Baofeng Technology's monthly increase of 30 times, Magic Mirror can no longer support the abnormal stock price

When Baofeng Technology released its prospectus last May, the market was still criticizing its revenue which was far less than Xunlei's . But now, Baofeng Technology's total market value of about 27 billion yuan is six times that of Xunlei. The world is changing too fast.

Since listing on the ChiNext on March 24 this year, Baofeng Technology has staged a myth of continuous daily limit rises. Its opening price on the first day of listing was only 9.43 yuan, but in just over a month, its stock price soared all the way to 278 yuan, a nearly 30-fold increase during the period, which shocked countless investors. However, on May 14, Baofeng Technology's myth of daily limit rise ended, and it fell for two consecutive days.

Before Baofeng Technology went public, a reporter from the Investor's Daily interviewed Wang Gang, the company's deputy general manager, who was very confident in the virtual reality business represented by Baofeng Magic Mirror. However, from the actual situation, although virtual reality has boosted the stock price, it has also seriously dragged down the company's performance.

In the first quarter of 2015, the company achieved a year-on-year growth of 24.2% in operating income, but the net profit attributable to the parent company's shareholders was -3.2085 million yuan, a decrease of 146.72% from the same period last year. The company explained that the virtual reality business is in the early stage of large-scale investment, which led to the company's overall loss in the first quarter. So, how long is the investment period of the virtual reality business? When is this business expected to bring profits to the company? In addition, how does the company view the current high stock price? What is the reason for the recent frequent resignations of company executives?

Regarding the above issues, a reporter from "Investors' Daily" called and wrote to Baofeng Technology on May 13, but as of press time, the company has not responded.

Decoding the business of virtual reality

What exactly is the virtual reality business that sounds so high-end?

Simply put, you wear the Baofeng Magic Mirror in front of your eyes, put your phone in it, and then watch the video played on the phone to experience 3D or even IMAX effects. Although it is called virtual reality glasses, it seems more appropriate to call it "3D head-mounted glasses" or "mobile phone helmets."

The reporter of "Investors Daily" has used Baofeng Magic Mirror 2, and the movie playback screen of it is not as good as the IMAX effect advertised. From the visual effect, it is like watching a 3D screen, with a slight curve and black frames around instead of full field of vision. Although the 3D effect can be felt, it is still a long way from the cinema-level experience.

As a first-time user, the reporter is still looking forward to the new experience brought by this device. But as the slogan of Baofeng Magic Mirror is: "A new toy for the curious", the current virtual reality glasses are just an attempt to let interested people experience and understand the functional effects of this new toy. But if Baofeng Magic Mirror wants to complete the evolution from a toy to a tool, it cannot rely solely on the civilian price of 99 yuan. What is more important is to give users a reason to wear it and continue to use it.

The reporter interviewed Li Chen, a senior editor of Pinwan.com who has tested several domestic virtual reality glasses. He believes that "currently, domestic virtual reality glasses that cost one or two hundred yuan are unlikely to be widely used. Almost all similar products on the market use the same solution, with no essential differences, and it is unlikely that there will be new improvements in process technology. In addition, content and user needs are also problems. In short, virtual reality still has a long way to go."

If that’s the case, why does the company push Storm Mirror so hard?

First, it is to catch up with the trend. Oculus's large head-mounted virtual reality device will be released in 2016. In order to catch up with the trend, similar manufacturers such as Baofeng Technology launched products in advance to let users experience them first, and then rely on product iterations to promote the maturity of technology and finally enter the virtual reality market.

Secondly, Baofeng Magic Mirror is just a hardware carrier, and the value-added services behind it are the source of profit. Relying solely on hardware for profit is not the best choice. Baofeng Magic Mirror is just an entrance and platform, and there is an ecosystem behind it. Baofeng Magic Mirror has allowed users to participate through a low threshold of 99 yuan from the beginning, and through an open platform and a model of co-construction with partners, it has built a platform for value-added services and content. Once it reaches a certain scale, its income will be much greater than that from selling hardware.

It is difficult for Baofeng Mojing to generate high income in the short term

However, the technical strength and user experience of the Baofeng Magic Mirror device itself will be the determining factors for its success.

As the reporter of "Investors Daily" said in the last report on Baofeng Technology, whether Baofeng Magic Mirror can carry the company's future and transform it into a video platform engaged in virtual reality business still needs to be tested by the market.

However, both Baofeng Technology and the capital market are optimistic about the smart hardware Magic Mirror. In January 2015, the company established a subsidiary to independently operate Baofeng Magic Mirror. In mid-April, Baofeng Technology announced that it would increase capital for its "Baofeng Magic Mirror" and attracted many companies to follow it, including Huayi Brothers , Tianyin Communications, Ruicheng Huida, and Guangqi Songhe.

The smart hardware field, which is favored by the capital market, will attract more and more companies to stop by. Currently, virtual reality glasses of the same type as Baofeng Mojing include Ant Vision Technology's Jitao, Qixin Yiwei's PlayGlass, and Daxiang Technology's Virglass. LeTV, which has an advantage in video content copyright, recently announced that it will release a virtual helmet. Although Baofeng Mojing is one of the first pioneers of virtual reality glasses in China, it will face increasingly fierce competition.

