Wang Zong's status. As for the online transmission of the detention letter, it is also confirming the authenticity and falsity with the family, and the subsequent disclosure will be disclosed through an announcement. At the same time, the letter said that in order to avoid fluctuations in the company's stock price, the company's shares will be suspended from now on and are expected to resume trading before December 29, 2021.
On January 5, the letter once again issued the "Announcement on the Progress of Stock Suspension", saying that as of the date of the announcement disclosure, the company continued to contact the actual controller of the company through various means, but has not yet made effective contact with it, and has also contacted the public security organs many times, but as of now the public security organs have not given a formal reply to the relevant information about Wang Chaoyong, and it is expected to resume trading before January 13.
The online transmission of the detention notice from the Chaoyang Branch of the Beijing Municipal Public Security Bureau shows that Wang Chaoyong is mainly suspected of the crime of embezzlement of office.
The crime of usurpation of office mainly refers to the conduct of personnel of a company, enterprise or other unit taking advantage of their position to illegally occupy the property of their own unit for themselves, and the amount is relatively large.
Image source: Network
In Sina Weibo, who is certified as the "Chairman of Xinli International Holdings Limited", Wang Chaoyong, a big V with 5.259 million fans, wrote in the profile: "The heart is like the sea, it can be calm and deep, and it can also be surging and surging." The last Weibo was published on October 19, 2021, and 20 Weibo posts were updated on the same day, focusing on the news of the awards, financing, and listings of the companies invested by Lili in the letter.
At the age of 15, he was admitted to Huazhong University of Science and Technology, known as a prodigy Wang Chaoyong, with an enviable resume.
Wang Chaoyong, 56, entered Tsinghua University at the age of 19 to become one of the first graduate students in the School of Economics and Management, was sent to study in the United States at the age of 20, and graduated with an MBA at the age of 22. As early as the mid-1980s, Wang Chaoyong worked as a senior manager in the investment department of JPMorgan Chase & Co. In the 1990s, he served as a co-director of the President's Office and vice president of Asia at Standard & Poor's and Morgan Stanley in the United States. In June 1998, after returning to China, Wang Chaoyong was invited by the China Development Bank to serve as a senior consultant.
The listed companies controlled by Wang Chaoyong include Xinli and Huicheng Technology. After borrowing more than one billion yuan to hold Huicheng Technology at a high premium, Wang Chaoyong failed to inject private equity business into listed companies, and since then, Xinli has begun to move towards Waterloo.
Looking back at Wang Chaoyong's participation in the advance and retreat of listed companies, he can be called a professional "old driver". However, from shell raising, shell borrowing to shell selling, it eventually ended up in a chicken feather.
2
Wang Chaoyong folded Huicheng Technology
Wang Chaoyong founded Xinli Capital Group in 1999 and is one of the earliest institutions engaged in venture capital and private equity investment in China. In October 2015, Xinli was listed on the New Third Board market, mainly controlled by Wang Chaoyong and his wife Li Yifei, with a shareholding ratio of 63.59%, of which Wang Chaoyong held 30.71%.
Screenshot source: Tianyancha
Xinli has invested in more than 200 enterprises, including Aston Martin, Baidu, Sohu, Huayi Brothers, Actually Home, Meinian Health and other domestic and foreign listed companies.
In his early years, Mustang Jun once had an in-depth exchange with Wang Chaoyong at the Beijing Fortune Mansion Club. He mentioned to Mustang Jun that at that time, one of the more regrettable investments was Pony Benteng, he came back from abroad, knew that the domestic film and television culture has a lot of room for development and opportunities, optimistic about the main creative team of Pony Benteng, was in more than 40 institutions that wanted to invest in this project, but did not expect to encounter li Ming's unexpected death such a black swan event, and later the company's important members of the internal discord, is even worse.
There are 6 fund managers under Xinli, including Beijing Xinli Equity Investment Management Co., Ltd., which was established in 2012, and there are 193 investment incidents. As of the end of 2020, there were 36 funds under management in Xinli, with a cumulative subscription scale of 16.125 billion yuan and a paid-up scale of 11.201 billion yuan under management.
The top private equity managers in the eyes of the public have turned around and taken risks at the highlight moment. Wang Chaoyong plans to emulate Jiuding, inject private equity platforms to avoid supervision into listed companies, and eventually enter the Internet game, which is already a competitive red sea track.
In April 2016, six months after the listing of the Xinli New Third Board, Wang Chaoyong and his wife spent a high premium of 1.65 billion yuan to collect Huicheng Technology, an A-share listed company, and promoted them to their actual controller with 11.1% of the shares.
