Those Years When I Was Forced to Top the Forbes List

Chapter 296 President Chen's September
A and B shares, meaning shares with different voting rights.

A-shares are issued to external investors.

Class B shares are held by the founders or management and each share carries multiple voting rights.

This system doesn't exist in mainland China. Hong Kong used to have it, but it's been abolished now. The system won't be available until after 2018.

Historically, there have been instances where B-share shareholders sold all their A-shares and then used the super voting rights of their B-shares to transfer company assets.

B-shareholders have become a privileged class, which goes against investment fairness. To protect the interests of A-share shareholders, many clauses need to be added to the articles of association, which is very complicated.

Therefore, none of the investors agreed to give Liu Qiangdong B-shares.

Chen Xuebing, of course, did not intend to give it to them right away, so he proposed a betting scheme.

First, a holding company is established in the Cayman Islands, all equity is transferred to the Cayman Islands, and a Hong Kong company is set up to establish a red-chip holding (Chinese company listed in the United States) structure.

The investors present first signed a concerted action agreement with Liu Qiangdong to guarantee his control.

The agreement is for a period of four years.

Furthermore, a resolution was passed at the shareholders' meeting that if JD.com successfully lists on the US stock market within four years, 3.35% of Liu Qiangdong's shares will be converted into B shares. B shares have 20 times the voting rights, while the voting rights of A shares will be reduced accordingly. As long as Liu Qiangdong retains his B shares, he will have more than 67% of the voting control.

As long as the combined shareholding of the investors present and Liu Qiangdong remains above 34% within four years, it can be guaranteed that no one can overturn this resolution.

Thus, Liu Qiangdong must guarantee a US listing within four years; otherwise, the agreement on concerted action will expire, he will lose control, and it will be impossible to form a new shareholders' meeting resolution to allow him to acquire B shares.

If the IPO is successful, given the mature regulatory system for listed companies in the United States, it would be impossible for Liu Qiangdong to use B shares for any covert operations.

This proposal will motivate Liu Qiangdong; everyone is in it for the sake of the IPO, so they all agreed.

In addition, Xu Xin proposed a performance-based betting agreement.

JD.com's current operating expenses account for about 8%, and Liu Qiangdong must ensure that sales increase fivefold in a year while maintaining an 8% gross profit margin.

This is the only way to successfully secure subsequent investment funds.

In other words, to wage a price war, one cannot go below the break-even point and must ensure a compound monthly growth rate of 16% in order to receive the installment investment funds on time each quarter.

Xu Xin originally planned to propose a fivefold increase in four years, but given the current level of investment, and considering that JD.com's natural growth without advertising is 10% per month, and now that they are expanding their product categories, a higher figure seems reasonable.

Liu Qiangdong is facing a major headache because Newegg has now entered the Chinese market, with its main operations in Shanghai, and its sales volume far exceeds that of JD.com. Once JD.com grows to a certain extent, the two companies will inevitably clash, and if a price war is restricted, he will be at a disadvantage.

At this moment, having learned about the main competitors, President Chen stepped forward once again.

"Break-even operation is too conservative. The logic of internet companies going public is not about making money, but about market share. If Newegg takes the initiative, no matter how low the price, I can provide you with a loan to fight them. We need to crush them in one fell swoop and not give them a chance to grow bigger."

Upon hearing this, Dongzi immediately transformed into Brother Dong and became quite assertive.

"With Mr. Chen's words, five times in a year is too conservative! Ten times in a year! 8 million! Within three years, our sales will exceed 40 billion, but you have to give me 15% of the equity to outstanding employees, is that okay?"

After everyone thought about it for a while, Chen Xuebing made the decision first.

“This 15% will come from the main company in China, and everyone will share it equally. It will not affect the equity structure of the overseas holding company.”

Liu Chuan noticed something amiss and smiled, "President Chen always puts President Liu first. In the future, President Chen won't be the one making the decisions in management, will he?"

He was reminding his two subordinates, and also reminding Liu Qiangdong.

After all, of the $4000 million that has been put forward so far, Lenovo accounts for half of it.

