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

Chapter 131 Everyone is pessimistic

BJ, a bar in a five-star hotel.

Three managing directors from foreign investment banks sat together and had already had three rounds of drinks.

The conversation started with the financial crisis, then moved on to the collapse of Lehman Brothers, then to the A-share market, and finally to JD.com.

An MD put down his glass: "You know what I hate most? I hate it when the media hypes up that student to the skies, calling him a 'investment genius' or 'China's Buffett'—it's all bullshit."

"Have you seen him?" another MD asked.

"I've never met him, but I have met Liu Qiangdong. Last year at a dinner party, he talked to me for twenty minutes about JD.com's business model, and I immediately felt that this guy was no good."

Building your own logistics network? Do you know how much capital investment that requires? He's an e-commerce entrepreneur, going into logistics—isn't that just asking for trouble?

"So you think JD.com is doomed?"

"It's not just my opinion, it's the data that tells me. Look at his cash flow, his debt ratio, and his gross profit margin."

Which is healthy? None. A healthy company doesn't scramble for money during a financial crisis.

Why did Lu Chenzhou vote?

"Because he doesn't understand. As a secondary market speculator, he thinks the primary market is also about buying low and selling high. He doesn't realize that once money goes into the primary market, it can't get out. When he wants to sell, who will buy it? Nobody will. Who would dare to take over JD.com's stock?"

"Capital Today, take it! Didn't Xu Xin already go with it?"

"Xu Xin had no choice. She invested in the Series A round, and if she didn't participate, all her previous investment would be wasted. She was forced to invest 800 million, not voluntarily. Just you wait, by the time it's Series C, Xu Xin definitely won't participate."

"What about Lu Chenzhou?"

"What can he do? He either continues to follow, or watches his shares get diluted. Either way, he'll lose money."

How much do you think he'll lose?

"1500 million US dollars, most likely gone to zero."

"Are you so sure?"

"I'm not certain, I'm judging from probability. The probability of JD.com surviving is no more than 10%. A 20-year-old student taking $1500 million to gamble on a 10% probability is not an investment, it's buying a lottery ticket."

Another MD laughed: "They have money, it's none of your business!"

"I can't control him, but I don't like the media portraying him as a genius. He's not a genius; he's just lucky. Galaxy Entertainment made him bet right, and he thinks he's a stock market god. I've seen too many people like that; they all end up suffering terribly."

"You hate him that much?"

"I don't hate him, I'm just annoyed by this kind of mythological narrative. Today they idolize him, tomorrow when he falls from grace, the same people will be the ones trampling on him the hardest."

"You've got a good eye for things."

"Having worked in this industry for twenty years, what haven't I seen? The dot-com bubble of 1999, the Nasdaq crash of 2000, and the financial crisis of 2008."

"Every time a 'genius' emerges, it's always the same script: first they're lauded to the skies, then they're utterly destroyed."

"So you don't think he's a good candidate?"

"Whether I'm optimistic about him or not is not important. What's important is that time will tell. Once JD.com collapses and his $1500 million is gone, we'll see what the media writes then."

He picked up his glass and drank it all in one gulp.

"Come on, let's drink. Let's not talk about him. He's just a student, not worth it."

A student group at Peking University's Guanghua School of Management.

"Have you heard? That guy from Renmin University who invests in stocks has invested in JD.com."

"I heard about it, $1500 million."

"Where did he get so much money?"

"His dad gave it to him, right?"

He's an orphan.

"Where did the money come from?"

"Investing in stocks, I turned 10,000 into billions."

"Hahahaha, you believe that?"

"I don't believe it, but it's true that he acquired a stake in Galaxy Entertainment in Hong Kong; you can find that in the exchange's announcements."

"So what? Are stock trading and investing the same thing?"

"Exactly! He's a short-term trader, and he's going to try long-term investing? Isn't that just asking for trouble?"

"And the investment was in JD.com, which is on the verge of collapse."

"I've seen an analysis that says JD.com's cash flow can only last until the end of the year."

"Wouldn't he be just a sucker if he went in now?"

"A sucker? Who's going to take over Liu Qiangdong's dump? JD.com doesn't have any dump at all."

"So he went there to deliver money?"

"Maybe, anyway, it's not my own money."

"Some of them are, but they're rich and can do whatever they want."

"It's not being willful, it's being stupid. $1500 million, if you throw it in water, you'll at least hear a splash, but if you throw it to JD.com, you won't even hear a thud."

"Don't say that. What if he wins the bet?"

"What if? You're investing based on what if?"

"Exactly. We finance students are all about risk-reward ratio. His risk-reward ratio is completely unfavorable."

"How do you know it's not worth it? You haven't calculated it."

"I've done the calculations. Even under the most optimistic assumptions, JD.com's current valuation isn't cheap. What's more, the most optimistic assumptions don't even hold true."

"You made a model?"

"I did it."

"And the result?"

"The result? The result is that unless JD.com becomes the Amazon of China, this price is too high."

"Could it become China's Amazon?"

What do you think?

The group was silent for three seconds.

Then: "No."

"Cannot be increased by 1."

"Cannot be increased by 2."

"Cannot add 10086."

""

"So he was just giving away money."

"It's Renmin University, so please understand."

"Hahahahaha"

Two graduate students are eating in the cafeteria at Tsinghua University's PBC School of Finance.

"Did you see that news about JD.com?"

"I saw it. Lu Chenzhou, from Renmin University."

What do you think he's thinking?

"I don't know what he was thinking, but I know one thing: if I had $1500 million, I would never invest in JD.com."

.

Why?

"Because JD.com's model is flawed. Building its own logistics sounds appealing, but it's incredibly difficult to implement. Suning and Gome don't do it this way, not because they're stupid, but because they've done the math and can't make it work."

