After the Ruixing scandal, the first China IPO, Jinshan Cloud tests the confidence of US investors
After the Ruixing financial fraud scandal, the US stock market will usher in the IPO of Chinese companies for the first time. How confident are US stock investors in the Chinese stock market?
On Monday, May 4, Kingsoft Cloud, a cloud computing service provider under Kingsoft, stated that it plans to go to the US for an IPO and plans to issue 25 million American Depositary Shares (ADS) at an issue price between $ 16 and $ 18 per share.
As a result, the amount of funds raised by Kingsoft this time is between US $ 390 million and US $ 450 million, and the company’s valuation is between US $ 3.6 billion and US $ 3.8 billion.
On Tuesday, Jinshan Yun further stated that the final issue price will be determined on Thursday, and the stock will start trading on Nasdaq on Friday. If the underwriters exercise the “green shoe” option and allow them to oversell the shares, the final amount of funds raised may be as high as $ 518 million.
At the same time, Jinshan Cloud’s existing shareholders Jinshan Software, Xiaomi, and French asset management company Carmignac Gestion are all interested in anchoring Jinshan Cloud’s IPO, which is expected to purchase US $ 50 million, US $ 25 million, and US $ 50 million, respectively. Of stocks.
According to the prospectus, Kingsoft Cloud’s revenue in 2019 was 390 million yuan, an increase of more than 78% from the previous year, but its net loss also increased by 10% year-on-year to 1.1 billion yuan. In the past three years, Kingsoft has suffered losses of nearly 3 billion yuan.
Jinshan Yun lost 2.8 billion in 3 years, and it still bucked the trend of the US stock IPO despite the crisis of trust in the Chinese stock market
After boiling for many years, the cloud computing market is full of fish, and a sudden epidemic has made the market see the huge value played by this industry. Some companies that are deeply involved in cloud computing are starting to embrace the capital market upwards to obtain better valuations. Following Qingyun’s proposed listing, Jinshan Cloud, a subsidiary of Jinshan Group, submitted an IPO application to the US Securities and Exchange Commission. Although this cloud computing vendor’s revenue and market influence are not as good as those of Alibaba Cloud and Tencent Cloud, it has also received great attention because of its backing against Lei Jun.
Kingsoft Cloud is scheduled to be listed on the NASDAQ under the symbol “KC”. The Jinshan Cloud IPO underwriters include JPMorgan Chase, UBS, Credit Suisse and CICC, plan to raise up to 100 million US dollars of funds. Judging from the scale of Jinshanyun’s fundraising, this is not a small sum of money.
For Jinshan Cloud’s listing at this time, there are two voices in the market: good singers believe that from domestic to global, various companies have begun to advocate for employees to work remotely, the demand for digital operations of enterprises has increased dramatically, and the global cloud computing market has grown rapidly . Taking into account this status quo, Jinshan Cloud listing can be more recognized. However, there are also those who say that the US stock market is not friendly to China stocks recently, and Jinshan Yun may encounter short sales as soon as it is listed.
Capital markets are very emotional most of the time. Buy when you sing well, and short when you sing. But it seems to be proved many times that only those who value the actual operation of the enterprise most are more likely to laugh to the end.
/ 01 /
Fame
3 years but lost 2.8 billion
Beijing Jinshan Cloud Network Technology Co., Ltd. (hereinafter referred to as Jinshan Cloud) is a cloud computing enterprise under the Jinshan Group. It was separated from Jinshan Software in 2012 and is a well-known independent cloud service provider in China. The business is mainly to provide technologies suitable for government affairs, finance, AIoT, medical, industrial, media, video, games, education, Internet, etc. through technologies such as artificial intelligence, big data, Internet of Things, blockchain, edge computing, AR / VR, etc. Industry solutions.
Jinshan Yun’s financing rhythm and investor background can be described as quite predictable. Since its inception in 2012, Jinshan Yun has almost raised a total of more than 4.6 billion yuan in financing in accordance with the annual round of financing. Investors involved Lei Jun, Jinshan Department, IDG Capital, and Shunwei Capital. At the same time on the eve of the listing at the end of 2019, the China Internet Investment Fund, co-sponsored by the Central Internet Information Office and the Ministry of Finance, also subscribed for Jinshan Yun D + series of preferred shares with an investment of US $ 50 million.
Kingsoft Cloud is currently China’s third largest Internet cloud vendor and sixth largest public cloud IaaS vendor. On March 20th, British research agency Canalys released the report of the Chinese public cloud service market in the fourth quarter of 2019. The report shows that Alibaba Cloud ranked first, and its market share rose to 46.4% month-on-month. Tencent Cloud’s market share is 18%, and Baidu Cloud’s share is 8.8%. Kingsoft Cloud is still in the “other” category, but it still ranks in the top three in the IaaS market, with a market share of around 5%.
