After a long drought and cold rain, Xu Jiayin’s circle of friends shows off again!
For Xu Jiayin, who was still quite prosperous in early July, because of China Guangfa Bank’s “unruly”, the capital chain problem of the entire Evergrande department once again surfaced, causing the stock price to continue to plummet.
Fortunately, Evergrande’s founder Xu Jiayin’s wealthy circle of friends once again helped, and gave Evergrande valuable cash. This time it was Tencent Holdings.
Hengteng Networks skyrocketed 48% in a single day
The strength of Xu Jiayin’s circle of friends has long been heard by the outside world. When Evergrande was preparing for the A-share backdoor listing, Suning founder Zhang Jindong alone sent a huge sum of 20 billion yuan, which was later unable to meet the promise. The recovery also became an important factor that overwhelmed Suning last year, and Suning eventually had to sell himself to Alibaba.
Somewhat surprisingly, at the moment of Evergrande’s crisis, another Internet giant, Tencent Holdings, helped out.
On August 1, Tencent acquired 7% of Hengteng Networks at a price of HK$3.20 per share, at a cost of HK$2.068 billion. Another independent third-party buyer also purchased 4% of Hengteng Networks at the same price, at a cost of HK$1.182 billion.
Evergrande cashed out a total of 3.25 billion Hong Kong dollars after selling the 11% equity of Hengteng Networks. Although the amount is not very large, it is probably a “life-saving money” for Xu Jiayin today.
Tencent’s shareholding also stimulated the stock price of Hengteng Networks to soar. After the Hong Kong stock market opened on August 2, Hengteng Networks rose by 30%, and the increase continued to expand in the afternoon. It closed at HK$5.06, up 48% throughout the day, and its market capitalization was 46.7 billion Hong Kong dollars.
China Evergrande’s share price was also stimulated in the afternoon, closing at 5.67 Hong Kong dollars, up 7.79%.
The second shareholder rescued the major shareholder, and the stock price soared 6 times at the beginning of the year
After the transaction is completed, China Evergrande’s shareholding in Hengteng Networks will be reduced from 37.55% to 26.55%, and it will remain the company’s largest shareholder. Tencent’s shareholding will increase to 23.9% and become the second largest shareholder. The shareholding gap between the two parties is close One step smaller, the above-mentioned independent third-party shareholding ratio is 4%.
Compared with the high-profile Evergrande Motors, Hengteng Networks, which focuses on Internet film and television, is also a magical stock. It has long been related to Tencent. Public information shows that Hengteng Networks’ predecessor is Mascotte, which is mainly engaged in investment and securities trading, and provide financing and other services.
In July 2015, Evergrande Group and Tencent Holdings jointly invested in the acquisition of Mascotte, which was renamed Hengteng Networks that year. At that time, Hengteng Networks’ major shareholder was Evergrande Group, with a shareholding ratio of 40.62%; Tencent Holdings was the second largest shareholder with a shareholding ratio of 14.1%.
The main business of Hengteng Networks has also changed, from the previous brokerage trading to the online sales of home customization, home appliance accessories, balcony fabrics, soft decorations, soft decoration engineering and kitchen supplies.
In July 2020, Hengteng Networks has undergone a major transformation again, announcing the wholly-owned acquisition of Ruyi Films at a cost of 7.2 billion Hong Kong dollars and becoming an Internet film and television company.
In the Spring Festival of 2021, the film “Hello, Li Huanying” produced by Ruyi Pictures became a big dark horse in the mainland box office. For a while, Hengteng Networks’ share price soared from less than 2.5 Hong Kong dollars to a maximum of 17.8 Hong Kong dollars within a month, an increase of more than 6 times, The company’s market value has also exceeded 160 billion Hong Kong dollars, and its size is on par with the mainland’s first-line video platform iQiyi.
Tencent intends to help build China Netflix
Looking back at Hengteng Networks’ stock price this year, with the constant emergence of Evergrande’s capital chain crisis, Hengteng Networks’ stock price also continued to fall, falling to above HKD 3 again at the end of July, which was only one step away from the starting point in early January.
If it is said that Hengteng Networks, which was in full swing six months ago, is not weaker than Evergrande Auto in terms of stock price trends, and constitutes Evergrande’s fourth largest industry in addition to real estate, automobiles, and property, then under the pressure of trillions of debt, Evergrande must sell assets, and Hengteng Networks, which has the farthest relationship with real estate, has become the best choice at the moment.
Moreover, in addition to film production, Hengteng Networks also has a product called Pumpkin Video, an online long video platform for major users in the Mainland. Hengteng Networks once said that it will rely on the user resources and capital strength of the two major shareholders of Evergrande and Tencent, as well as the film and television production capabilities of Ruyi Pictures, to build Pumpkin Movies into China’s top streaming media platform benchmarking Netflix.
Of course, under the current financial situation of Evergrande, it is no longer possible to build a Chinese version of Netflix alone. The sale of equity is an inevitable option. Before the takeover of Tencent, Evergrande had just transferred 739 million shares of Hengteng Networks for HK$4.433 billion. For the shares, the takeover party is Ke Liming, the actual controller of Ruyi Film and Television, which accounts for 8% of the company’s share capital.
In Tencent’s investment landscape, in addition to the core profitable business of games, the most important thing is the entertainment industry. Tencent’s own Tencent Film and Television has already produced its own movies and TV series, as if it has the momentum of the Chinese version of Netflix, and it is in the long-term video market in China. In an absolute leading position, Tencent is also the largest publicity platform for Chinese movies.
Although Pumpkin Film and Television is only a second-tier video platform, the successful experience of Ke Liming and Ruyi Film and Television in the Spring Festival file, combined with Tencent’s publicity resources and numerous IPs, is also a supplement to Tencent’s cultural and entertainment landscape, and it is anti-monopoly in China. Under pressure, the earlier the acquisition, the better.
Adding the price of 3.20 Hong Kong dollars, although it is a lot of premium over the beginning of the year, it has shrunk by more than 80% from the high point in February. As the second shareholder, at this time, it only costs 20.68 Hong Kong dollars to become the second-largest shareholder, which is very good for the stock price. The supporting role of Evergrande is also a help for Evergrande.
From the perspective of Tencent’s consistent foreign investment logic, it is not surprising that it has invested in Hengteng Networks at this time. Combining the current equity gap between the two parties, it is even possible to replace Evergrande as the largest shareholder of Hengteng Networks.
For Evergrande, through two consecutive sales of 19% of Hengteng Networks’ equity, HK$7.7 billion in cash and silver was returned, which is very important to supplement the group’s cash flow, and from the perspective of stock price trends, it can also allow investors to temporarily gain confidence.
However, compared with Evergrande’s huge debt, the 7.7 billion Hong Kong dollars is a drop in the bucket. And as one of the four kings of Evergrande, once Hengteng Networks leaves the Evergrande system, then Evergrande Motors is likely to have a chain reaction. It’s just that the former has at least the Spring Festival movie performance that can allow Tencent to take over. Evergrande Motors may not be so easy to find potential takeovers.