Blue City brothers, which chose to privatize, mainly served LGBTQ people. Although it was favored by investors at the initial stage of listing, the poor performance of the stock price after listing was very disappointing. In addition to its excessive dependence on the income of live broadcasting business, the poor effect of many M & A transactions initiated was also an important factor.
Blue City brothers listed in the United States mainly serve LGBTQ people, especially the fist product blued, which focuses on “gay” people. The company’s main profit point is live broadcasting, and its contribution to payment business is relatively low. In addition, most of its service objects are located in South Asia, Latin America and other places. Although the company acquired Fanka, lesdo and other companies after listing, lesdo was shut down one year after the merger.
The company once boasted that it was “small and beautiful”, but the growth story and performance were not recognized, and the latest share price was less than 1 / 10 of the IPO issue price. Recently, the privatization draft of Blue City brothers has triggered investor disputes, and many minority shareholders have said that their consideration is unreasonable.
the market price is less than 1 / 10 of the issue price
the privatization plan of Blue City brothers is controversial
Due to the relatively low access threshold in the U.S. stock market, many distinctive Chinese enterprises have successfully listed in the United States, and Blue City brothers (BLCT. O) is one of them. From the perspective of business characteristics, the company mainly serves LGBTQ people, especially gay men. When it was listed on NASDAQ in 2020, the IPO price of Blue City brothers reached $16.
As a rare LGBT concept company in the capital market, Blue City brothers was indeed sought after before its listing. Originally, it only wanted to raise $50 million, but due to the popularity of roadshows, it raised the financing scale to $84.8 million. But unexpectedly, its performance after listing was not as good as expected. The stock price fluctuated all the way down, and the latest offer was only $1.45.
For the Blue City brothers, many seller researchers have also looked away. For example, after the release of the 2020 annual report of Blue City brothers, Tianfeng Securities Co.Ltd(601162) global technology chief analyst Kong Rong (once an excellent analyst in the small and medium-sized plate of the 2021 crystal ball award) team is high-profile and bullish. It is expected that the total revenue of the whole year in 2021 is expected to increase by 42% to RMB 1.46 billion. Based on this, maintain “buy”. But in fact, the share price of Blue City brothers has fallen all the way from the $11.50 released by the research report, and has fallen nearly 90% so far.
Or because of the long-term sluggish stock price, the privatization of Blue City brothers has also been put on the agenda. In early January 2022, blue city Brothers announced that it had received a preliminary non binding proposal. The company’s founder and CEO Ma Baoli and propeller tech Limited formed a buyer’s group to acquire the company’s issued ordinary shares, including class a ordinary shares represented by American depositary shares, at a purchase price of US $3.7/ordinary shares or US $1.85/ads.
The privatization is controversial. For example, many users have raised objections on snowball. Users @ just love speculation, saying, “the price of privatization is too low, and the inequality of voting rights is really a hidden danger.” Another user also said that the privatization price of Blue City brothers is much lower than the IPO issue price, which has a great shock to investors. “Ma Baoli currently holds about 30% of the shares, but holds the voting right, accounting for 70% of the total share capital. According to the delisting rules of us stocks, if the voting approval rate exceeds 2 / 3, the privatization plan can be passed.”
Hao Junbo, the chief lawyer of Beijing Hao Junbo law firm, has rich experience in US stock securities litigation. He admitted to the reporter of red weekly that the privatization price of Blue City brothers is only about 1 / 10 of the IPO issue price, which is really low.
For the privatization of Blue City brothers, some users on the snowball have shouted “collective opposition to the privatization of Blue City brothers at 1 / 10 of the issue price.” For example, the user with ID @ wolf Qiao Yimeng has counted the “seven sins” of the management of Blue City brothers: acquiring lesdo at a high price shortly after listing; Acquire Fanka at a higher price five months after listing; No operation capacity after acquisition until lesdo stops service; Ma Baoli, CEO with 70% voting rights, plans to privatize with 1 / 10 of the issue price
So, in the eyes of investors, what kind of privatization price is reasonable? Mr. Yu (a pseudonym), a senior U.S. stock investor who once held Blue City brothers, said that the reasonable price is not easy to be accurate, but the IPO price of Blue City brothers is $16, and now the share price is less than 1 / 10 of the issue price. “Even if the current privatization price doubles, the vast majority of shareholders will lose.” He bluntly said that investors who have survived a long decline and still hold Blue City brothers are certainly optimistic about the company’s prospects. If the management really feels undervalued, it can have more reasonable choices, such as repurchase and management increase. However, the “US $3.7/common stock and US $1.85/ads” proposed by the buyer’s group is indeed too low, which has hurt the feelings of shareholders accompanying its growth all the way.