Chen Xuebing laughed and said, "If I were to personally take charge of the management, that would be a real blessing for everyone. However, I have a lot of things to do and really don't have time. The promotion of JD.com's Series C financing still needs everyone's joint efforts."

A roc rises with the wind in a single day.

This September is destined to be extraordinary.

Less than a week later, a company called JD.com suddenly appeared on Sina's homepage, announcing that it had bought the domain name "JD.COM" from a mysterious seller for 450 million RMB, and JD Multimedia was renamed JD Mall.

This is, of course, Mr. Chen's idea.

Many short domain names were registered even if they were not used in the early days. JD.com bought this domain name in 2013, which was already the beginning of the mobile Internet era.

And it cost $300 million.

At this point, the domain name is cheaper and more valuable.

Alongside this news was another announcement – ​​renowned investor Chen Xuebing invested $500 million in JD.com.

The news spread quickly in investment circles, but it did not cause a huge uproar online. Some netizens who only had a vague understanding of the situation glanced at it and thought that Chen Xuebing had increased his investment in BOE again.

That stupid Sina.com actually missed a character in the company name.

Is Chen Xuebing going to become the chairman of BOE?
Yes, this person is indeed quite wealthy.

He'll come back and kick me when he becomes chairman.

However, just two days later, a piece of news simultaneously made the headlines of three major portals.

Legend Capital, Hony Capital, Capital Today, and Lei Jun, Chairman and CEO of Kingsoft, jointly announced that they have invested $3500 million in JD.com's Series B round, valuing the company at $1 million.

2.8 million RMB.

That's incredibly awesome.

Some observant people compared the news from the previous two days and discovered that two days prior, JD.com had completed a Series A funding round of $500 million, valuing the company at $1666 million.

In just two days, he bought a domain name and its value skyrocketed sixfold?!

It increased by 8334 million US dollars!

2.8 million RMB!

What domain name is worth 2.8 million RMB?!
This news was not only uploaded online, but also reported by many print media outlets, and even on television news.

A 35% investment for a high valuation—that's not just an inflated valuation! It's a very real one!
Most listed companies have net assets that are less than one-third of their market capitalization!
Moreover, there was another $500 million in cash before that, so they had a total of $4000 million in cash on hand!
Moreover, to those with a keen eye, this bizarre Series A and B investment trajectory seems like... like...

Four investors are helping Chen Xuebing carry his sedan chair.

The media swarmed towards Liu Qiangdong.

This entrepreneur, favored by capital, has an honest face and a simple smile, but his words are incredibly domineering.

"This isn't a game of capital; JD.com wants ordinary people to experience the benefits of online shopping! We've already set a plan to subsidize the market with 200 million yuan every day! JD.com is undergoing a full-category transformation, connecting with manufacturers, offering 48-hour delivery and cash on delivery in the Beijing area! Next, we'll expand to users in East and North China!"

JD.com did not fully choose online banking or Newegg's credit card channel early on. Instead, it combined its experience in expanding the market in Zhongguancun with the experience of offline channels and launched a "mail + Beijing self-pickup + cash on delivery near Zhongguancun" service.

Such self-operated services cannot be arranged with manufacturers in time; it is necessary to build warehouses and stock up on goods, which incurs huge costs, and the manpower costs required for warehouse transfers are extremely high.

Serving only one area, Beijing, requires a level of inventory and labor costs comparable to several large supermarkets.

Including delivery personnel, the required team is staggering.

However, the customer experience is absolutely incomparable to previous online shopping experiences. Therefore, even without advertising, JD.com has a stable monthly growth of 10%, and its reputation spreads by word of mouth.

Now it's in the media, and everyone in Beijing knows about it.

48-hour delivery, all categories—this isn't just about online shopping; it's about taking over supermarkets!
Liu Qiangdong even received a call from a JD.com user named Liu Chuan, who said he bought a newly launched Huasheng fan from JD.com and received it the day after ordering. It was genuine, and he had sent someone to compare it at a shopping mall. It was 10% cheaper than the mall price. So he asked about the service fee in more detail and wanted to put two Lenovo laptops on JD.com as well.