Compared with Ali and Tencent, Jinshan Cloud is slightly low-key. However, it is also different from the first two to seek the whole industry. Jinshan Cloud is relatively focused on the layout of the industry, eats through one industry, and then makes the next. The Jinshan Cloud prospectus mentioned that the number of senior customers in 2019 was 243, an increase of 89 compared with 2018, and the average income of each senior customer was 15.9 million yuan. Among them, in terms of game cloud, Jinshan Cloud’s customers include Jinshan Software’s Xishanju, Giant Network, Perfect World and Palm Fun Technology; in terms of video cloud, customers include ByteDance, iQiyi, Station B, etc .; enterprise cloud customers include Construction Bank and Huatai Securities etc.
In terms of revenue structure, Kingsoft Cloud’s main revenue source is the public cloud business, which accounted for 97.3%, 95.1%, and 87.4% of revenue in 2017–2019; in addition, at the end of 2017, Kingsoft Cloud announced a comprehensive Entering the enterprise market, the proportion of this business’s revenue has increased year by year, from 1.2% in 2017 to 12.3% in 2019.
Looking at Jinshan Yun’s prospectus, it can be seen that although the company’s annual revenue is increasing, the company’s losses are also increasing. At the same time, Jinshan Cloud has a history of net losses, but its future profitability is uncertain.
In the three years from 2017 to 2019, the company’s revenue was 1.236 billion yuan, 2.218 billion yuan and 3.956 billion yuan respectively, and the year-on-year growth rates in 2018 and 2019 reached 79.5% and 78.4%, respectively. But at the same time as revenue growth, Jinshan Cloud’s losses continue to increase. From 2017 to 2019, Jinshan Cloud’s net losses were 714 million yuan, 1.006 billion yuan, and 1.112 billion yuan, respectively, with a cumulative loss of 2.832 billion yuan over three years. The net losses attributable to ordinary shareholders were as high as 1.32 billion yuan, 1.749 billion yuan, and 1.16 billion yuan, respectively.
During the same period, cash from operating activities continued to flow out. The net cash used in operating activities was -134 million yuan, -383 million yuan, and -439 million yuan, respectively. The net cash generated from fundraising activities was 1.861 billion yuan, 2.436 billion yuan, and 64 million yuan, respectively. As of the end of December 2019, the cash and cash equivalents of Jinshan Cloud at the end of the year were 2.023 billion yuan.
From the above data, the annual high financing amount corresponds to a loss of hundreds of millions of years. Can’t help asking, where did Jin Shanyun’s money go?
Like all technology companies, Kingsoft Cloud’s spending is mainly invested in R & D and IDC (IDC is an Internet data center, referring to a service platform with complete equipment, professional management, and perfect applications).
According to the prospectus, Jinshan Yun ’s research and development expenses in the past three years were 399 million yuan, 440 million yuan, and 559.5 million yuan, accounting for 65.6%, 56.5%, and 51.7% of the overall operating expenses, respectively, accounting for the proportion of total revenue. 32.3%, 19.9% and 15.1%. The IDC costs (bandwidth cost and rack cost) were 1.033 billion yuan, 1.905 billion yuan and 2.8566 billion yuan, respectively, accounting for 76.3%, 78.2% and 72.3% of the revenue cost. Jinshan Cloud’s R & D expenses are constantly decreasing, but compared with the same industry, it still pays attention to R & D investment.
It should be noted that Kingsoft Cloud has included “personnel costs” in “income costs” rather than generally in operating expenses. This may be due to the higher correlation between personnel costs and IDC infrastructure, which will also lead to The gross profit margin looks lower, but this part of the revenue cost ratio is not high, in the past three years have been around 1%.
Cloud computing has a huge economic volume, and all these require huge cost to support. The Jinshan Cloud prospectus did not disclose information such as the issue price range and issuance volume, but only stated that it needed to raise nearly 100 million US dollars. The main uses include: about 50% of the funds are used for further investment to upgrade and expand the company ’s infrastructure; about 25% of the funds are used for further investment in technology and product development, especially in artificial intelligence, big data, cloud technology and the Internet of Things; 15% is used to fund ecosystem expansion and international influence; about 10% is used to supplement the company ’s general working capital.
/ 02 /
Income depends on Xiaomi
How long can a loss-making “empire” be delayed?
From 2017 to 2019, Jinshan Cloud’s total revenue from senior customers accounted for 93.7%, 95.3%, and 97.4% of the total revenue for the year. Among them, the income from Xiaomi accounts for 27%, 25% and 14% of the total income respectively. At the same time, the income from Jinshan Group is not low, accounting for 4.0%, 3.5% and 2.8% respectively in the past three years.
In terms of specific amount, in the past three years, Jinshan Cloud provided revenue of 323 million yuan, 547 million yuan, and 570 million yuan in cloud services to Xiaomi Group, enterprise cloud services were 11.321 million yuan (2017 only), and other services were 120,000 yuan (2019); obtained 49.619 million yuan, 77.732 million yuan, and 100.9 million yuan from the public cloud service of Jinshan Group; obtained 23.9 million yuan, 6.202 million yuan, and 8.57 million yuan public cloud from Cheetah Group Service income.
