2003: Starting with Foreign Trade

Chapter 984 The Largest Share Reduction in History
"It's good if it drops a bit, we've been making too much noise lately."

On November 10, both the European Union and China's State Administration for Market Regulation issued antitrust guidelines on the platform economy.

In two trading days, the stock prices of leading companies such as Ali, Tencent, Orange, Meituan, Dongzi, and Pinduoduo have all fallen by more than 20% cumulatively.

Among them, Ali suffered the biggest drop. Since the 28th, Ali's market value has fallen by 33%, equivalent to a loss of HK$2.2 trillion.

On the 11th, Ali's market value evaporated by nearly 8000 billion yuan, and related Chinese concept stocks also experienced sharp declines.

Throughout 2020, after a brief trough at the beginning of the year, the market value of internet companies grew at an extremely rapid pace, driven by factors such as performance and market expectations.

Special events have not only boosted the healthcare industry, but also made internet companies, which have a significant advantage in digitalization, the biggest beneficiaries.

Throughout the year, the market capitalization of the entire internet industry was almost at its peak. Even Xiaomi Group, which was previously unpopular in the Hong Kong stock market, has seen its market capitalization exceed 1000 billion US dollars.

Orange Group's market capitalization peaked at over US$120 billion in the middle of the year. Before Jack Ma's controversial remarks, Tencent's previous peak market capitalization was over HK$6 trillion.

At its peak, Ali's market value reached HK$3.7 trillion, making it one of the most popular internet companies in the world at the time.

The public opinion and industry crisis brought about by Lao Ma's speech are far more complex than just the postponement of Ant Group's IPO.

Public opinion is vehemently criticizing the internet industry, with negative news flooding the media, while new regulatory rules for the industry are being introduced one after another.

It wouldn't be an exaggeration to say that everyone was on edge. Tan Jincheng reacted quickly, initiating a self-inspection and self-examination of the group company on the 25th.

Others, such as Little Ma, Da Qiangzi, and Wang Xin, reacted swiftly and very quickly, with Little Ma being the most decisive.

In a very short period of time, Pony Ma quickly "gave away" his shares in companies such as Meituan and Jingdong to investors in the form of dividends.

While actively responding to regulations, Pony Ma's move is tantamount to sending a signal to the market and higher authorities that Tencent will safeguard its own business boundaries and has no intention of becoming a conglomerate.

Compared to the ByteDance group, Tencent, with its longer development time and greater profits, is more like a business empire with formidable strength.

Meanwhile, major internet companies invested in by Tencent, such as JD.com, Meituan, and Pinduoduo, have all stated that they will safeguard their own business scope and conduct self-examination and self-inspection in relevant fields.

The internet era has entered a phase of strict regulation, and major companies are actively adjusting their strategies. As a member of the emerging hot topic OTA, Orange naturally has to follow suit.

Cheng Hao, Lu Qi, and Gu Qingqing have all expressed their opinions. Although Tan Jincheng has not made any public statements, his attitude of working quietly behind the scenes is evident to both those in power and netizens.

This generation of netizens is not as easily fooled as before. After years of being immersed in the internet environment, they can clearly see who is just talking and who is doing real work.

Since October 25th, the interfaces of Orange and its related companies' apps have become much cleaner, and the occasional small loan ad links that used to appear have all disappeared.

In fact, among all internet companies, only Orange and Pinduoduo have not ventured into the micro-loan business.

Although Pinduoduo offers a pay-later option, the credit limit is very small and it can hardly be considered a microloan business. Huang Zheng chose to follow the example of Chengzi in this regard.

It must be said that in this wave of criticism of the internet industry centered on micro-loans, Pinduoduo has gained a lot of goodwill.

Orange Group's stock price was the least affected in the early stages, and it also attracted the most attention. However, the sharp drop over the past two days has somewhat eased the high spirits of the general public.

"Yes, it's good that it's dropping a bit. If it stays lukewarm like before, we'll have to spend a lot more on public relations."