Chen Xuebing isn't the only one troubled by retailers; Lenovo has been stuck in a distribution rut for years. Investing in JD.com actually opened up Liu Chuan's business mind.

In the middle of the month, Chen Xuebing was negotiating with Wang Dongsheng at the State-owned Assets Supervision and Administration Commission in Beijing when he received a call from Jack Ma.

"Mr. Chen, that's not fair! That's not fair!"

"How is that unfair?"

"Mr. Liu said, 'JD.com is a scheme you orchestrated? Aren't we on an exclusive partnership?'" "An exclusive partnership means pre-installation of system software. What, is that delaying my investment?"

"We need to cooperate on Alipay in advance! Alibaba is going public next year, but JD.com has stolen all the limelight. How can we talk about IPO financing now?"

How can we cooperate in advance?

"The price will be as you said, 1 million for a 35% stake, but you have to agree to two conditions!"

"We'll talk about it later, I don't have any money on hand right now."

"You can pay later!"

"Okay, state your terms."

"First, you need to announce to the public that you've invested 300 million! And that Alipay is valued at 1 billion! Second, when you hold the press conference, the Taobao and Alipay app icons must appear on your phone's home screen!"

"Sure, but I'm busy lately. Bring the investment contract to Beijing and your lawyer with you. We'll sign it in person."

9 month 20 day.

When discussions about JD.com's business model reached their peak, Alibaba stepped in.
— Chen Xuebing, Chairman of Guan Group, invested US$3750 million in Alipay E-commerce Corp, a subsidiary of Alibaba.

Alibaba mobilized its greatest resources for publicity.

Jack Ma said, "I am very pleased to conduct some small joint explorations with Mr. Chen Xuebing in the field of mobile payment. This investment is not related to the value of Alipay itself, but is just a strategic financing."

3750 million US dollars.

Or is it strategic? Then your value must be even higher.
People learned that Alipay, which is just a payment software under Alibaba that serves Taobao, received a $3750 million investment and was valued at $1.25 million, surpassing JD.com.

Since the investor is still Mr. Chen, there is no issue of different valuation philosophies.

Moreover, Mr. Chen invested in the first round, when JD.com was only worth $1666.

JD.com and Alibaba: the difference in quality is obvious.

Alibaba's learning has gained the upper hand again.

Mr. Chen served as the referee in this round.

Dongzi didn't dare say anything, but focused all his efforts on building the first modern logistics warehouse in Beijing.

Two days later, just as Mr. Chen, whose reputation had been revived, had completed negotiations with the Beijing State-owned Assets Supervision and Administration Commission regarding the board seats of BOE and subsequent equity issues, Li Xueling called again.

"Boss! It's your turn to help me this time! You're so famous now, you wouldn't refuse to participate in YY's Series A funding, would you?"

Previously, Li Xueling had been helping Chen Xuebing find media outlets for various matters, and YY Inc. had also been relocating along with Singularity Technology. Every time Chen Xuebing came to Shenzhen, they would drink together. When Li Xueling asked for help, Chen Xuebing felt embarrassed to refuse.

"Tell me, how much do you want?"

"Boss Lei found me a Morningside Venture Capital firm! They're only willing to offer $300 million for a 10% stake. Can you help me raise it to $500 million, and also give me a 10% stake? Then I'll go talk to them again, okay?"

"I'm broke right now."

"Then pay later! Hey, I've heard about it! You Changzheng Capital are making a killing! Everyone at Qidian is waiting for you to give out red envelopes! Hey, don't be biased, we at Huanju Times are your people too, when you give out red envelopes, come down and give us some too."

"Screw you, I'm short on cash. Why don't you raise some funds and lend me some?"

"Bye, boss." Li Xueling hung up abruptly.

Chen Xuebing cursed and swore, then thought for a moment and turned to call Lei Jun.

"Jun'er, Li Xueling needs to raise funds, are you coming?"

"I'd like to come here, but I'm out of money, so I've been eating spring rolls for breakfast lately."

