Becoming the King of Bottom Fishing After Going All-In on A-Shares

Chapter 130 The Primary Market Boils Over

BJ, Goldman Sachs office.

People came from the investment banking department, direct investment department, and research department.

There's only one topic: JD.com's Series B funding round.

"US$1500 million, post-investment valuation of US$6000 million, no bargaining." The speaker was Mr. Lin, head of the direct investment department, in his early forties, who had worked at Goldman Sachs for fifteen years. "This Lu Chenzhou, does anyone know anything about him?"

Zhou Yuan from the research department raised his hand: "I've heard that a student from Renmin University, a junior this year, started with 10,000 yuan and now has at least several billion Hong Kong dollars in his hands."

There was a moment of silence in the conference room.

"From ten trillion to several billion?" President Lin frowned. "How did you do that?"

"The specifics of his actions are being discussed in the industry. People say he has a different perspective than others. A couple of days ago, he acquired a 24% stake in Galaxy Entertainment in Hong Kong, becoming its second-largest shareholder. It's said that even the Ho family was alarmed."

"Galaxy Entertainment?" Another investment banking MD put down his pen. "That's the Ho family's core asset. A mainland student going to Macau to bid for a stake in a Ho family company?"

"Yes, it was taken over from a European private equity fund, and Galaxy Entertainment's stock price has already risen by 30%."

Mr. Lin leaned back in his chair and remained silent for a while.

"What about JD.com? What's your opinion?"

Xiao Wang from the investment banking department opened his notebook: "JD.com's cash flow is indeed running out; they might not even be able to pay November salaries. Suppliers are pressing for payment, and logistics companies are withholding payments. Entering at this point is very risky."

"But Lu Chenzhou went in," Zhou Yuan said.

"So?" President Lin looked at him.

"So I'm wondering if he knows something we don't."

The meeting room fell silent again.

Mr. Lin picked up a pen and wrote two words in his notebook: JD.com.

Then I drew a line under those two words.

"Keep an eye on it," he said.

After the meeting adjourned, Zhou Yuan stayed in the conference room and did not leave.

He took out his phone and found Lu Chenzhou's number.

He typed a message: "Mr. Lu, is it convenient for us to chat?"

After thinking about it, I deleted it again.

He didn't know what to say.

How did you figure out that JD.com could survive?

He couldn't bring himself to ask that question.

Because he felt that Lu Chenzhou wouldn't answer.

Morgan Stanley, BJ's office.

Researcher Zhao Mu is still working overtime.

He wasn't working overtime because of JD.com; he was doing a quarterly review of the Hong Kong stock market's consumer sector.

But as he was working on it, he opened the JD.com page.

In 2007, the company's revenue was 3.6 million RMB.

The projected revenue for 2008 is 13 billion RMB.

The growth rate was 260%.

Then he opened the cash flow forecast sheet.

Then he frowned.

"Are you there?" he sent a message to his colleague on MSN.

"Yes, what's wrong?"

"Could you help me find out who the investors were in JD.com's Series B funding round?"

Five minutes later, a colleague replied with a message: "Today Capital has invested $800 million, and Zhizhou Capital has invested an additional $1500 million, bringing the post-investment valuation to $6000 million."

Who owns Zhizhou Capital?

Lu Chenzhou, a student at Renmin University.

Zhao Mu stared at the screen for ten seconds.

Then he opened a new EceI and started working on JD.com's DCF model.

He wasn't optimistic about JD.com.

It's because he wants to know: what did someone who dared to invest in a company that was about to go bankrupt during the financial crisis, and who didn't even try to negotiate the price, see?

The model was finished at 1 a.m.

Conclusion: If JD.com can achieve break-even within three years and profitability within five years, its current valuation is reasonable.

But the question is whether it can break even within three years.

Zhao Mu leaned back in his chair, took off his glasses, and rubbed his eyes.

He didn't know the answer.

But Lu Chenzhou seemed to know.

He picked up his phone and sent a message to a friend who worked in an investment bank in Hong Kong: "Have you heard of Lu Chenzhou?"

Three seconds later, my friend replied, "Who hasn't heard of it?"

