Business | Ma Huateng took Xu Jiayin's Netflix dream

Selling millions of new energy vehicles a year, doing the Chinese version of Netflix... In addition to the real estate business, Xu Jiayin once planned a series of dreams for "New Evergrande", but the reality of lack of money is pressing step by step, which is making this series of beautiful dreams shattered one by one.

On Friday, November 5, according to the hkex equity disclosure documents, China Evergrande sold its stake in Hengteng Network to cash out HK$717 million, and its shareholding ratio dropped from 26.55% to 22.98%.

With the completion of the cash-out action, China Evergrande also stepped down from the position of the largest shareholder of Hengteng Network, giving way to Tencent, which holds 23.90% of the shares. This means that Evergrande's initial idea of building a diversified ecosystem with eight major industries has become a distant goal in the short term.

According to the perspective of real estate new media, Hengteng Network is China Evergrande and Tencent in June 2015 jointly subscribed to 75% of the shares of Masgar Group, according to the original idea, this platform should be an extension of the evergrande real estate business.

Hengteng Network launched the Hengteng Mimi app in December 2015 to create a smart community service. Subsequently, in June 2016, it launched the bag check-in service to create an Internet home business; in October 2017, it began to provide home building materials services to create an Internet materials business; in May 2018, Hengteng Honey Home Mall was launched online, and home building materials were easily purchased online; in September 2019, Hengteng Honey Home Store was opened offline to provide one-stop decoration services; in December 2019, using the advantages of supply chain and platform, we built a home building materials own brand...

All business is based on the huge scale of real estate sales of China Evergrande, and the performance of Hengteng Network has also increased, with turnover rising from 113 million yuan in the first full year (2016) after Evergrande held it to 337 million yuan in 2019, and profit rising from 4.307 million yuan to 90.065 million yuan.

The performance is indeed OK, but the capital market does not recognize this model. In addition to the stock price of Hengteng Network when the acquisition was completed, it has gone all the way down since then, and later fell into a "fairy stock".

The change occurred in 2020, this year the real estate industry is limited by three red lines, how to meet the standard has become a problem that real estate developers need to face, Evergrande is particularly serious.

In the face of the new regulations of the "three red lines" supervision, in 2020, in addition to selling the property to collect money, the most important thing for Evergrande is to introduce 20 billion yuan of war investment, spin-off and listing and reorganization of Hengteng Network and other capital operations through Evergrande Property to realize the value of assets.

Hengteng Network acquired Ruyi Pictures and Pumpkin Film, and the transformation of the streaming media video business was born in this context.

In October 2020, Hengteng Network acquired all the shares of Ruyi Pictures and Pumpkin Film through the allotment and issuance of shares and the subscription of shares.

According to the announcement at the time of the acquisition, Ruyi Pictures is a top film and television company in China, and has the first member subscription video platform "Pumpkin Movie" in China, with an installed capacity of more than 100 million units / time, with 30 million registered users, and has become the largest member subscription video platform in China.

The films produced by the company include "To the Youth We Will Eventually Pass Away", "Old Boy: Raptors Across the River", "Animal World", "Sewing Machine Band", etc.; the TV series produced by the main control mainly include "No War in Peking", "Old Chinese Medicine", "The Frontier of Love", "Old Tavern" and so on.

At that time, Hengteng Network shouted that it wanted to become China's top streaming media platform that benchmarked Netflix.

The capital market likes this slogan very much, and suddenly it has changed from a strong related business that can only rely on the upstream and downstream of real estate in the past to a high-frequency, daily business, with huge imagination space.

As a result, hengteng network's stock price has soared, from the lowest HK$0.62/share in recent years, 2-3 Hong Kong dollars/share at the time of acquisition, all the way to the highest 17.8 Hong Kong dollars/share.

In fact, business data is also a very good embodiment. After the completion of the acquisition, Hengteng Network's revenue soared from 230 million yuan at the end of 2020 to 1.395 billion yuan in mid-2021. Even if it turns from profit to loss, the market still sees room for imagination.

It is worth mentioning that Evergrande has strengthened its linkage with other businesses in order to make the story of the Chinese version of Netflix look more moving. For example, in Evergrande Property, the launch of registered pumpkin movie members to give away property fees and other related preferential activities, so since Hengteng Network completed the acquisition on January 20 this year, the number of users has increased explosively.

According to the data, as of the end of June 2021, the cumulative number of registered members of Pumpkin Movies reached 61.94 million, the cumulative number of paid users reached 24.62 million, and the number of effective paid users exceeded 10.52 million. Before it was acquired, the cumulative number of registered members and 4.32 million paid users in the six years since The Pumpkin Movie was launched reached 29.77 million.

In April 2021, through another major shareholder, Tencent, Hengteng Network will cooperate with Tencent Video under its Pumpkin Movie, and Pumpkin Movie will obtain a large number of film and television works authorized by Tencent's exclusive copyright for members to watch.

Hengteng Network has also become one of evergrande's fourth eight major industries after real estate, new energy vehicles and properties.

Since June 2021, Evergrande's negative public opinion has increased, including commercial ticket turmoil, litigation, land payment deferral, etc., and its credit rating has been downgraded.

The Chinese version of the Netflix dream is insignificant in the face of short-term debt risk exposure. The ultimate fate of Hengteng Network has no other way but to be sold.

Evergrande first transferred 739 million shares of Hengteng Network to Ruyi Pictures and Pumpkin Film founder Ke Liming for HK$4.433 billion in June, and then sold 7% of its stake to Tencent in August for a total consideration of HK$2.069 billion. At the same time, 4% of the shares were sold to another buyer.

At that time, Evergrande was still able to retain its position as the largest shareholder. The latest news shows that China Evergrande continued to sell hengteng network equity to cash out 717 million Hong Kong dollars, and the shareholding ratio dropped from 26.55% to 22.98%.

Ma Huateng sat in the seat of the largest shareholder, and Xu Jiayin's Chinese version of Netflix dream was also to be taken away.

Business Journal | Traditions are being changed, changing and merging in the history of business development.

This article originated from the viewpoint real estate network