"You should have said so earlier. I took you with me to dinner with Wang Dongsheng yesterday. We went to Shunfeng Restaurant in Dongzhimen and had seafood. *burp*"

"What the hell?"

"Well, isn't Lakala also half-dead? Why don't I just take care of Lakala's business as well?"

“Lakala Legend Capital is also involved, holding a larger stake than me. I won’t participate in the Series A round. You should contact Mr. Liu directly.”

"Don't bother contacting President Liu about such a trivial matter. Just contact Zhu Linan for me directly."

"understood."

end of June.

— Chen Xuebing and Morningside Venture Capital each invested US$500 million in YY Inc., acquiring a 10% stake in the company, valuing YY at US$5000 million.

Founder Li Xueling said: "Mr. Chen is an investor who only helps and doesn't cause trouble, and he is also a good older brother to the young people."

— Chen Xuebing and Zhu Linan of Legend Capital jointly announced their investment in Lakala on their blogs. Many online media outlets also reported on it that day. In this round of financing, Lakala was valued at $800 million. Chen Xuebing invested $160 million, holding a 20% stake, while Legend Capital invested $320 million, holding a 40% stake, maintaining its position as the absolute majority shareholder.

Founder Sun Taoran, who previously founded BlueFocus and Hengji Weiye and is already a billionaire, created a blog to express his welcome to Mr. Chen to the Lakala family and thank Lenovo for its long-term trust.

9月28日一早，京东方忽然发布上市公司公告：京东方4.5代线与BJ天宇朗通公司签订500万片3.5英寸手机屏幕预订单，价格目前未明。

BOE's stock price surged from the ground up, reaching the daily limit of 5.61 yuan after the midday break, ending with a limit-up opening and 6 lots of sell orders.

The following day, the stock continued to rise after opening, and after several fluctuations, it closed at 6.02 yuan.

It was Friday, and the National Day holiday was just around the corner. The stock market, which had been booming for a month, was now officially entering an eight-day break.

Shanghai Composite Index: 1766 points.

This month's stock market highlights: Oceanwide Construction, this year's champion, hit the daily limit up three times this month, with a total increase of 42.17%.

Among the biggest beneficiaries was Changzheng Capital.

The month is not over yet.

On September 30, at the Hunan TV show "Super Girl".

The stage lights shone brightly, and the audience cheered deafeningly.

Hosts Wang Han and Li Xiang stood in the center of the stage to kick off the grand finale of this year's most-watched program.

"Welcome everyone to the 2006 Super Girl National Finals! Tonight, our top three contestants will compete for the ultimate championship with their most moving voices!"

"Yes! And tonight's voting method will also make history! For the first time, we are using high-tech real-time interactive voting—the official voting device is the Kirin mobile phone provided by Qidian Technology, the sponsor of this year's Super Girl!"

The camera then cuts to Wang Han's hand, where a screen encased in a green phone case appears. The case also features a circular "Aqiyi" logo on its edge. Wang Han taps the screen, revealing a standby screen with an Earth background.

Swipe your finger to unlock, and a voting interface will appear.

"That's right! This Kirin phone not only boasts superior performance, but also features the Kunlun OS system independently developed by Singularity Technology. Tonight, it will carry the final decision of the five mentors—Hei Nan, Eric Moo, Zhu Hua, Song Ke, and Cang Yanbin—as well as the enthusiasm of the audience nationwide!"

At this moment, tens of millions of live TVs are broadcasting the moment Wang Han gracefully swiped to unlock the device.

"This is even more awesome than Nokia!"

"What kind of phone is this? It has such a big screen!"

"Oh!! It's it! It's it! That super popular video on Youku! This phone really has it!"

Millions of people across the country remembered this scene.

These few seconds of close-up footage were asked about by more than 20 netizens on various forums the next morning. Posts titled "Request for disassembly of Kirin phone" appeared on ZOL forum, and Baidu Tieba users analyzed the unlocking animation frame by frame.

These few seconds, in later history, are known as the "first cry of the mobile internet".

(End of this chapter)