“From the listing all the way down to now, the shareholders who can continue to hold must be prepared to endure losses and grow with the company. However, the choice of the management is equivalent to stabbing the supporters in the back. (privatization) may be cost-effective for themselves, but at the time when stocks are generally under pressure, it can only be said to be too irresponsible.”
Of course, the current privatization offer is not the final plan, and it is unknown whether it is even a false shot. It can be proved that the privatization plan announced by the listed company is a “preliminary non binding proposal”, and the company can not guarantee that it will receive any final offer, nor can it guarantee that the transaction will be approved or completed. After the release of the privatization draft, the depressed share price of Blue City brothers also jumped 30% to $2 for a short time, and soon fell back to $1.45 at present.
Generally, zhonggai shares are often listed again in other markets after privatization. Analysis by insiders: considering the sensitivity of Blue City brothers’ business, the possibility of listing in A-Shares is very small; It is more likely to be listed in Hong Kong. However, since last year, the primary market performance of Hong Kong stocks has been sluggish, a large number of new shares have been broken, and the volume of Blue City brothers is small. It may land in the capital market through business restructuring and M & A.
It is worth noting that river tech Limited, which jointly initiated the privatization with Ma Baoli, is also a major shareholder of chizicheng Technology (9911. HK). Chizicheng technology is known as the largest social sea company in China. It has created dozens of apps for global users in the fields of video, social networking and games, including yumy, yiyo, mico and Yoho. It is widely popular in the Middle East, North America, Southeast Asia and South Asia.
Then, does the emergence of propeller tech Limited mean that blue city brothers may have more in-depth cooperation with chizicheng technology, and even land in Hong Kong stocks through the platform curve of chizicheng technology?
Relying too much on the live broadcasting business, the consumption power of mainstream users is low, and it is not easy to compete with Grindr in the European and American markets
During the privatization of Blue City brothers, the management was also involved in the dispute. Mr. Yu visited the company’s office last year. He admitted, “before, I had a good impression of the management of Blue City brothers and Ma Baoli. I was low-key, not boastful, and had feelings. I felt that I was a person who did things.
”But after the release of the privatization draft, “I am very disappointed in this matter.”
Ma Baoli’s experience is legendary. Public information shows that Baoli Ma is the founder and soul of Blue City brothers. He worked as a policeman for 16 years in his early years. “Ma himself is also a \’gay man\’. While working in the Public Security Bureau, he quietly does something in the field of LGBT.” A public interview revealed that when I went to the police school, I found myself different from others. “I especially wanted to find an answer. Why do I like different from others? But at that time, I found that there were no answers in magazines and textbooks. I received a lot of negative information and felt very confused.”
According to the reporter of red weekly, due to the particularity of business, the channel + promotion expenses of Blue City brothers are relatively small. In terms of public relations advertising, the company has also made some donations to research and treatment institutions such as AIDS and AIDS patients, which is still very low-key in general. Mr. Yu revealed that the Blue City brothers performed well in maintaining government relations, “this may be related to Ma’s police resume.” Public information also shows that Ma Baoli was also invited to participate in the celebration of the 70th anniversary of the National Day in 2019.
Nevertheless, the business model of Blue City brothers is still controversial. In 2019, the “cover up” of the “cover up” in the “cover up” of the “cover up” in the cover story of “Caixin”, said that the Blued software “protecting minors” is a nominal thing. A considerable proportion of the minors are highly at risk through Blued gay friends and AIDS caused by unsafe sex. This was a major public opinion crisis in the development of Blue City brothers. Subsequently, blued temporarily closed the registration of new users and organized relevant departments to carry out content screening and rectification.
In terms of business model, “the main realization mode of Blue City brothers is live broadcasting, but the concept of live broadcasting has fallen miserably in the past two years.” Although Ma Baoli previously said in an interview that the goal of Blue City brothers is the full life cycle business, not a simple live broadcasting company, and the company also launched member services in 2018, so far it can not replace the contribution of live broadcasting business to revenue. According to the third quarterly report of 2021, the scale of paying users of Blue City brothers in the third quarter increased by 57% year-on-year, reaching a total of 776000 people. In the third quarter, the member service revenue was 35.1 million yuan and the online commodity sales revenue was 22.8 million yuan, that is, the live broadcast revenue is still the largest.
The third quarterly report also showed that the total revenue of Blue City brothers in the first three quarters of last year was 833 million yuan, a year-on-year increase of 10.7%. Among them, the revenue in the third quarter was 270 million yuan, down month on month; In the first three quarters, the net loss was 160 million yuan, and the profit turned into loss. Compared with the prediction of tiger securities and other platforms, this performance is slightly weaker than expected.
By the end of 2020, Blue City brothers had more than 72 million users, and blued’s market share among “gay” people was also the second in the world.
