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Why does the original say that everything is new (Love Recycling) IPO may not be so optimistic


Let me talk about a widely circulated paragraph: In 2013, apart from the news of Ali’s upcoming IPO in the media, only a few of Ali’s executives knew the approximate progress. For many employees, they don’t know when the company will be listed, so they are moved. Many employees who are in urgent need of cash want to sell their Ali shares at a discount. Of course, there may also be some Ali who is not so optimistic about the future. Staff.

After seeing this situation, CTO Wang Jian told these employees that he was willing to buy stocks. At one time, Ali employees who sold stocks at the door of Wang Jian’s villa lined up. In the end, Jack Ma came forward to stop the purchase before Wang Jian stopped buying.
The friend who told this story told Chang Gengjun that at the time Wang Jian did not know when Ali was IPO. On the one hand, he bought employee stock to help these colleagues who needed money urgently. On the other hand, he was very optimistic about the future of Alibaba. So I am willing to sell iron to increase my holdings.
Later, when it went public in September 2014, the opening price was 92.7 US dollars, and the current stock price is 215 US dollars. The historical high has reached 319 US dollars.
The reason for telling this story is that, in Chang Gengjun’s opinion, even if it is an investment bank or fund investigator, no executive knows his company better. If executives increase their shareholding significantly, it can explain the company’s future prospects to a certain extent. Yes, if executives significantly reduce their holdings, it may indicate that the company’s future prospects are not so optimistic.
On May 29, the parent company of the Aihuishou brand submitted an IPO prospectus to the New York Stock Exchange, preparing to go public in the United States. The company’s Chinese name abbreviation is “Wanwu Xinsheng”, the English name is AIHUISHOU, and the stock code is “RERE”. No surprise, this will be the first second-hand 3C e-commerce stock listed in China’s concept stocks.
It is worth noting that Chen Xuefeng, the founder and CEO of the company, has publicly stated that he will never go public, and will only seek to enter the capital market when the valuation is between US$4 billion and US$5 billion. This statement shows that Chen Xuefeng is full of confidence in the future, which is a good thing.
However, the publicly disclosed information is not consistent with Chen Xuefeng’s remarks. The information disclosed in the prospectus shows that since February 2021, Chen Xuefeng has successively reduced his holdings of 19,959,981 shares of Aihui. In addition, the prospectus disclosed that another founder, Sun Wenjun, also sold 600,645 shares of Aihui before the company’s listing. Reclaim the shares.
According to calculations by Sina Finance, more than 1.6 million shares of the two founders, Chen Xuefeng and Sun Wenjun, were sold to Series F shareholders in the form of ordinary shares at a unit price of $15.55 per share. This price is not only lower than the selling price of Series F preferred shares ($19.43/share), but even lower than its Series E selling price ($17.84/share). If these two reductions were cash out, Chen Xuefeng had already cashed out 20-30 million U.S. dollars before the company went public, and Sun Wenjun had cashed out about 9.3 million U.S. dollars.