Hong Kong, Sequoia Capital office.

After reading JD.com's briefing, Shen Nanpeng wrote something in his notebook and then went to a meeting.

After he left, a few people remained in the conference room and continued their conversation.

"What do you think Mr. Shen is thinking?" an investment manager asked in a low voice.

"President Shen didn't say anything, but his silence was the biggest statement he could make."

"What do you mean?"

"If he's optimistic, he'll say he'll think about it further. If he's pessimistic, he'll say he won't invest. He didn't say anything, which means he's hesitant."

"What are you hesitating about?"

"I'm wondering if I've missed something."

"What did you miss? JD.com? That dying JD.com?"

"Don't say that. What if he survives?"

"What if? Can you rely on 'what if' when investing? We invest in certainty, not 'what if'."

Why did Lu Chenzhou vote?

"Lu Chenzhou is a speculator in the secondary market; he doesn't understand the primary market. In the secondary market, you can buy today and sell tomorrow, but in the primary market, you can't get out for at least three to five years. He's a short-term speculator, yet he tries to play the long-term game; it's no wonder he's going to fail."

"But Galaxy Entertainment made money."

"Galaxy Entertainment is a Hong Kong stock, which is also the secondary market. It's true that he made a takeover bid, but that was a secondary market purchase, and he can sell at any time. JD.com is different; it's private equity, and it's locked up."

"So you think he's definitely going to lose money?"

"I think he'll most likely lose money, not because he's not smart enough, but because he's entered an unfamiliar field. The rules of the primary and secondary markets are completely different. Just because he can make money in the secondary market doesn't mean he can do it in the primary market."

"Then why is Mr. Shen hesitating?"

"Because Mr. Shen has seen too many impossibilities become possibilities, his hesitation is not because he is optimistic about JD.com, but because he doesn't want to miss out on another one."

"So what do we do now?"

"Let's wait and see if JD.com can survive until next year. If it does, then we can go in. Anyway, there's always C later."

Wheel, D-wheel.

"What if we don't survive?"

"Then Lu Chenzhou's $1500 million has gone down the drain, and it has nothing to do with us."

"Are you so sure he'll lose money?"

"I'm not sure he'll lose money, but I'm sure he shouldn't have invested like that. No bargaining, no protective clauses, no board seat—that's not investing, that's gambling."

BJ, a private club.

Xiong Xiaoge invited a few old friends to dinner.

During the meal, the conversation somehow turned to JD.com.

"Have you heard? JD.com has been acquired in its Series B funding round." The speaker was a partner at CDH Investments.

"I heard about it, Zhizhou Capital, $1500 million." Another investor chimed in.

Who owns Zhizhou Capital?

Lu Chenzhou, a student at Renmin University.

Xiong Xiaoge put down her chopsticks: "Students? Students invested 1500 million US dollars?"

"Yes, and there's no bargaining. The post-investment valuation is 6000 million, the same as the Series A round."

There was a moment of silence on the table.

Xiong Xiaoge picked up her chopsticks, then put them down again.

"I've heard of this Lu Chenzhou. He made a takeover bid for Galaxy Entertainment in Hong Kong, acquiring a 24% stake. I've heard he's met with the Lu family."

"Can the Lü family get him on the board of directors?" someone asked.

Whether he gets a seat on the board is another matter; the key point is that he bought shares at a low price and now has a profit of at least 30%.

"Ming, you hit the nail on the head."

"What about JD.com? Do you think they can make a profit?"

Xiong Xiaoge did not answer immediately.

He picked up his teacup, took a sip, and then said something that left everyone speechless: "The JD.com case isn't about whether it will make money or not. It's about whether we dare to do it. We all don't dare, but he does. So if JD.com succeeds, he deserves to make money."

No one at the table spoke.

Xiong Xiaoge put down her teacup and smiled.

"Let's eat, the food's getting cold."

But he was thinking about something: IDG had also looked at JD.com.

twice.

They didn't vote.

He's unsure whether it was the right judgment or a missed opportunity.

BJ, DCM office.

Lin Xinhe sat alone in the conference room, with a stack of printed JD.com financial data in front of her.

He wasn't reviewing the situation.

