Huayu: Starting from joining the mainstream entertainment industry in 96

Chapter 497, Section 495: The Bells Will Toll

Late autumn of 2003.

After a brief shock from events at the beginning of the year, China's capital market is gradually recovering along with the strong recovery of the macroeconomy.

After hovering between 1300 and 1400 points, the Shanghai Composite Index began to show a slow upward trend.

Although discussions on the reform of the share structure are becoming increasingly heated in academic and regulatory circles, it has not yet been implemented. The market is still immersed in the atmosphere of the end of the era of manipulated stocks—there is both a desire for policy dividends and an obsession with the market driven by funds. Retail investors are searching for direction amidst various rumors that are difficult to distinguish between true and false and their instinctive herd mentality.

The regulators have made it clear that they will "vigorously develop the capital market and support high-quality enterprises to grow bigger and stronger," especially welcoming enterprises that represent the new economy and new consumption patterns.

Against this backdrop, the IPO process of Shengying Media Group Co., Ltd.—"China's first listed film company"—has attracted much attention.

After meticulous preparation for the pre-listing guidance, several rounds of feedback and supplementation of the application documents, and rigorous review by the Issuance Examination Committee, Shengying Media's A-share IPO application was finally approved in late October 2003.

The moment the news broke, the listing task force and the intermediary teams from CICC, King & Wood Mallesons, and PricewaterhouseCoopers all felt a long-suppressed excitement finally being released.

Countless days and nights of hard work, verification of massive amounts of data, and meticulous consideration of regulatory feedback have finally earned us this ticket to the capital market.

This is not just an IPO, but an extreme test of the capacity of China's capital market and confidence in the cultural industry.

After repeated discussions and special approvals from regulators, Shengying Media obtained an issuance quota far exceeding the norm. This is not only an affirmation of its leading position, but also seen as a strategic pilot for the cultural industry to "overtake" others through the capital market.

The final equity structure and financing scale were revealed to the public in a way that shocked the market:
Total shares outstanding before listing: 10 billion shares.

This number alone demonstrates its status as an industry behemoth.

Wang Sheng: He holds 77 million shares, accounting for 7.7%. After the listing, his personal wealth will be calculated in billions, but its significance goes far beyond the increase in personal wealth. Rather, it means that the founder's absolute control over this cultural behemoth has been maintained, ensuring the stability and execution of the strategy.

China Film Group Corporation: Holds 2 million shares, accounting for 20%. The deep binding of state-owned capital provides the company with an irreplaceable "ballast" role in policy-sensitive content fields and nationwide layout.

Chen Liang (representing an individual and an early small group): holds 3000 million shares, accounting for 3%. The equity incentives for early contributors have now transformed into an enviable capital feast, perfectly illustrating the value of following and persevering.

After learning about the potential benefits, Chen Liang voluntarily gave up a portion of it to the members of the early small group.

As for the shares held by Wang Sheng, no one raised any objections.

This offering involves the public issuance of 2.5 million RMB ordinary shares (A shares), representing 20% ​​of the total share capital (12.5 billion shares) after the offering. This is a financing volume that is enough to shake the entire A-share market.

The determination of the issue price is a high-stakes gamble on confidence.

Despite the challenging price range (RMB 18.8/share - RMB 22.8/share), the underwriting syndicate and company management demonstrated remarkable courage by setting the price at the upper limit of the range—RMB 22.8 per share—based on the almost frenzied subscription demand shown by domestic and international institutional investors during the roadshow—with effective subscription multiples exceeding 200 times.

this means:

Total market capitalization: RMB 285 billion.

Total funds raised: A staggering 57 billion RMB!
The initial price-to-earnings ratio (after dilution) was set at 48 times.

The news sent shockwaves through the market.

Critics have called this a "market dream rate," which is an overestimation of growth expectations for the next decade.

Some analysts exclaimed that there was a "valuation bubble," while others cautioned that "risks are accumulating."