Lu Qi, who is also used to keeping a low profile, is clearly not used to the recent limelight, as this popularity has seriously affected Orange's overall operations.

"Let's wait and see. Once the hype dies down, people won't pay attention to these things anymore. Overall, this hasn't had a big impact on us."

Orange One's core business can be described as a streamlined version of Baidu, without so many extraneous features, and it focuses on the field of artificial intelligence.

OpenAI's GPT-3, as the world's largest pre-trained language model, has ignited a surge in interest in the artificial intelligence field.

In addition, significant breakthroughs have been made in molecular dynamics and quantum chemistry this year, providing scientific basis for the fields of artificial intelligence and cloud computing.

Due to the impact of special events, hundreds of millions of people are working from home, leading to an all-time high demand for cloud computing and providing excellent development opportunities for major companies.

Domestically, Tsinghua University, Peking University, and other large research institutions and internet giants such as chrysanthemum factories have all proposed new model plans.

This year, Orange Group also upgraded its artificial intelligence and cloud computing businesses. At the end of September, Dingding was upgraded to Dingding Business Unit and fully integrated with Orange Cloud, consolidating the group's relevant resources to ensure the implementation of the strategy.

In addition, Orange has established several new business units this year to support the development of its core business.

Other internet companies have also made significant breakthroughs in artificial intelligence and cloud computing.

Currently, in the field of artificial intelligence, companies such as Baidu, ByteDance, Ali, Huawei, Orange, and iFlytek are in leading positions.

In the field of cloud computing, Ali Cloud, Tencent Cloud, Baidu AI Cloud, Kingsoft Cloud, Huawei Cloud, and Orange Cloud are all relatively advanced platforms.

Orange Cloud currently holds approximately 8% of the domestic cloud computing market share, comparable to Huawei Cloud.

However, the current challenges facing artificial intelligence and cloud computing are also very obvious: insufficient self-reliance in core technologies, bottlenecks in application scenarios, and a disconnect between talent structure and scientific research transformation.

Furthermore, ethical and safety risks, technological barriers, and ecological monopolies are all challenges facing the industry's development.

"Essentially, we are now facing the dual pressures of catching up in technology and upgrading our industries. On the one hand, we need to solve the bottleneck problem, and on the other hand, we need to resolve the contradiction between cost and efficiency in the digital transformation of traditional industries."

"Large amounts of user data and an open market environment give internet companies a natural advantage in the fields of AI and cloud computing."

"But look at it, how many companies are seriously doing these things now, and how much investment is being made in basic research and development?"

"While some of the netizens' comments are biased, it is indeed time to regulate the use of such large resources to engage in micro-loans and monopolies."

As someone who understands how the market will change in a few years, Tan Jincheng wanted to do something to make the industry better.

Orange Group has stopped engaging in micro-lending and instead invests its profits in basic research and development. It has also acquired semiconductor companies, among other initiatives, all in an effort to make some changes.

However, the current state of the industry as a whole cannot be changed by one person or one company.

Leading companies have a demonstrative role, which has some benefits, and the changes brought about by Tan Jincheng and Orange cannot be said to be entirely without merit.

However, these things require more people to join in, and as the absolute leader in the industry, Ali's contribution is indeed undeniable.

However, in recent years, Ali, or rather, Ma Huateng, has indeed gone astray. Back then, Ali was an absolutely technology-driven company.

But for some reason, Ali has been increasingly involved in the financial sector, especially in internet finance, investing in companies like campus loan companies.

Old Ma's attitude has also changed significantly. This speech could be described as a coup attempt.

Ant Group's postponement of its IPO may have been somewhat unexpected for investors in the market. They had already paid their IPO subscription fees and completed the lottery process, just waiting for the market to open for trading.

As a result, it was suspended at this point, which is extremely rare in the history of global finance.

They have serious problems, but instead of trying to change them, they want to use their influence to change others.

