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A One-Page Announcement: Is Suning Changing Hands?
"For businesses not in the retail main track, close those that should be closed, cut those that should be cut." — Zhang Jindong, Chairman of Suning Group At noon today, a bombshell announcement stunned netizens. Suning.com plans to transfer 20%-25% of its shares, with the transferee in infrastructure and other industries. What exactly does Zhang Jindong intend to do? In December last year, Suning Holdings pledged all its equity to Taobao. Now Suning.com is transferring over 20% of its shares. The former industry leader is truly about to undergo a major change. Behind this, it also reveals that Suning is indeed under financial strain, and another giant has started a "sell, sell, sell" mode. -01- Zhang Jindong Plans to Transfer 20%-25% of Shares Is Suning.com about to change hands? On the morning of February 25, the Shenzhen Stock Exchange issued an announcement that Suning.com planned to plan a change in control, and with the company's application, its stock was temporarily suspended from trading from the opening on February 25, 2021. At midday close, Suning.com responded to the change in control, saying it received notice from its controlling shareholder Zhang Jindong and shareholder Suning Appliance that they plan to plan the transfer of company shares, with an expected transfer ratio of 20%-25%, and the equity transferee belongs to infrastructure and other industries. The announcement stated that according to the proposed share transfer ratio, it is expected that the company's control may change. If the transaction is completed, it will help further optimize the company's equity structure and steadily advance its long-term strategy. The specific transaction plan is still being planned, requires approval from relevant authorities, and there is uncertainty. The company's stock was suspended from trading from the opening on February 25, 2021, with an expected suspension of no more than 5 trading days. Latest data shows that Zhang Jindong directly holds 20.96% of the company's shares, while Suning Appliance Group Co., Ltd. and Suning Holdings Group Co., Ltd. hold 16.8% and 3.98% of the shares, respectively. Meanwhile, Zhang Jindong holds 50% of Suning Appliance Group, 51% of Suning Holdings Group, and 80% of Nanjing Runxian, a shareholder of Suning Holdings Group, with a total beneficial stake in Suning.com of 33.3%. Additionally, Taobao (China) holds 19.99% of Suning.com. Since the beginning of 2021, Suning.com's largest shareholder Zhang Jindong and the third-largest shareholder Suning Appliance Group Co., Ltd. have repeatedly added or supplemented equity pledge records. As of the latest data, Zhang Jindong's unpledged equity pledge amount is 411.63 million shares, accounting for 4.42% of total share capital; Suning Appliance Group Co., Ltd.'s unpledged equity pledge amount is 897.07 million shares, accounting for 9.64% of total share capital. -02- The Buyer Has State-Owned Background It is understood that the buyer this time has a state-owned background. Some media believe that, referring to the recent trend of multiple listed companies in Jiangsu being controlled by state-owned capital, combined with relevant information, Suning.com is likely to be invested in by Jiangsu state-owned capital. Previously, there were rumors that Suning.com planned to sell part of its equity to state-owned enterprises, with a valuation range of 8 billion to 10 billion yuan, and investors including Jiangsu Guoxin Investment Group Co., Ltd., Jiangsu Transportation Holding Co., Ltd., Jiangsu Agricultural Reclamation Group Co., Ltd., and Nanjing Xingong Investment Group Co., Ltd. The state-owned enterprises plan to inject these shares into a new industry fund jointly established with Suning. However, this news has not been confirmed yet. Additionally, in December last year, when rumors spread about Suning's tight capital chain, Zhang Jinghua, member of the Standing Committee of the Jiangsu Provincial Party Committee and Secretary of the Nanjing Municipal Party Committee, led a team to Suning's headquarters for investigation and research, and had in-depth communication with Zhang Jindong, Chairman of Suning Holdings Group, on the company's development in 2020 and its planning for the "14th Five-Year Plan" period. Wind data shows that as of January 29, 2021, Suning.com's largest shareholder is Zhang Jindong, holding 20.96%; the second-largest shareholder is Taobao (China) Software Co., Ltd., holding 19.99%; the third-largest shareholder is Suning Appliance Group Co., Ltd., holding 16.80%; the fourth-largest shareholder is Suning Holdings Group Co., Ltd., holding 3.98%. Among them, Zhang Jindong holds 50% of Suning Appliance Group and 51% of Suning Holdings. Next, with the addition of new shareholders, the equity structure will change. The announcement stated that according to the proposed share transfer ratio, it is expected that the company's control may change. The announcement also stated that after this suspension, the addition of new shareholders will help steadily advance the company's long-term strategy and will bring significant improvements to corporate governance, business development, comprehensive credit, and other aspects. Having深耕 the industry for many years, Suning.com has achieved full-scenario coverage of online and offline retail. Offline, Suning.com's network covers the whole country, with various stores such as Suning Plaza, Suning Carrefour Community Center, Suning Department Store, Suning Retail Cloud, and Suning Jiwu; online, Suning.com operates through self-operated, open, and cross-platform operations, ranking among