As the first CDR project, Xiaomi Group has made new progress in its domestic listing.
On the evening of June 14, Xiaomi Group confirmed that the proportion of the underlying shares of this CDR issuance accounted for not less than 7% of the total share capital after issuance; and the issuance of 'basic shares corresponding to CDR' will account for no less than the total size of the issue. 50%; At the same time, the CDR issue will adopt the principle of 'low with Hong Kong stocks' pricing.
On the same day, the SFC conducted as many as 84 questions on Xiaomi's CDR issuance application and received feedback of no less than 20,000 words; this is also the first feedback from the regulator on the CDR filing project.
The 21st Century Business Herald reporter found that Xiaomi Group’s shareholding structure, preference shares on gambling, customer veracity, valuation pricing, and equity differences have all become areas of concern in the feedback of the China Securities Regulatory Commission; analysts believe that the supervisory Many feedback questions to the CDR project means that although the current policy supports the new economic enterprises such as Xiaomi Group, it will still be treated fairly in the issuance of the audit, and it will remain under strict review.
An investment banker close to the supervisory level stated that for the current CDR project to be launched, the supervisory level pays more attention to the issuer’s profitability and valuation issues; weaker profitability or excessive valuation of the issue pricing make it easy for the CDR project. Brewing potential risks; such issues will also be of high interest when other CDR projects are filed.
Sustained earnings pending
Although wearing the 'unicorn' and 'first CDR' two halo, Xiaomi Group's listing application still received long feedback from the Securities Regulatory Commission.
According to the feedback from the Xiaomi Group, the CSRC made a total of 84 questions relating to the Xiaomi Group in terms of regulatory issues and information disclosure, including 38 issues of compliance issues, 41 issues of information disclosure, and 5 other issues. Field issues.
The 21st Century Business Herald’s statistics on the aforementioned 84 issues revealed that supervisory feedback on the issue more focused on the millet’s profitability and business model issues.
For example, in Xiaomi's ecological chain investment, VIE structure form, patent use, product sales, advertising, after-sales system, online games and other aspects, whether the impact on the company's profitability has always been mentioned by the regulator in the feedback.
'Because of the prevention of risks such as changing performance, continuous profitability has always been the top priority of the IPO review so far this year. Several IPO projects for this year were due to profitability problems. 'Bao Dai, an investment bank representative of a large securities company in Beijing, said: 'CDR project is more concerned about the market, so supervision is concerned with profitability is inevitable.'
Industry sources pointed out that the continued profitability of the Xiaomi Group has attracted attention due to two aspects. First, with the continuous growth in revenue, the net profit of the Xiaomi Group has been shortened after the deduction. The second is that its preferred stock financing has caused its book to show huge losses.
According to the disclosure of the prospectus, Xiaomi Group's operating income from 2015 to 2018 was 66.811 billion yuan, 68.434 billion yuan, 114.625 billion yuan, and 34.412 billion yuan; and the net profit after deduction was only 2.248 billion yuan. , 233 million yuan, 3.945 billion yuan and 1.038 billion yuan.
'At present, it is still mainly relying on hardware sales, so the level of gross margin is limited. This is also an internal cause of concern for profitability.' said investment bankers said.
In addition, the book float caused by its preferred stock financing was also involved in the feedback.
Before the application for listing, Xiaomi Group had completed A-F round of preferred stock financing. Debtization of preferred stock also led to Xiaomi Group’s “paper huge loss”. As of March 31, 2018, the millet’s net assets were -128 billion, accumulated loss of 135.2 billion, this huge net worth is negative and the cumulative loss is mainly due to 'convertible redeemable preferred shares measured at fair value'.
This also affected Xiaomi Group's annual net profit. From 2015 to 2018, the company's net profit was -76.27 billion yuan, 492 million yuan, -438.89 billion yuan, -70.27 billion yuan.
For this effect, the CSRC has put forward no less than ten more specific requirements, such as asking them to explain the reasons for the issuance of preference shares, the specific plan and the corresponding valuation basis; calculating the risk exposure if the company fails to qualify for listing; Required to list preferred stock related accounting methods.
The 'ecological chain' model is concerned
Another problem that was supervised in the feedback was at the business model level.
In terms of the nature, Xiaomi Group defines itself as an “Internet company with mobile phones, smart hardware and IoT platforms as the core”; but from the perspective of revenue structure, Xiaomi Group is highly dependent on hardware sales. From 2015 to 2017, Xiaomi The sales revenue of the company's smartphones was RMB 53.715 billion, RMB 48.764 billion and RMB 80.64 billion, accounting for 80.40%, 71.26% and 70.28% of the main income, respectively.
In fact, the China Securities Regulatory Commission also requested in the feedback that it be positioned as an Internet company at this stage rather than a hardware company 'accurate'.
For analysts, Xiaomi's IoT (internet of things) and ecological chain investment model is just the key to making it different from other hardware companies, and it is also relying on a higher valuation of the market.
'Millet's ecological chain investment model may be the basis for its valuation, otherwise it is not easy to distinguish effectively from traditional hardware companies, so the ecological chain's effectiveness, particularity, market, and supervision are all more concerned. 'Beijing A medium-sized brokerage TMT analyst said.
The above business model is also the focus of feedback from the regulator. For example, in the new retail concept mentioned in the prospectus, the Securities and Futures Commission requires a detailed explanation.
'About the new retail. Please sponsor agencies and lawyers to supplement the verification description of the definition of new retail, whether there is a standard definition, whether it belongs to the issuer's initiative.' The Securities Regulatory Commission pointed out that 'whether the issuer can achieve the integration of online + offline scene; Whether it belongs to the concept of speculation. '
In addition, the Xiaomi Group’s ecological chain investment is also the focus of feedback. According to statistics and feedback from 21st Century Business Herald reporters, the supervisory level mentioned the ecological chain up to 70 times in more than 20,000 words.
In this regard, the SFC requires Xiaomi Group to explain ecological chain investment, management, transaction modes and processes, including not only the selection criteria of investment targets, decision-making process, investment ratio, post-investment management model, ecological chain, existing industry distribution, and ecology. 3. The chain enterprise and company's transaction mode, transaction pricing principle and fairness, interest distribution mechanism and other multiple factors.
The aforementioned Bao Dai pointed out that the supervisory level provides a reference for Xiaomi Group's concerns or for the listing of future CDR projects.
“High revenue, heavy model, and high traffic are usually the characteristics of some 'unicorn' companies. Therefore, in terms of profitability, valuation, etc., the supervision’s attention to Xiaomi may also provide ideas for the application of follow-up projects. Said.
However, some people in the industry believe that since the CDR is a matter without precedent, prior to the disclosure of applications, feedback, etc., the sponsor institution and the issuer will usually conduct more detailed prior communication, so it is not a problem for such projects.
'Whether it is material declaration or feedback, issuers and sponsor brokers are required to repeatedly communicate with the supervisors. 'An investment banker close to the millet group stated, 'So these supplementary disclosures, millet has a high probability of completing the reply on time. Feedback. '