This is somewhat domineering. Furthermore, in Tan Jincheng's view, Ant Group is such a profitable company with a huge cash flow that there is no need for it to go public.

Every day, countless companies, large and small, channel funds into Alipay through various channels such as Taobao, funds, and banks.

The escrow service on Taobao alone has brought Alipay huge profits.

Lu Qi also agreed with this view and nodded, saying, "It really should be addressed."

His work experience at Orange over the years has made him realize that artificial intelligence and cloud computing are a very large system.

If you want to achieve something, integration between industries is actually the best way, but right now, everyone is fighting their own battles.

If large corporations, high-quality small companies, and research institutions collaborated without requiring each other to open up their core data, the current state of the industry would not be like this.

Orange Cloud's ability to catch up and surpass others is largely due to its open and cooperative attitude.

The Orange Group's headquarters, branches, subsidiaries, upstream and downstream suppliers, as well as collaborations with other companies under Tan Jincheng and government agencies, combined together, offer significant advantages in both data and application scenarios.

In addition, while Orange doesn't have a good solution for breaking through the bottleneck, it is not on the entity list, and Tan Jincheng has made preparations in advance.

Orange currently has no shortage of AI chips or other high-end chips, so in terms of computing power, Orange is also among the top tier.

As long as the current layout and planning continue, Tan Jincheng and the senior management of Orange Group have reason to believe that Orange will one day achieve a technological breakthrough.

Just like the technological breakthroughs Wei Lai achieved this year, giving Orange more time will make everything better.

The rectification of Orange Group is underway, and the rectification of another company owned by Tan Jincheng has also begun.

That is ByteDance's advertising platform, which serves as a large reservoir providing "water" for Tan Jincheng himself and various groups. Currently, ByteDance's advertising platform holds a large number of shares in peers and partner companies.

“Sell some of your shares, especially those in Xiaomi Group.”

Xiaomi Group's stock price is currently between HK$24 and HK$26, and has more than doubled since the beginning of the year.

Although Xiaomi's stock price was also greatly affected on the 10th and 11th, the rebound was also very rapid.

Since the beginning of this year, Xiaomi's stock price has frequently hit new historical highs, and correspondingly, Tan Jincheng's investment returns in Xiaomi have also been very impressive.

Currently, Tan Jincheng holds nearly 100 million shares in Xiaomi Group, which, based on a midpoint price of HK$25, corresponds to a market value of approximately HK$25 billion.

ByteDance's holdings in Xiaomi remain at 41.17 billion shares, with a market value of HK$1029.25 billion.

Based on the current exchange rate, the combined market value of the two is approximately 910.7 billion yuan. Xiaomi has contributed significant investment returns to Tan Jincheng and ByteDance's advertising platform. Therefore, the current assessment of Tan Jincheng's net worth is like a significant discount from Pinduoduo.

The investment returns from Xiaomi alone exceeded 900 billion yuan, but the returns from other companies were roughly the same.

In the current situation, this wealth is indeed the most eye-catching, and ByteDance's valuation is also frightening, but because it is not listed, it does not receive much attention.

Without any hesitation, Cheng Linfeng asked, "How much should I reduce my holdings?"

Huang Ming and Cheng Linfeng were both somewhat excited. This year marks the tenth anniversary of Xiaomi and the tenth anniversary of ByteDance's investment in Xiaomi.

For a full decade, both Tan Jincheng and ByteDance saw their investment returns increase, but they received almost no return on their investment.

Huang Ming also laughed and said, "Yes, how much has been reduced? We've invested in Xiaomi for ten years, and this time we've finally gotten our money in our hands."

"Haha, I understand you guys. You haven't had it easy these past few years. Since it's a return on investment, let's go big."

After a moment of contemplation, Tan Jincheng said, "You should also deal with my own shares. Let's reduce our holdings by half this time."

With a total of 42.17 billion shares and a market value of over 1000 billion RMB, reducing holdings by half is a very significant move.