"Didn't Lu Chenzhou calculate that?"

"I don't know if he's done the calculations, but as someone from the secondary market, his understanding of the primary market is definitely not as good as ours."

"You're that confident?"

"It's not confidence, it's specialization. The secondary market focuses on trends, momentum, and sentiment. The primary market focuses on business models, competitive advantages, and management teams. These are two completely different analytical frameworks. He used a secondary market framework to invest in the primary market; it's no wonder he made mistakes."

"So do you think he'll lose money this time?"

"It's highly likely, but not 100%. There's no such thing as 100% certainty in investing."

"What if he doesn't lose money? What if JD.com really succeeds?"

"Then I'll admit I misread it, but I don't think I could have misread it."

"Are you so sure?"

"I'm not certain, I'm judging from a probability perspective. The probability of JD.com succeeding is no more than 20%."

"So what do you think of him as a person?"

"I think he's quite interesting. Regardless of whether he makes a profit or a loss this time, he's got the entire financial world talking about him. A 20-year-old..."

For a 12-year-old student to be able to do this is already very impressive.

"So you admire him?"

"I admire his courage, but not his judgment. Courage and judgment are two different things."

On a financial forum, the post about JD.com's Series B financing has received over 10,000 comments.

"A 20-year-old college junior investing $1500 million in a company that's about to go bankrupt—either he's crazy, or the market is crazy."

"I looked it up, and this Lu Chenzhou started by speculating on 10,000 yuan and turned it into billions. You guys think he's crazy? I think he's shrewder than any of you."

"Are stock trading and investing the same thing? Just because he made money in the secondary market doesn't mean he's good at the primary market. If you ask a race car driver to fly a plane, would he dare to?"

"JD.com is doomed. I'm writing this as proof."

"A student from Renmin University? No wonder, Renmin University produces swindlers."

"Have you ever thought about this: if Lu Chenzhou is right, and JD.com really succeeds, how will those of you who are mocking him now face yourselves in the future?"

"He can't be right."

"What if?"

"There's no 'what if'."

On the Renmin University sports field, Wen Zhiyu looked at Lu Chenzhou, who was holding her hand, and asked after a moment of silence, "The financial circle, especially the investment banking circle, is in an uproar, did you know that?"

Lu Chenzhou shook his head: "I don't know, but I can guess. I guess a lot of people are waiting to see me make a fool of myself."

Some people say you're crazy.

"Um."

"Some people say you're a fraud."

"Um.

""

Some people say you're just lucky.

"Um.

""

"Some people say you're bound to lose money."

"Um."

Wen Zhiyu looked at him and couldn't help but laugh: "Aren't you angry?"

Lu Chenzhou looked up and glanced at her.

Why should I be angry?

"That's what they said about you..."

"They're right."

Wen Zhiyu was taken aback.

"In their eyes, I really was crazy. During the financial crisis, everyone was cutting prices, but I didn't. Everyone thought JD.com was going to die, but I invested. They didn't understand, so their ridicule was normal."

"So you're not going to respond?"

"What's the point of responding? Once JD.com survives, they'll naturally shut up. If JD.com doesn't survive, whatever they say will be right. Responding now is meaningless."

Wen Zhiyu looked at him and remained silent for a while.

"Aren't you worried at all?"

"Of course I'm worried. It's $1500 million, not $1500. But if we don't invest because we're worried, then nothing will get done."

He paused for a moment.

"Zhiyu, do you know what the cruelest part of this industry is?"

"What?"

"It's not about losing money, it's about how when you make the right decision, everyone says you're lucky."

When you make a wrong decision, everyone will say you're an idiot.

You can never please everyone.

Therefore, you can only do one thing: make yourself satisfied.

Wen Zhiyu nodded: "Brother Lu, I think you're right."

"Thanks."

Wen Zhiyu didn't reply. A gust of wind blew by, and she shrank her neck.

"Cold?" Lu Chenzhou asked.

"good."

Lu Chenzhou released her hand, took off his coat, and draped it over her shoulders.

Then he took her hand back and put it in his pocket.

Wen Zhiyu didn't say anything, and stuffed it in a little more.

We walked for a while longer.

The wind subsided a bit when we stepped into the shade below the stands.

Wen Zhiyu stopped, and Lu Chenzhou also stopped.

"What's wrong?"

Wen Zhiyu didn't speak, she just looked at him.

Then she stood on tiptoe and kissed him.

After the kiss, I stepped back.

"Let's go," she said, in the same tone as if she were saying "Let's go" to a meeting.

Lu Chenzhou looked at her but didn't move.

"this one?"

Wen Zhiyu looked at him: "Then what else do you want?"

Lu Chenzhou did not answer.

He took a step forward, one hand still in his pocket holding hers, the other raised to cup the back of her head, and leaned down to kiss her.

It's been much longer than Wen Zhiyu's.

It took so long that Wen Zhiyu eventually pulled her hand out of his pocket and grabbed the collar of his coat.

After a while, Lu Chenzhou raised his head.

Wen Zhiyu's lips were a little redder than before. She looked at him; the tips of her ears were red, but her face remained expressionless.

"Is it done?" she asked.

"Alright."

"Let's go."

"Um."

Lu Chenzhou put her hand back in his pocket, and the two continued walking.

I walked down to the dormitory building.

"arrive."

"Um.

""

"See you tomorrow."

"See you tomorrow."

Wen Zhiyu went upstairs, took a few steps, looked back at him again, didn't say anything, and turned to go upstairs.

Lu Chenzhou stood downstairs, his hands in his coat pockets.

It was still warm in my pocket.

He stood there for a while, then turned and left.