the top e-commerce retail enterprises. The addition of new shareholders and new capital will provide more sufficient "ammunition" for the development of Suning.com's online and offline retail scenarios, consolidating its market scale and position. At the end of November 2020, Suning.com's subsidiary Yunwang Wandian completed a Series A financing of 6 billion yuan. According to the performance forecast, Suning.com achieved operating revenue of 257.562 billion yuan to 259.562 billion yuan in 2020. -03- Suning's Lack of Money Is Not a Secret On the evening of December 10 last year, the change information on the National Enterprise Credit Information Publicity System showed that shareholders of Suning Holdings Group, Zhang Jindong, Zhang Kangyang, and Nanjing Runxian Enterprise Management Center (Limited Partnership), had pledged all their equity to Taobao (China) Software Co., Ltd. Among them, Zhang Jindong pledged 51,000 shares, Zhang Kangyang pledged 39,000 shares, and Nanjing Runxian pledged 10,000 shares. The total pledged shares were 100,000, with a total pledged equity amount of 1 billion yuan, equivalent to the registered capital of Suning Holdings Group. The equity pledge registration date was December 4, 2020. In addition, the National Enterprise Credit Information Publicity System also showed that Zhang Jindong also pledged 65,000 shares of Suning Real Estate Group, with the pledgee also being Taobao (China) Software Co., Ltd., and the equity pledge registration date also being December 4 this year. In response, Suning said: This equity pledge is a normal commercial cooperation and has no substantial impact on Suning.com's strategic development and normal operations. According to Damo Finance, as of the third quarter of 2020, Suning.com's book cash was 30.837 billion yuan, while the company's liabilities due within one year were 28.097 billion yuan. But as of the third quarter of 2020, Suning.com's net cash flow from operating activities was -2.429 billion yuan, so Suning.com would need to spend at least 30.526 billion yuan in cash this year. If the company's financial situation deteriorates in the fourth quarter, it is very likely to lead to a break in the company's capital chain. The debt scale of Suning.com's controlling shareholder, Suning Appliance, has also been expanding in recent years. As of the first half of 2020, Suning Appliance's short-term debt ratio rose to about 76%, meaning over 130 billion yuan would mature within one year, including short-term borrowings of 50.087 billion yuan, notes payable of 24.176 billion yuan, and non-current liabilities due within one year of 60.9 billion yuan. As of the end of June 2020, Suning Appliance had cash on hand of 24.8 billion yuan, with a cash-to-short-term debt ratio of less than 0.2 and a current ratio of 0.92, indicating significant debt repayment pressure. At the end of January 2021, Suning.com issued a performance forecast, expecting operating revenue of 257.562 billion yuan to 259.562 billion yuan for 2020, with a net loss attributable to shareholders of listed companies of 3.953 billion yuan to 3.453 billion yuan, a year-on-year decrease of 140.16% to 135.08%. -04- Zhang Jindong Once Said "Close Those That Should Be Closed, Cut Those That Should Be Cut" At the end of November last year, according to Bloomberg, Suning.com was reportedly considering selling part of its e-commerce business, seeking a valuation of about $6 billion. Bloomberg, citing sources, reported that to ease financing pressure, Suning.com, one of China's largest retailers, was considering selling part of its e-commerce business. Regarding the sale rumors, Suning.com posted "not true" on its official Weibo. But the rumors had already caused fluctuations in Suning's outstanding bonds in the secondary market. To boost investor confidence, Suning subsequently repurchased several bonds. Not only that, Suning.com's subsidiary Yunwang Wandian also successfully completed a Series A financing of 6 billion yuan, showing the capital market's attention to the investment value of this retail giant. It is reported that on February 19, the eighth day of the Lunar New Year, the first day of work for all Suning employees, Zhang Jindong, Chairman of Suning Group, delivered a New Year's speech around what Suning should adhere to, believe in, and advocate in 2021. Zhang Jindong once again emphasized that in 2021, Suning must firmly grasp the two main development tones of "focus" and "efficiency creation," achieving a transformation from business model to profit model and from retailer to retail service provider. "2021, with multiple internal and external factors intertwined, is destined to be a special year in Suning's development process, and it will also be a turning point year for Suning's development in the past decade," Zhang Jindong pointed out. Only by maintaining determination and facing difficulties can we resist external uncertainty and have the opportunity to achieve a new round of rebirth. "In the fourth decade, Suning is shedding its burdens and traveling light, but at the same time, there is no room for maneuver." Zhang Jindong said that in response to the ever-changing market environment, Suning will adhere to focusing on advantageous businesses in the retail track and adhere to a development orientation that prioritizes efficiency. It must have the determination to "walk a wide road as if it were narrow" and the ability to "walk a narrow road as if it were wide." At that time, Zhang Jindong emphasized, "For businesses not in the retail main track, we must actively make subtractions, shrink the front, close those that should be closed, and cut those that should be cut." Source: NetEase Finance