Obviously, as the two largest shareholders of Jinshan Yun, Xiaomi and Jinshan Group contributed the most to the company’s revenue. The reason that tied the two with Jinshan Yun was from Lei Jun. Lei Jun is both the chairman of Xiaomi and the chairman of Jinshan Software. He has also served as the chairman of Jinshan Cloud since April 2015, with a personal share of 15.8%, far exceeding CEO Wang Yulin ’s 2.1% Proportion, accounting for nearly 85% of all directors and executives holding shares. If the listing of Kingsoft Cloud is successful, this will be the fourth listed company of the Lei Jun Department.
Although Jinshan Cloud is backed by the big tree of Xiaomi, but by relying on affiliates to make money, investors may not be optimistic, and there are also greater risks. This is also mentioned in Jinshan Yun ’s prospectus, “If we can no longer benefit from our business cooperation with Jinshan Group or Xiaomi Machine Ecosystem, our business may be adversely affected.” “In the foreseeable future , We are likely to continue to rely on a limited number of customers to obtain a large part of our revenue, and in some cases, our future attributable to a single customer ’s revenue may increase. Losing one or more senior customers or reducing any senior customers ’ Usage will reduce our revenue. If we are unable to maintain existing customers or develop relationships with new customers, it will harm our business. “
At the same time, the scale of Jinshan Yunchao’s money is too violent. From 2017 to 2019, Jinshan Yun’s gross profit margins were -9.6%, -9% and 0.2%, which were lower than that of Youkede and Qingyun Technology, but Jinshan Cloud’s 2019 revenue was 2.6 times that of Youkede and Qingyun Technology. And 10.5 times, this is not in line with common sense. There is a voice in the market that the only possible explanation is that Jinshan Yun is doing business in a reversed manner, especially in 2017 and 2018.
There are no successful precedents for Chinese independent cloud service providers on this path. No one can give a definition of whether the most important strategy for the big customer strategy formed by Kingsoft Cloud Burning is. But the fact is that the B-end market is a slow market. In particular, the enterprise-level service market does not seek fast and cannot rely on one trick. It has been more than 10 years since the development of the Chinese cloud computing market, but players are still gathering and the competition is fierce. This is an industry that emphasizes depth, severity, and stability, and is also a capital sector that emphasizes investment value.
In addition, Node Finance inferred that Jinshan Yun chose to list the two adverse factors of the US stock bear market and the Chinese stock market trust crisis at this time. It is not excluded because-especially after the weak shipment of Xiaomi mobile phones-it is difficult Dragging this loss-making “empire”.
/ 03 /
Enemies everywhere
Daring to go against the trend
From Ruixing Coffee to who to study with, to the chain reaction triggered by iQiyi, the recent Chinese stock market is very uncomfortable. Someone who has contact with Jinshan Cloud’s listed business told Node Finance that in the eyes of American investors, they don’t know what kind of company they are, and only give them a hat called “Chinese stock”. Jinshan Yun’s IPO in the United States will obviously be affected at this time. First, the SEC will focus on evaluating Jinshan Yun’s company resume and business performance, and will face more acute problems during the roadshow. After the listing, the valuation will be more calm.
This is not an arbitrary conclusion. On April 23, for the first time in history, the chairman of the US Securities Regulatory Commission publicly reminded investors on TV media that they should not “invest in Chinese stocks.” Around 2010, Lino Technology and China High Speed Channel were attacked by short-selling agencies such as Hunshui and Citron, which caused many Chinese concept stocks to be suspended or delisted due to counterfeiting, and then hit the surface to all Chinese companies. According to Ernst & Young’s “Global IPO Update”, there were 42 Chinese companies listed in the United States in 2010 and only 3 were delisted; by 2011, the number of listed companies decreased to 14 and the number of delisted companies surged to 41 companies. The number of Chinese stock companies that delisted in the first half of 2012 reached 19, and only Vipshop and Huanju Times went to the United States for IPO throughout the year.
At the same time, apart from the fact that the U.S. stock market has little goodwill on Chinese stocks recently, investors will still hold a magnifying glass to see the enterprise value of cloud computing companies that have frequently taken advantage of the recent listing. Jin Shanyun was in an awkward position.
As capital and technology continue to increase, the head effect appears in the cloud computing market. Whether it is Amazon, IBM, Google in the United States, or Ali, Tencent, and Huawei, they are all giants in the Internet industry, and their financial resources and technology have great advantages.
As a division of “Others”, Jinshan Cloud still cannot compare with it. At the same time, the industry’s rookie Qingyun Technology and Youkede are constantly catching up, and Jinshan Cloud is under attack from all sides.
Compared with the top three “elephants” in the industry, Jinshan Cloud’s revenue is relatively small and its growth rate is relatively low. Compared with the “ant”, Jinshanyun held high. Between the two sides, how much the market can give Jinshan Yun after the listing remains to be seen.
Disclaimer: The opinions in this article only represent the author’s personal opinions and do not constitute investment advice. The author does not make any guarantees about the accuracy, completeness and timeliness of the article information, nor is he liable for any loss caused by the use or trust of the article information.
