According to the Red Star Capital Bureau, on the evening of April 13, Beijing time, Sohu (NASDAQ: SOHU) issued an announcement confirming that the US Securities and Exchange Commission (SEC) has included the company in the recognition list based on the Foreign Company Accountability Act and does not intend to object to the SEC's provisional determination.
This also means that Sohu, which has been listed for many years, may leave the NASDAQ, and whether it will return to China in the future is unknown.
Infographic According to IC photo
01. The beginning and end of the event
On Tuesday (April 12), local time, the U.S. Securities and Exchange Commission (SEC) added 12 Chinese companies to the "pre-delisting" list, which is the fourth batch of Chinese companies to be included in the list since March.
At the same time, the SEC claimed that the deadline for the 12 companies to submit their defenses was May 3, local time.
The list includes: Microvast, China Automobile Systems, Daqo New Energy, Connad Biologics, OneConnect, Green Map Biotechnology, Legendary Biologics, Sohu, Melco Shadow, Melco Boya Entertainment, Logiq and Noah Holdings.
On the evening of April 13, Beijing time, Sohu responded that it confirmed that the US Securities and Exchange Commission (SEC) included the company in the list of recognitions based on the Foreign Company Accountability Act and did not intend to challenge the SEC's provisional determination.
At the same time, Sohu said that it cannot guarantee investors that delisting or alternatives (if any) will not adversely affect the market value of ADS. Other courses of action are being explored, but possible actions by the company have not yet been identified.
As of U.S. stocks closed on Wednesday, Sohu shares fell 0.79 percent to close at $18.86, bringing a total market capitalization of $721 million.
02. About Sohu
Sohu was founded by Zhang Chaoyang, known as the "Godfather of the Chinese Internet". In 1996, Zhang Chaoyang founded Artesin after getting investment, which is also the predecessor of Sohu. In 1998, Artesin began to emulate Yahoo as a portal and named it Sohu.
Since Sohu, NetEase and Sina all rose on the portal, the founders of the three companies are also known as the "Three Musketeers" of the Chinese Internet.
In 1999, Zhang Chaoyang was listed on the Hurun Rich List. In 2000, Sohu was successfully listed in the United States. According to the company's financial report, Sohu achieved full profitability in the third quarter of 2002.
But with the advent of the mobile Internet era, the portal has also rapidly declined.
In the face of the decline of the portal and the fierce market competition, Sohu has gradually lost its "main backbone". Its search business, Sogou, has been suppressed by Baidu, the game business Changyou mainly relies on a single hit, and as for the video business, it is also facing strong competitors such as Tencent Video and iQiyi.
In July 2020, Sogou announced that it had received an initial non-binding takeover offer from Tencent. After the completion of the transaction, Sogou will become an indirect wholly-owned subsidiary of Tencent and will be delisted from the New York Stock Exchange, and will no longer retain any rights and interests in Sogou. Since the third quarter of 2020, Sogou's performance has no longer appeared in Sohu's financial statements.
This also means that Sohu has changed from a three-legged walk of "search + game + portal" to only two main businesses of "game + portal".
Source: Company Financial Report, Red Star Capital Bureau
Looking closely at Sohu's game and advertising business, the overall situation is not very "able to fight", and it is difficult to support the future of Sohu.
As far as Sohu's game business is concerned, the most profitable at present is the online game "Tianlong Babu" and its derivatives launched in 2007.
Changyou has also tried other games, and has launched many games such as "Sword" and "Sword Fairy", but the market response has not been as expected, and the embarrassing situation of a game playing the world is still difficult to get rid of. In addition, Compared with Tencent and NetEase, Sohu's game business has a small revenue scale and a large gap.
Speaking of advertising, according to the company's financial report, Sohu's portal advertising business has had three consecutive quarters of negative revenue growth, and the revenue in 2021Q4 fell by 19% compared with the same period last year. Perhaps in the context of the decline of the portal, portal advertising itself is not a good business.
03. Summary
Reviewing Sohu for more than 20 years, it has explored many parties in the Internet field, but in the end it has not left a work with competitive strength; perhaps the opponent is too strong, or perhaps Sohu always misses the best time.
But Sohu has not given up on transformation and innovation, at Sohu's 2019 financial report online media communication meeting, Zhang Chaoyang revealed that live broadcasting, social networking and short videos are the focus of Sohu's efforts in 2020.
As a result, Sohu launched the social APP Fox Friends in June 2019, and now Zhang Chaoyang himself has opened a live physics class on Sohu Video.
But for Sohu, which has lost its traffic entrance, no matter which way it takes, it is inevitable that it will be difficult.
Red Star News reporter Yu Yao Liu Mi
Edited by Tao Yueyang