In short, Baofeng Technology's main business is not outstanding at present, and its new smart hardware business is still in its infancy, which is difficult to provide significant support for the company's performance. Some analysts pointed out that in the next three quarters, Baofeng Technology's financial data is unlikely to perform well.

Many major forces boosted the stock price to soar

"Internet Plus", "Return of Chinese Concept Stocks", "Virtual Reality", with so many conceptual themes, Storm Technology took advantage of the storm.

In addition to the "Internet +" concept that the market is already familiar with, Baofeng Technology has also been labeled as a "returning Chinese concept stock", becoming the "first case of removing the VIE structure and successfully listing on the A-share market". Due to the lack of reference, there is a differentiated effect in the capital market. At the same time, the surge in stock prices is inseparable from the "bull market", especially the promotion of the "Shen Chuang Board".

According to the company's first quarter report, as of March 31, the top ten circulating shareholders of Baofeng Technology were all institutions, including Huatai Securities, Industrial and Commercial Bank of China Corporate Pension Plan, Hua Xia Advantage Growth Stock Fund, Hongyang Securities Investment Fund, etc., and the number of shares held by each of them was more than 20,000 shares. Most of these institutions obtained their shares through the initial public offering online.

However, judging from the after-hours Dragon and Tiger List data since April, institutions have begun to withdraw. From April 1 to May 14, institutions sold a total of about 150 million yuan. On May 13, institutions sold 137 million yuan.

In addition to institutions, hot money also frequently appears in the buying and selling seats. Since May, Baofeng Technology has been on the Dragon and Tiger List many times, and the active sales departments include Guotai Junan Shanghai Jiangsu Road Sales Department, Guosen Securities Hongling Middle Road Sales Department, Huatai Securities Shanghai Gonghe New Road Sales Department and other well-known hot money seats.

On May 6, Baofeng Technology was listed for trading, and a fierce battle between long and short sides occurred. The intraday fluctuation reached 15.04%, and the turnover rate was as high as 58%. On May 14, when Baofeng Technology obtained its first negative line, the intraday fluctuation reached 17%, and the turnover rate was 31%. The high turnover rate reflects the increasing differences between various funds as the stock price continues to rise, and it is also a necessary measure to maintain popularity.

Generally speaking, the main force behind the surge in each "magic stock" is likely to be more than one, and the change of the main force will cause the increase in trading volume and turnover rate. Moreover, popular and strong stocks like Baofeng Technology are more likely to attract the attention of short-term hot money.

Yang Delong, chief strategy analyst of Southern Fund, reminded investors, "Since the IPO price-earnings ratio is low, all new shares have been hyped up. Judging from the funds involved, they are all hot money. Some hot money keeps pushing up the stock price and then cashes out at high prices. After some new shares have risen several times, the valuation is obviously too high. It will be difficult to set a new high in the next few years. Investors should still be cautious about this."

Although it is difficult to determine the future trend of Baofeng Technology, the example of Hanwang Technology is of some reference value. Hanwang Technology went public in March 2010. Its performance was mediocre, but its stock price continued to soar thanks to its related concepts. At its peak, it became the top stock on the GEM board at 175 yuan. However, less than a year later, the company's stock price began to plunge, falling by 80% at one point.

Senior executives resign to prepare for cashing out

As the stock price continued to soar, executives of Storm Technology resigned one after another.

In late April, Zhang Zhen, former director of Baofeng Technology, and Wang Gang, former secretary of the board of directors, both submitted their resignations. Zhang Zhen will no longer hold any position in the company after his resignation, while Wang Gang will continue to serve as deputy general manager and editor-in-chief of Baofeng Technology.

In early May, the company's former deputy general manager Qu Jingyuan resigned from all positions in the company, becoming the second executive to leave Storm Technology since its listing.

Public data shows that Qu Jingyuan directly holds 1.2378 million shares of Baofeng Technology. In addition, Qu Jingyuan also indirectly holds part of Baofeng Technology's equity through Ronghui Sijin. The prospectus shows that his shareholding in Ronghui Sijin is 5.6%, and Ronghui Sijin directly holds 2.5729 million shares of Baofeng Technology.

Based on the shares he holds, Qu Jingyuan's current net worth has reached 340 million yuan.

Although some investors questioned whether the resignation of senior executives when the stock price soared was a cash-out, Qu Jingyuan promised in the prospectus that "if he reports his resignation within six months from the date of the issuer's initial public offering, he will not transfer the directly held shares of the issuer within eighteen months from the date of reporting his resignation."

Regardless of whether the executives resign or remain in office, on the surface, the high stock price has made their net worth soar. But now, no matter how much the stock price rises, it is only "paper wealth". The executives face a lock-up period of at least one year. How much they are worth at that time depends on the subsequent trend of Baofeng Technology's stock price.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.