Written by: Planets
Source: Bedo Finance
Recently, Alibaba Group (hereinafter referred to as "Alibaba" or "Alibaba") announced that its logistics subsidiary Cainiao (together with Cainiao Logistics and Cainiao Network) withdrew its initial public offering and listing application on the Hong Kong Stock Exchange, and plans to acquire the equity of Cainiao's minority shareholders and the equity vested by employees, with a total consideration of up to US$3.75 billion.
Alibaba said in the announcement that it plans to adjust some of Cainiao's businesses to better achieve strategic synergies with Taotian Group and Alibaba International Digital Business Group, and support Cainiao's long-term strategic expansion of its global network.
Although Alibaba said that "this strategic adjustment of rookies is consistent with Alibaba's strategic priorities", as the only remaining listed "sole seedling" under the asset restructuring plan, it chose to withdraw its IPO application at the last moment, which inevitably caused the industry to have a lot of speculation about the future planning and strategic positioning of rookies.
With such a huge rookie system, why did the listing process fail in the middle of the process? What chess is Alibaba's equity repurchase plan playing? What challenges will rookies face under the new regulations of the express delivery industry?
First, the valuation has shrunk sharply, and Alibaba's attitude has reversed
Turning back the clock to a year ago, Daniel Zhang, then chairman of Alibaba's board of directors (i.e. chairman) and CEO, announced that Alibaba would launch the "1+6+N" change. That is, under the group, six business groups and a number of business companies have been established, including Alibaba Cloud, Taobao Tmall Business, Local Life, International Digital Commerce, Cainiao, and Dawen Entertainment.
Since then, Alibaba has announced an asset restructuring plan to spin off its Cloud Intelligence Group and promote the independent listing of e-commerce logistics company Cainiao and new retailer Super Hema . Among them, Cainiao, which submitted a listing application to the Hong Kong Stock Exchange on September 26, 2023, fired the "first shot" of Alibaba's spin-off.
However, the road to the independent spin-off of Ali was not smooth. After the listing plans of Cloud Intelligence Group and Hema were halted due to "the market was not as expected", Cainiao became the "only seedling" of Alibaba's listed subsidiaries. At that time, Alibaba said that a separate listing could better reflect the value of Cainiao as an important business of Alibaba.
On the market side, the industry is also optimistic about the listing of rookies. Some media have reported that Cainiao's listing will be one of the hottest IPO plans in Asia in 2024. After a difficult 2023, Asian IPOs are likely to get a boost as Hong Kong expects a gradual return to large Chinese deals this year.
Soon after, Alibaba's attitude towards Cainiao's listing changed. After Ali released its financial results for the third quarter of fiscal year 2024, Chairman of the Board of Directors Tsai Chongxin said on the earnings call that he was not in a hurry to let Cainiao and Hema carry out IPOs, and now the focus of the strategy is to promote synergies between different businesses within the group.
Tsai said that since Alibaba's restructuring was announced in March 2023, market sentiment has been sluggish, and conducting capital market transactions has not actually brought transparency to the potential value of the business and helped investors value the overall business. In the current market environment, Cainiao hopes to wait for a better time to go public.
In other words, today's rookies are using a similar tone to other companies that have terminated their listings — the market is falling short of expectations. Previously, the list of global unicorn companies released by Hurun in 2023 showed that Cainiao ranked tenth in the overall list with a valuation of up to 185 billion yuan, ranking first among logistics companies.
According to the buyback announcement issued by Alibaba, Alibaba plans to repurchase the minority shareholders of Cainiao and the attributable equity of employees at a price of US$0.62 per share, with a total consideration of up to US$3.75 billion. Through calculations, it can be seen that Cainiao's current valuation is 10.3 billion US dollars, equivalent to about 74.4 billion yuan, which is relatively "cut in half".
On this basis, Alibaba's intention to buy back minority shareholders' equity and employee equity is also essentially harming the interests of minority shareholders (including external investors). Fundamentally, Alibaba's proposed buyback share price is unlikely to be higher than Cainiao's original planned IPO stock price, and the corresponding valuation has shrunk (declined) significantly.
According to media reports, after the first round of rookie roadshows, the feedback from investors was not good, "mainly focused on the high valuation of the company, the valuation given by the investment bank is not as high as expected by the media and the rookie, and the price given by some more conservative investors is even cut in half from its highest valuation."
On the other hand, regardless of positioning, in essence, whether a rookie is a logistics company, a technology company, or an e-commerce logistics company, there will be a huge difference in valuation. In layman's terms, you can't value a logistics company according to the model of a technology company, and vice versa.
Advertised as a technology company, is the rookie really specific and powerful in scientific research?
Second, it is difficult to say that it is completely independent, and dependence has existed for a long time
In terms of performance, the rookie did not deliver excellent answers during the sprint to market.
According to the prospectus, in fiscal year 2021, fiscal year 2022 and fiscal year 2023 (as of March 31) and the first quarter of fiscal year 2024, Cainiao's revenue was 52.733 billion yuan, 66.867 billion yuan, 77.800 billion yuan and 23.164 billion yuan, respectively.
Among them, Cainiao's revenue in the first quarter of fiscal year 2024 (corresponding to the second quarter of 2023 of the natural year) increased by 33.62% compared with the same period in 2022. In terms of numbers, the scale of Cainiao's revenue is very considerable, and it has achieved continuous growth, which can be described as one step at a time.