“In terms of user distribution, a considerable proportion of blue users are located in economically underdeveloped areas such as South Asia and Latin America, with low per capita consumption capacity.” Mr. Yu said that during the previous investigation in Blue City brothers, the management also said that one of the business priorities in 2021 is to increase resource investment and development in European and American developed markets.
Blue’s main competitor overseas is Grindr, the world’s largest same-sex dating software, which is favored by Chinese enterprises. In 2017, Kunlun Tech Co.Ltd(300418) (300418. SZ) announced that it would acquire Grindr for $245 million, and then sell it for $608 million three years later, making a lot of money. Grindr occupies a dominant position in the European and American markets, and the main profit point is payment income. The European and American markets are exactly the important goals that blued aims to achieve.
the road of M & A is full of thorns
lesdo hasty shutdown
The road of M & A and expansion of Blue City brothers is not smooth. Before listing, Blue City brothers\’ main product has always been blued. After listing, the company began to acquire frequently. In November 2020, blue city Brothers announced that it would acquire gay social software Fanka for 240 million yuan. Ma Baoli believes that Fanka focuses more on helping users establish social and emotional connections than blued aims to provide users with products and services throughout the life cycle, “which is of strategic supplementary significance for Blue City brothers to build LGBTQ community”.
However, some investors said that the original acquisition of Fanka alone cost 240 million yuan. Now the total market value of Blue City brothers is only $50 million, and it only needs slightly more than 240 million yuan to acquire all circulating shares. Does this mean that the original valuation of Fanka was too high and suspected of interest transfer?
In addition, Blue City brothers acquired lesdo, a social software for female users, in 2020, but public information shows that lesdo officially stopped operating in October last year, which is a major setback for Blue City brothers to get out of the male user strategy.
Nevertheless, Ma Baoli’s ambition is more than that. At the 2021 World Internet Conference not long ago, Ma said: “I believe that metauniverse is the next Internet form, at least at the first level”, which means that he has started the idea of metauniverse market again.
In addition to continuous mergers and acquisitions, Blue City brothers are also willing to spend money on R & D. According to the financial report, the technology and R & D expenses in the first three quarters of last year were 166 million yuan, a year-on-year increase of nearly half. It is worth noting that the 2020 annual report of Blue City brothers shows that its monetary capital is still 440 million yuan, but by the third quarter of 2021, the scale of monetary capital has been reduced to 370 million yuan. If considering the reality of long-term losses of the company, there is a suspense about how long the existing funds can last.
In addition, the 2020 fourth quarter report disclosed by Blue City brothers shows that the quarterly revenue is $42.7 million, about $4 million less than the forecast. In response to this change, some investors filed a lawsuit to the court on the grounds of false statements. Hao Junbo disclosed that investors accused the company of making false statements during the period from July 8, 2020 to July 19, 2021, exaggerating its business status and financial prospects. At present, this lawsuit is in progress.
dream broken US stocks, large-scale delisting of China concept stocks
Blue City brothers is only a microcosm of the recent situation of Zhongyu shares. On the whole, zhonggai shares have not been recognized by overseas investors since 2021. Taking bocom CSI overseas China Internet Fund as an example, the net value has nearly halved since last year, and the funds investing in zhonggai shares have also been ridiculed as “zhonggai Internet”. Generally speaking, if the share price of NASDAQ is less than US $1 for 30 consecutive days or the total market value is less than US $35 million, there is a delisting risk. According to wind, at present, there are 51 companies with a share price of less than US $1, including Jiuzhou pharmacy (cjjd. O), Mogu Street (Mogu. N), Jupai investment (JP. N), best. N and other well-known enterprises in China, and more than 60 companies with a market value of less than US $35 million.
In this context, a large number of China concept stocks have been delisted actively or passively. Among them, Sina, Sogou and other old China concept stocks have been delisted actively in 2021, and the most recent case is duo. O, which announced on January 7 this year that it has received a delisting warning from NASDAQ. Hao Junbo admitted that in the process of privatization, “the key is money. As long as the offer price is too low, investors are generally dissatisfied.”
“Zhonggai shares are mostly listed in vie structure, and the listed subjects are often offshore companies registered in Cayman Islands and other places. If investors are not satisfied with privatization and cannot file a lawsuit in the United States, they must file a lawsuit in the place of registration, which is more difficult to protect their rights.” Hao Junbo pointed out that the class action system in the United States is very mature and the protection for small and medium-sized investors is relatively perfect, but the legal environment and costs of offshore islands are very strange to Chinese investors. According to him, the securities litigation cycle of U.S. stocks is generally about two years, and the compensation process takes another year, often about three years to get compensation.
The reporter also tried to interview the Blue City brothers by e-mail. As of press time, there was no reply.