"Wow, this is a really big return."

Cheng Linfeng gasped in shock; a massive reduction of 500 billion yuan in holdings is an enormous sum on a global scale.

"Then this reduction in holdings will have to last for at least three months."

Huang Ming was also shocked. The boss really did not reduce his holdings for ten years, but once he did, he wiped out more than half of them.

"Yes, to be honest, if I wasn't worried about not being able to reduce the number of shares all at once, I was prepared to reduce at least 30 billion shares."

The investment in Xiaomi has fulfilled its historical mission, and reducing holdings at this point to recoup funds is a good choice.

"Besides Xiaomi, we should also significantly reduce our holdings in secondary markets such as Tencent and NetEase."

The internet industry has undergone a dramatic transformation, and liquidating your stock holdings and investing in new sectors is a sound strategy.

"Alright, let's make the arrangements now."

Compared to A-shares, it is much easier for major shareholders holding more than 5% of shares to reduce their holdings in Hong Kong and US stocks.

Fortunately, the listed entities of these internet companies are mostly in Hong Kong and the US stock market, which makes it much easier to cash out, even if the amount of cashed out is too large.

Taking A-shares as an example, Xiaomi's 42.17 billion shares can only be reduced by a maximum of about 4 million shares this time. Any more than that and it will be heavily criticized.

"Our ultimate goal is to reduce our stake in Xiaomi to around 5%, which is approximately 12.9 billion shares."

Xiaomi's moves to build cars are getting bigger and bigger. Although Tan Jincheng is not afraid of Xiaomi's entry, he will definitely not provide much help in terms of capital.

Reducing his stake in Xiaomi and relinquishing his position as the second-largest shareholder reflects Tan Jincheng's attitude towards Xiaomi's foray into car manufacturing.

We can cooperate on technology and the industrial chain, but let's forget about capital.

"Okay, I understand. We'll make the arrangements right away. What about the funds for the additional share reduction?"

According to Cheng Linfeng's rough calculations, the share reduction plan led by Xiaomi Group in the internet industry will bring back at least 700 billion RMB after all of it is completed.

Even with Tan Jincheng's current status, such a large sum of cash would be a hot potato in these extraordinary times.

This is all cash.

"Is that even a question? Of course, we should continue investing. Don't you already have one ready-made?"

"National Technology?"

"Yes, National Technology has seven or eight hundred billion in cash, which is indeed a very large number, but it's not much in the semiconductor industry."

The costs include land purchase and construction, construction of special factories such as high-standard cleanrooms, salaries of new R&D personnel, investment in experimental equipment, and patent application fees.

From factory construction costs to R&D costs, and then to subsequent operation, marketing and sales costs, the investment required for an automotive-grade semiconductor company is enormous.

The team that came from ZTE has a foundation in National Technology, but in Tan Jincheng's view, it's not enough.

The acquisition is just the first step. To build its own automotive-grade semiconductor company, Tan Jincheng's plan for National Technology is not as simple as just spending a few billion yuan to make minor repairs.

There are plans to build factories in Shenzhen, Beicang, and Tanjincheng. In addition, in terms of research and development, National Technology plans to establish a new R&D team of 50 to 100 people.

Including the existing team, National Technology's annual salary expenditure is estimated to be over 100 million yuan, in addition to a series of high-precision, high-value equipment purchases.

An advanced lithography machine can cost hundreds of millions of yuan, and the cost of purchasing a complete automotive-grade semiconductor production line can reach tens of billions of yuan.

This doesn't even include subsequent maintenance; 70.8 billion is really not much.

"Once the cuts are done, you're in charge of spending the money. I will keep my promise to invest 500 billion yuan in National Technology."

"Hehe, this time I'll let you experience a different way of spending money."

Huang Ming smiled upon hearing this: "Indeed, it's not the same. In the past, Lao Cheng's money would quickly yield returns, but this time it might be like Xiaomi again."