The two founders significantly discounted their holdings in the few months before the company went public, regardless of whether they were cashed out or not, it was unreasonable. This behavior not only caused a lot of speculation from the outside world, but also caused everyone to pay attention to the data disclosed in the prospectus. Chang Gengjun also carefully checked the IPO prospectus of Wanwu Xinsheng (Note: For the sake of understanding, the name Aihuihui will continue to be used below), he concluded that: at least from the public information disclosed in the current prospectus, this company Many data on the first stock of second-hand 3C e-commerce are not so optimistic. The information disclosed in the prospectus shows that from 2018 to 2020, Ai Huihui’s net losses were 210 million yuan, 540 million yuan, and 200 million yuan, respectively, and the net loss in Q1 of 2021 was 94.78 million yuan. Operating cash flow was -358 million yuan, -411 million yuan, -413 million yuan and -303 million yuan. Of course, the loss is not enough to explain the future of a company. For example, even if high-growth companies such as Tesla and Weilai lose money, the capital market will buy it. Everyone is optimistic about the future, not the present. However, the prospectus data also shows that as of the end of 2020, the cash and equivalents recovered by Ai was 140 million US dollars, and by the end of March this year, the cash and equivalents were only 100 million US dollars. In one quarter, Aihuihui’s book cash and equivalents decreased by 40 million US dollars. At this rate, if it does not continue to raise funds, Aihuihui will face the exhaustion of funds before the end of this year. On the one hand, the two founders discounted their holdings of the company’s stock before the IPO. On the other hand, the company’s book cash and equivalents are less than US$100 million. This is the first reason why Chang Gengjun questioned Ai Hui. Even if second-hand 3C e-commerce is a promising industry, it still has to survive to enjoy the dividends. In the past few years, there have been too many cases of pioneers in the Internet field. You must know that there are still idle fish in this industry. Zhuanzhuan waits for competitors to be eyeing. From an income perspective, the growth performance of Aihuihui is fairly good. The company’s revenue in 2020 is close to 4.9 billion yuan, a year-on-year increase of 23.6%, and GMV reached 19.6 billion yuan, a year-on-year increase of 61%. However, the prospectus did not disclose the number of monthly active users and the number of trading users. Some media analysis believes that nearly 88% of the merchandise sales of Aihuishou are sold to second-hand merchants on the B side through B2B mode. The revenue from to B transactions accounted for 83%. GMV in China and overseas to B The total accounted for 58%. These data show that Aihuihui is more like a supply chain service company and B2B platform in the second-hand 3C field, rather than a typical e-commerce trading platform. If these analyses can only represent part of the media’s perspective, the data disclosed by third-party research institutions may allow us to make a more comprehensive judgment on love recycling. There are currently three apps under the umbrella of Ai Recycle: C2B mode of Love Recycling, B2B mode of Paijitang and B2C mode of Paipai. According to data disclosed by data monitoring agency QuestMobile, the average daily active users of these three apps in April 2021 were 17,000, 33,000, and 35,000, respectively. These data can to some extent support the judgment of some media that Aihuihui is still a to B company. Chang Gung Jun also recognized this judgment, and at the same time, this is also the second reason for questioning Ai Huihui. You know, it is also a second-hand business, and the market has completely different recognition of shells with pure to C mode and Uxin, whose main business is to B. Shell’s opening price was 35 US dollars when it went public, and the latest share price is currently 46 US dollars. The high point has risen to around 79 US dollars. After Uxin opened at $10, the current share price is only $4.5, which once fell to $0.76. Aihuihui’s revenue is mainly composed of two business segments: product revenue and service revenue. Product income is mainly to buy second-hand electronic products from consumers and merchants, and then sell these products at higher prices. Simply put, it is the model of “second-hand dealers make the difference”. There is nothing to say about this model. There are not many stories to tell in the capital market. Service income refers to the transaction commission collected by Aihuitang and Paipai APP. In Q1 of 2021, the platform service fee income of Aihuihui was 200 million yuan, a year-on-year increase of 137%. In the prospectus, Aihuihui expects that the proportion of service revenue will continue to increase as the business grows. The growth rate of service revenue is good, but another set of data is more worthy of attention: In Q1 of 2021, Aihuihui’s contract performance fee was 220 million yuan, and marketing expenses were 220 million yuan. Obviously, such a revenue model cannot make people look optimistic about Aihuihui’s platform service business. Its platform transformation is worrying. This is the third reason why Chang Gengjun questioned Aihuihui. At present, JD.com is the largest strategic shareholder of Aihuihui, with a shareholding ratio of 34.7%. Ai Recycling stated in its prospectus that its relationship with JD Group is mutually beneficial. Ai Recycling helps deal with all the transactions of JD’s consumer-side second-hand mobile phones, laptops, tablets, digital cameras, and certain other electronic products. Online and offline businesses also benefited from JD’s consumer traffic. Second-hand 3C e-commerce transactions are itself a low-frequency demand for C-end users. Chang Gengjun believes that, judging from the information disclosed in the prospectus, Aihuishou plays more of a role as a second-hand service provider on the JD platform. On the second-hand trading track, there will be fierce competition between idle fish and Zhuanzhuan in the future. It is still too early to talk about the victory or defeat. This is also the reason why I cannot be very optimistic about Aihuihui. In general, Aihuihui, which has been named a new life for all things, has a listing path and business model that are very similar to Uxin, the first stock of used car e-commerce in the past. Now it is also listed on the US stock market. How is its performance in the secondary market? It remains to be tested by time