Of the 1.65 billion yuan of acquisition funds, 1.2 billion yuan was raised by Xinli through the asset management plan of China Merchants Wealth Asset Management Co., Ltd. (hereinafter referred to as "China Merchants Wealth"), and 350 million yuan was borrowed from Xinli to Beijing Hengyu Tianze Investment Management Co., Ltd. at an interest rate of 12%.
It can be seen that Wang Chaoyong's acquisition fund is borrowed from debt, leveraging 1.65 billion leveraged funds with about 100 million yuan of its own funds, and therefore financing at high costs. According to the stock price of Huicheng Technology at that time on the last trading day before the suspension of trading at that time, the premium was as high as 113.7%.
Huicheng Technology mainly focuses on game and electrical revenue. In the heyday of the Internet game industry, Huicheng Technology brought shareholders excess profits of Rijin Doujin.
From the data of 2018, it can be seen that the game business contributes 83% of the business revenue and more than 90% of the net profit to Huicheng Technology, occupying a pivotal position in the business composition of Huicheng Technology. There is no doubt that Wang Chaoyong's choice has also brought great returns to the shareholders of Xinli.
Coincidentally, in 2018, it was also the high point of the revenue of Xinli, with revenue of 2.722 billion yuan in that year, an increase of 172.34%, and the net profit attributable to shareholders was 337 million.
In December 2016, after Xinli Holding Huicheng Technology, Wang Chaoyong formed the 1.8 billion yuan Beijing Xinli Zanxin Equity Investment Center (Limited Partnership) (hereinafter referred to as the "Zanxin Acquisition Fund") through the above two holding listed companies and AVIC Trust, of which 400 million yuan was used to acquire 22.43% of the equity from the original shareholders of Chengdu Dormon Network Technology Co., Ltd. (hereinafter referred to as "Dorcom").
In December 2017, Huicheng Technology acquired the remaining 77.57% of Docomon's equity for RMB1.383 billion in cash. Huicheng Technology raised no more than RMB830 million with the help of AVIC Trust's asset management plan, accounting for 60% of the acquisition funds.
From this point of view, Xinli once again paid for the acquisition through external leveraged funds and cash, first using the acquisition fund composed of it and Huicheng Technology to acquire part of the equity, and then using the listed company to acquire the remaining equity. Wang Chaoyong once again bought a 100% stake in Docomon at a high premium, with the latter priced at a price of 1.78 billion yuan.
However, the good times did not last long.
Under the tightening of the regulatory environment, after Xinli Holding Huicheng Technology, it lost the financing channel of the secondary market due to capital pressure, coupled with the continuous downturn in huicheng technology's stock price, it was unable to help controlling shareholders obtain higher financing.
In 2019, both the revenue and net profit of Xinli declined.
In 2020, xinli's annual operating income fell to less than 1 billion yuan, only 879 million yuan, down 32.26% year-on-year, and the net profit attributable to shareholders was -1.627 billion yuan, down 23751.03%. Total assets fell from 8.136 billion at the beginning of the year to 5.513 billion, a drop of 32.23%.
The performance plummeted, and the letter also explained in the financial report that due to industry policy changes and intensified market competition, Huicheng Technology's game revenue and electrical revenue fell sharply, resulting in revenue and gross profit falling by 69.93% and 76.53% compared with the same period.
In the first half of this year, the income of Xinli was 221 million yuan, down 63.56%, and the net profit attributable to shareholders was -212 million yuan, down 387.36%.
Image source: Letter of Profits
At the same time, the balance of interest-bearing liabilities in the first half of the year was 148 million yuan, while the balance of its monetary funds was only 22.41 million yuan, and the company admitted that it had already experienced liquidity risk exposure.
In view of the liquidity risks faced, what measures has Xinli taken? According to its announcement, in early November 2021, the company borrowed 26.52 million yuan from Shenzhen High-tech Financing Guarantee Co., Ltd. to repay its mature debts. In addition, strategic investors are being introduced and negotiated with potential investors to transfer some assets, and cooperation agreements are signed with non-performing asset disposal institutions to dispose of sluggish assets.
In July this year, Huicheng Technology announced that the company's actual controlling person changed owners, and in the same month, Wang Chaoyong resigned as chairman of Huicheng Technology.
At this point, Wang Chaoyong and Huicheng Technology seem to have no connection anymore, but is this really the case? How the future will be interpreted will have to wait for time to give an answer.