However, in the eyes of its fervent supporters, Shengying Media represents not the past, but the future—the future of explosive cultural consumption among China's 1.3 billion people, the future of an ecosystem where "channels are king, content is secondary, and cultural tourism is the frontier," and the future of an Eastern giant that could potentially compete with Disney and Universal. ...

This fervor was fully demonstrated in the subsequent offline allocation and online subscription.

The offline placement is targeted at institutional investors such as funds, insurance companies, securities firms, and QFIIs (although the system has not yet been officially implemented, some qualified institutions are already preparing for it).

The feedback brought back by the roadshow team was unprecedentedly enthusiastic.

Although Wang Sheng did not personally attend all the roadshows, his Time magazine cover, a series of successful international project cases, and his clearly outlined "channel + content + cultural tourism + technology" ecosystem blueprint became the most powerful persuasive tools.

Institutional investors see more than just a film company; they see a potential hegemon riding the wave of China's consumption upgrade and cultural confidence, poised to replicate or even surpass overseas media giants.

Subscription intentions poured in like snowflakes, with the effective subscription multiple for the initial inquiry exceeding an astonishing 150 times, necessitating the activation of a high-proportion clawback mechanism.

What truly propelled this capital feast to its climax was the online subscription service open to the general public.

The Chinese stock market in 2003 experienced many ups and downs, with a large group of retail investors whose emotions were easily influenced.

They may not understand complex DCF models, and they may not be very sensitive to price-to-earnings ratios and price-to-book ratios, but they have the most basic judgment logic—"follow the strong" and "believe in the power of brands."

The name "Shengying Media" has become deeply ingrained in their daily lives over the past few years through a series of popular works such as "Kung Fu Soccer," "Night at the Museum," "The Proposal," "Lost in Thailand," and "Lurking."

Wang Sheng's name is closely associated with "success," "miracle," and "winning glory for the country."

Appearing on the cover of Time magazine and being regarded as a hero of Chinese cultural export, the boost of this national pride is far more powerful than any dry investment research report.

In addition, the extensive media coverage and sensationalism, such as "China's first film stock," "Wang Sheng's capital myth," and "The next Disney?", constantly stimulated investors' nerves.

On the eve of the subscription date, the topic of discussion in major securities brokerages almost entirely revolved around "Shengying Media".

Veteran investors flipped through the prospectus summaries in the newspaper, trying to find the secret to future stock price doubling between the lines; new investors, on the other hand, excitedly inquired about how to activate their trading permissions and how much capital they needed to prepare.

A collective sentiment that "you're guaranteed to make money by subscribing to new shares" and "you'll regret missing out for the rest of your life" is spreading rapidly.

This herd mentality stems from a path dependence on the profit-making effect of "IPO subscription" in the past period, and even more so from an almost superstitious trust in the "Shengying" brand and Wang Sheng himself.

On the subscription day, a huge amount of subscription funds poured in like a tidal wave.

The amount of frozen funds eventually reached a record high, and the odds of winning the lottery were reduced to a pitiful percentage.

Countless retail investors who failed to win the lottery were lamenting their missed opportunity on forums and in brokerage offices, as if they had missed out on a windfall; while the lucky winners were overjoyed, as if they had won the lottery, and were already looking forward to the wonderful prospect of consecutive limit-up days after the listing.

The market's enthusiastic response completely dispelled all doubts about the issue price being too high.

Shengying Media's undeniable market recognition has proven its value and set a new benchmark for the valuation of subsequent cultural and media companies going public.

Amidst all the noise and commotion, a final decision was issued from the board office of Shengying Media and announced to the public through the listing prospectus:
Shengying Media Group Co., Ltd.'s A-shares will be officially listed and traded on the Shanghai Stock Exchange on December 8, 2003. The stock abbreviation is "Shengying Media" and the stock code is "603888".

The bells will soon toll.

(End of this chapter)