He was waiting for someone.

Five minutes later, his partner arrived.

"What's wrong? Why did you call me over so late?" The partner sat down.

What's your opinion on the JD.com case?

"Lu Chenzhou? I think he's insane."

Why?

"$1500 million, post-money valuation of $6000 million, no bargaining. What kind of market is this? Financial crisis! Everyone's haggling, he's not, isn't he just giving away money?"

"You don't think JD.com is worth 6000 million?"

I don't know how much JD.com is worth, but I do know one thing.

In today's market, if you don't haggle, you're a fool.

Everyone will think you're easy to bully, and if you invest in other projects later, they'll offer you the same price.

"So he broke the rules?"

"Yes, he broke the rules. That's not how you play in the primary market. When you haggle, it's not to save a little money, it's to show that you're professional, rational, and not impulsive. By not haggling, he's telling everyone that I'm unprofessional, irrational, and impulsive."

Lin Xinhe remained silent for a while.

"But what if he wins the bet?"

"So what if he bet right? He bet right, JD.com succeeded, and he made money. And then what? Everyone will say he was just lucky, and he won't become a top-notch investor because of this deal."

"So you don't think he has any faith in him at all?"

"It's not that I don't think he's good, it's that I feel his approach is unsustainable. He might win once, or twice, but what about the third time? The fourth time? He'll eventually make a mistake, and when he does, the losses will be far more than just 1500 million."

Lin Xinhe leaned back in her chair, looking at the ceiling.

"You're right," he said.

But he was thinking something else: What if he wasn't gambling?

What if he really saw something?

Lin Xinhe did not say those words aloud.

Because he felt it would be too stupid to say it.

Can a 20-year-old student be more accurate than DCM?

impossible.

Kuang Ziping was getting ready for bed when his phone rang.

Caller ID: Gan Jianping.

"Ziping, are you asleep?"

"Not yet. What's wrong?"

Have you seen the JD.com case?

"I've looked at it. Zhizhou Capital, $1500 million, no bargaining."

"Who do you think this Lu Chenzhou is?"

Kuang Ziping paused for a moment: "I checked, he's a junior at the School of Finance and Economics at Renmin University, 20 years old this year, and started from 10,000 yuan. I conservatively estimate he has 1 billion Hong Kong dollars in his hands. He just made a bid for Galaxy Entertainment and now holds 24% of the shares."

"Twenty years old? A billion?" Gan Jianping's voice was filled with obvious disbelief.

"right."

"How did he do that?"

"I don't know, but everyone's saying the same thing: he's never lost money."

There was silence on the other end of the phone.

"Never lost money?" Gan Jianping repeated.

"I've never lost money, not even once."

"That's impossible."

"I know it's impossible, but all the publicly available records confirm it."

Gan Jianping fell silent again.

After a while, he said, "Ziping, do you think we missed something?"

Kuang Ziping did not answer.

Because he was thinking about this problem too.

Zhang Ying from Matrix Partners China sat in her car, scrolling through Weibo.

He saw an update from a friend: "JD.com has completed its Series B financing. Today Capital invested $800 million, and Zhizhou Capital invested an additional $1500 million. The post-investment valuation is $6000 million. The founder of Zhizhou Capital is Lu Chenzhou, a junior at Renmin University, who is 20 years old this year."

There are already over a hundred comments below.

Zhang Ying neither commented nor reposted.

He put down his phone and looked out the car window at the hazy BJ.

Matrix Partners also looked at JD.com, but didn't invest.

It's not that I don't want to invest, it's that I feel the timing isn't right.

During the financial crisis, all institutions are contracting. Who would dare to invest in a company that is not yet profitable?

Lu Chenzhou dared.

Zhang Ying typed a line on her phone, intending to send it, but then deleted it after thinking about it.

The text read: "Some people see crisis, some see opportunity; the difference lies not in their eyes, but in their courage."

He didn't send it.

Because he felt that it was too early to say that.

It's not too late to talk about it after JD.com has actually survived.

But what if JD.com doesn't survive?

That statement then becomes a joke.

Zhang Ying put her phone in her pocket, opened the car door, and walked into the office.

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