Regarding the plight of Wang Chaoyong and his holding listed companies, Zhao Jiao, business management department of Shangzhi Fengyuan (Beijing) Fund Sales Co., Ltd., believes that with the country's policy adjustment to industrial development, the game industry has suffered a cold winter, and the decline of Huicheng Technology has officially pushed the major shareholder Xinli and a generation of tens of billions of private equity tycoon Wang Chaoyong into a dilemma.
3
How far can the PE+ listed company model go?
In the capital markets, it was once all the rage for listed companies to participate in the establishment of buyout funds through partnerships with private equity investment institutions (PE).
It was also the exchange at the Beijing Fortune Mansion Club that Wang Chaoyong once mentioned to Mustang Jun that he admired the PE+ listed company model, and he believed that there would be a wave of mergers and acquisitions and industrial integration in China in the future, and the M&A foundation would become the dominant party in many transactions. At that time, he was committed to being a pioneer of sailing in China, and because of this, he renamed chaoyong in his name "chaoyong".
The investment method of "PE+ listed companies" is that PE obtains control of the target enterprise by acquiring its equity, the listed company is usually a limited partner, and the PE acts as a general partner, investing around the development strategy of the listed company, and giving priority to selling the invested enterprise to the listed company when exiting.
As a result, the industrial fund realizes the investment income of the primary market, and the listed company obtains high-quality assets, which can accelerate the industrial integration and structural upgrading of the listed company in a sense, and the industry calls it the "PE+ listed company" model.
The touchstone of such a combination in the domestic capital market is the case of Dakang Animal Husbandry (now renamed Pengdu Agriculture and Animal Husbandry, 002505.SZ). In September 2011, Paradise Silicon Valley and Dakang Animal Husbandry jointly initiated the establishment of Paradise Silicon Valley Dakang Industrial Development Partnership (Paradise Dakang).
Complementing each other's strengths and taking what they need sounds beautiful, but the reality is harsh.
Later, due to the change of Dakang animal husbandry, in terms of industrial integration, this cooperation did not bear fruit, and the two sides even went to court. However, in the end, the two sides released their previous suspicions and jointly initiated the establishment of an international agricultural industry M&A fund with a total scale of RMB 5 billion in 2016.
In 2012, Gao Tejia, a "master of capital operation", brought Boya Bio (300294.SZ), which has been controlling equity for 8 years, to the ChiNext board, which was regarded as a benchmark case for domestic PE institutions to try to control equity investment. Since then, the industrial merger and acquisition fund set up mainly by "PE+ listed companies" has become the main model for institutional withdrawal, and was once highly sought after.
Gao Tejia bought Boya Biotech for 100 million yuan in 2007, built a listed company 5 years later, and finally ushered in an exit 13 years later. According to the relevant announcements of Boya Biology, when the acquisition of China Resources Pharmaceutical is finally completed, Gao Tejia will complete the cash-out of about 2.8 billion yuan, and will also retain the identity of boya Biology's minority shareholders, with a stock market value of about 2.4 billion yuan.
Jiuding "backdoor" Zhongjiang Real Estate, IDG Capital's acquisition of Sichuan Shuangma and Shunchang Group, Shengshijing Venture Capital's acquisition of Kangyue Technology's controlling stake, Zhongyu Capital's backdoor "Golden Ham"... In recent years, there has been no shortage of classic cases.
According to Choice statistics, from 2011 to 2016, there were nearly 700 buyout funds with the participation of listed companies.
However, because of the interests involved, there are not a few cases of unhappiness and failure in reality, and the "PE + listed company" model that has been hyped up by the capital market may encounter a bottleneck in development.
Xinhua Network had a set of statistics in 2016: from 2014 to the end of 2015, a total of 194 listed companies announced the establishment of industrial merger and acquisition funds with PE institutions in two years, with a total fund size of more than 200 billion yuan, and 125 companies did not disclose any progress after the establishment of the fund, accounting for 64.43%.
It can be seen that for the "PE+ listed company" model, there are opportunities but also challenges. Zhao Jiao believes that no matter how strong the personal ability is and how brilliant the historical achievements are, we must still be cautious in words and deeds. However, she believes that the profit in the letter will not necessarily fall, after all, the customer funds of the private fund that is in compliance with the record are fully isolated, and as long as the fund itself is paid according to the contract performance, the old investor may still choose the private equity product of the letter.
The PE+ listed company model that was once optimistic about Wang Chaoyong, what bottlenecks do you think are in this model, and how far can it go next? Welcome to leave a message to discuss.