Another decade? Can it work?
Cheng Linfeng also laughed and said, "This is a challenge."

Purchasing semiconductor equipment is not as simple as investing in stocks. For most companies, even with plenty of money, they can't find a direction to spend it on.

"So, you have a lot of responsibility. Mr. Huang, please take charge of cooperating. Semiconductors are a long-term business, and we need to develop it into the second largest business pillar of Juling."

ByteDance's main business is financial investment. The companies it holds shares in generate a huge amount of money every year, making money very quickly.

However, the money was spent very quickly. Public undertakings planned by Tan Jincheng, such as education and philanthropy, were all spent on Juliang.

Investment channels are becoming increasingly narrow, but the amount of money required is increasing. In addition to its financial investment business, Juliang also needs to develop more business systems.

Meizu is a new business growth point, and so will National Technology in the future.

Thursday, March 11th.

Xiaomi Group shares rose 5% in a single day, closing at HK$25.2, with trading volume exceeding HK$50 billion.

After the market closed, ByteDance, the second largest shareholder of Xiaomi Group, issued an announcement stating that Mr. Tan Jincheng, the actual controller of the company, reduced his holdings of Xiaomi Group shares by 2400 million shares through the secondary market, accounting for 11.76% of the daily trading volume.

Today's surge in Xiaomi's trading volume is largely due to Tan Jincheng's reduction of his holdings.

Tan Jincheng, who has held shares in Xiaomi Group for ten years, has reduced his holdings on a large scale for the first time, which is seen by the market as a signal.

Tan Jincheng did not respond to the reason for the reduction in holdings, and ByteDance's announcement only mentioned that it was due to the need for capital allocation.

On the second day, the last trading day of the week, Xiaomi Group's trading volume continued to increase, equal to the previous trading day, and after the market closed, ByteDance announced another reduction in holdings.

Over two trading days, Tan Jincheng reduced his holdings by more than 4700 million shares, bringing his personal shareholding down to 5000 million shares.

According to the average selling price given by ByteDance's advertising platform, Tan Jincheng cashed out a total of HK$11.42 billion from Xiaomi Group through the secondary market.

Based on the current exchange rate, this is equivalent to approximately RMB 9.73 million. On the same day, ByteDance also announced a plan to reduce its stake in Xiaomi Group by more than HKD 500 billion.

The market was shaken.

"Mr. Tan, why didn't you give us a heads-up before reducing your holdings?"

Lei Jun, who had traveled all the way from Beijing to Ningbo over the weekend, greeted us with a wry smile.

As a non-controlling shareholder, the reduction of holdings did not result in a change of control of the company, nor did it have a significant impact on the company's operations and financial condition.

Therefore, even the second largest shareholder is not required to notify management in advance; they only need to disclose the reduction plan within three trading days of the start of the reduction.

ByteDance's share reduction plan is in compliance with regulations, both in terms of the company's articles of association and existing listing rules.

However, such a massive share reduction plan caught Lei Jun off guard. It should be noted that Xiaomi is currently planning a share issuance of more than 10 billion shares, which is expected to be worth more than HK$230 billion.

Through the share issuance, Xiaomi's total share capital will increase by 4%. In addition, Xiaomi Group will issue US$8.55 million in zero-coupon guaranteed convertible bonds maturing in 2027.

On the surface, these two large sums of money are intended to increase operating capital to expand the business, invest in strategic ecosystems, and for other corporate purposes.

However, in reality, these two huge sums of money were used to support Xiaomi's car manufacturing plan.

"It was already announced, it's only a day late."

Tan Jincheng smiled and gestured for Lei Bus to sit down. Today, the capital city experienced its first snowfall of the year.

Although Ningbo also has a lower temperature, the daily average temperature of around ten degrees Celsius is still relatively warm compared to Beijing.

Lei Jun, who was wearing a down jacket and hadn't had time to change, had a slight sheen of sweat on his forehead.

(End of this chapter)