However, the profitability of rookies is very limited. During the reporting period, its net profit was -2.015 billion yuan, -2.286 billion yuan, -2.801 billion yuan and 288 million yuan respectively. On a non-IFRS basis, its adjusted net profit was -829 million yuan, -1.030 billion yuan, 279 million yuan and 1.093 billion yuan, respectively, achieving profitability.
Emerging from the logistics needs of Alibaba's e-commerce platform, Cainiao has always maintained long-term business cooperation with the former. During the reporting period, Cainiao's revenue from Alibaba was 15.423 billion yuan, 20.614 billion yuan, 21.901 billion yuan and 6.880 billion yuan respectively, accounting for 29.2%, 30.8%, 28.2% and 29.7% of the revenue, respectively.
Cainiao repeatedly emphasized in the prospectus that it "does not rely on Alibaba to obtain merchants or brands as customers", but it is foreseeable that if the scale of Alibaba's e-commerce business declines, it will undoubtedly have an adverse impact on Cainiao's business operations and order volume, which in turn will affect its performance.
Alibaba, which strives to detach the group's operational focus from specific businesses and provide a support base for its subsidiaries, is also facing the "traffic dependence syndrome" of its subsidiaries in the long-term mutual benefit and symbiosis. How far can the rookie who originally planned to "fly solo" can fly is still a topic of great uncertainty after its withdrawal from listing.
Returning to the share acquisition plan, according to the plan, the plan will be implemented in August 2024, and employees can voluntarily sell all Cainiao shares vested on or before August 1, 2024. Alibaba said the acquisition is a reward for the long-term contributions of employees and will help further boost the confidence of the team and employees.
However, it should be pointed out that in the case of shrinking valuations and termination of listings, "loss-making transactions" in which the repurchase price is higher than the original planned IPO stock price rarely occurs. In other words, Alibaba's approach is more like a "timely stop-loss" after withdrawing an IPO than to make up for the "reassuring mind" strategy of employees and shareholders.
In addition, after Alibaba buys back Cainiao, it is bound to expand its overall scale.
Third, the market competition is hot, and the service advantage may be difficult to maintain
In recent years, the controversy and doubts about the rookie's operating model have become more and more intense.
At the beginning of its birth, Cainiao Logistics was positioned as a logistics service platform that integrates the operation, scenarios, facilities and Internet technology of the logistics industry, aiming to improve the efficiency of terminal operation and gradually develop into a logistics network with end-to-end capabilities.
Different from JD.com's "asset-heavy" supply chain model of self-built warehouses and logistics channels, Alibaba defines Cainiao as the "data center" in the logistics system, does not set up vehicles, routes, logistics and warehouses, and only relies on "Tongda" express delivery companies to master the terminal link of distribution through the "Cainiao Station" under the franchise model.
However, while the Cainiao Station stores are expanding rapidly, the store service quality and safety compliance control under the franchise model have also become the biggest constraints to the development of Cainiao. Of course, this situation is not unique to rookies, and a similar situation can occur with any logistics service provider.
In October 2023, the term "deadly rookie station" also appeared on Weibo's hot search. Zhang Xiang, a netizen certified as a "Shanxi Young Writer", posted that his wife accidentally fell from the hole dug by the post station when she picked up the goods at the rookie station, and was diagnosed by doctors as a cervical vertebra fracture and cervical spinal cord injury, and may face high paraplegia.
Zhang Xiang believes that the rookie station has dissipated the quality of service of "home delivery" and questioned its significance as a middleman. In addition, many netizens said on social platforms that there are also potential safety hazards such as building mezzanines without permission, blocking fire escapes, and obstructing the passage of users.
In addition, conflicts between consumers and express delivery companies due to "home delivery" are also common. Many users reported on the black cat complaint that many express delivery companies placed the express delivery at the rookie post station without the consent of the user, and some post station staff also had the problem of verbally insulting the pick-up person and forcing the disclosure of user information.
Previously, a paper titled "Analysis of the Logistics Profit Model of Rookie Franchisees" had revealed the essence of this kind of "service out of focus" - the average benefit of each express delivered delivered by franchisees is about 0.6 yuan. In other words, Cainiao Post helps logistics companies convert their distribution costs into time costs and distribute them to users who pick up their parcels.
In response to such problems, the Ministry of Transport's newly revised "Express Market Management Measures" clearly stipulates that express delivery companies shall not confirm the receipt of express mail without the consent of the user, and shall not deliver express mail to smart express boxes, express service stations and other express terminal service facilities without authorization, and if the regulations are violated, a maximum fine of 30,000 yuan will be imposed.
For rookies who have been deeply involved in the core business model of "intermediary sites" for a long time, the "last mile" of logistics is its core. If the voice on the user server side is weakened, it will inevitably further affect its expansion, which in turn will have a negative impact on Alibaba.
In addition, strong competitors in the logistics market are waiting, such as J&T Express and Fengwang Express, which are also seizing the minds of merchants and consumers at low prices, and the competition is gradually heating up. At the same time, the peak of the user scale is also a potential risk. In the future, there are still variables, and it is inevitable that the muscles and bones will be damaged.