Baofeng Technology's stock price has overdrawn 1 to 2 years of performance

If the stock price hits the daily limit again today, Baofeng Technology will be able to tie the record of 24 consecutive daily limits since the IPO was reopened. Previously, this record was held by Lanshi Heavy Equipment. As of the close of the 24th, Baofeng Technology hit the daily limit again, which is the 23rd time.

I am a loyal user of Baofeng Video. But it is precisely at this time that I remain cautious and even vigilant about its performance in the capital market.

Let's go back to common sense. Who would believe that a video player company that does not have much core technology, has a single profit model, and has made little profit in the past few years can support a stock price of nearly 80 yuan and a market value of 10.043 billion?

I think that the stock price of Baofeng Technology has overdrawn its performance for at least the next one and a half to two years. Today's daily limit and even another daily limit on Tuesday set a record. After the wealth creation effect, it will accumulate greater pressure on it.

The success of Baofeng Technology in the capital market reveals the foresight of Feng Xin and the institutional investors behind him, but it also has a blatant sense of opportunism. In summary, the main reasons for its popularity are:

1. It has the honor of being "the first case to dismantle the VIE structure and successfully list on the A-share market". There is a lack of reference in the A-share market, and it has a differentiated effect in the capital market, which is very obvious.

If you look at its prospectus, the reference companies seem to be Youku and LeTV. The former is listed in the United States, and LeTV is a local monster stock, which gave Baofeng the opportunity to leverage its strength to speculate.

To some extent, Baofeng's removal of VIE and successful entry into the local market is also what the local authorities expected to happen. Over the past three years, the competent authorities have indeed been paying attention to the listing of technology stocks locally. When JD.com first submitted its application to the SEC, a certain department expressed concerns. You can feel that the current enthusiasm is still the result of policy changes. In fact, there are also many Internet companies seeking to be listed on the A-share market recently, and Focus Media is very enthusiastic.

Feng Xin does have a good vision. In the early days, the A round of investment in Baofeng was from IDG and Matrix. After the financial crisis, until the end of 2010, the effect of the US capital market weakened significantly. The local market strengthened, especially the cultural media and Internet entertainment sectors. In 2011, Feng Xin asked IDG and Matrix to withdraw, and in 2012, he dissolved the VIE structure and decided to list on the A-share market. It was indeed strategic.

2. The small-cap stock effect of the GEM. This is also the rule of the entire capital market. Baofeng has only 30 million shares in circulation, which is very easy to manipulate, especially A shares.

3. Baofeng caught up with the craziest round of the market. In the past two months, the market was crazy. Many people made money by speculating in stocks. Baofeng, under the concept of the Internet, did have an effect.

4. The timing of IPOs caught up with the window of policies and trends. The listing at the end of March was the window for the fermentation of the open signal of the two sessions. The authorities sent out open signals, especially emphasizing the value of the Internet industry in promoting economic transformation and industrial structure upgrading, that is, the concept of the Internet. In this wave of enthusiasm, Internet companies were directly lifted up. Baofeng Qihua, and some Internet companies' stock prices tripled in less than a month. For example, Hangzhou's Wangsheng Business Treasure.

I didn't mention its business side. This is because, whether it is the main business, profit model, or future strategic expectations, Baofeng does not have many bright spots. Its 23 daily limits have completely deviated from the business, which is a very typical "market dream rate" effect.

Think about it, if the same cycle, the same packaging, if Baofeng landed in the US market, would it have such a performance? My answer is absolutely impossible.

Yes, Feng Xin has a very good nose for products. He is also a product expert. From working at Yahoo China 10 years ago to Kingsoft, he has been able to seize opportunities to launch killer products at every stage. Baofeng was once the standard for PC terminals. His success is indeed not accidental. But that was a PC era. So far, we have not seen Baofeng Technology gain such a position in the mobile terminal. In the past three years, the reason why it has made a slight profit is mainly through cost control. It is not even a small fortune, because in order to go public, its financial packaging is also very obvious. The financial means have been very aggressive since 2013.

In other words, Baofeng Technology, which is extremely popular, is actually in its most difficult stage. Although its old business, the PC side, can be maintained for a while, its bonus period is coming to an end. And its new business, that is, the virtual reality concept of its subsidiary, is still just a concept. This means that for at least one to two years, Baofeng Technology will be under pressure of a lack of successors.

In this light, Baofeng's IPO in March is actually a manifestation of its danger. If it is not listed at this time, it is likely to fall into the same situation as Xunlei.

I don't believe that its financial situation can continue to support the current stock price after listing. We have seen that its financial situation has changed less than a month after listing: in Q1, it turned from profit to loss. The reason given by Baofeng is that it is mainly affected by the virtual reality business of its subsidiary.

This reason is financially tenable, but it is somewhat difficult to justify from a business logic perspective. Because, although this project requires investment in the early stages, it is still in the preparation and financing stages, with multiple companies involved, and Baofeng itself only holding 30% of the shares, so the pressure is not very great. In the case of a new business with limited investment and not yet the main business, attributing the company's losses to this business is obviously fishy.

In my opinion, this is just the aftereffect of Baofeng's aggressive financial performance in order to rush for an IPO. The change in performance is not unexpected at all. There is a joke that most companies on China's ChiNext were profitable before listing, but lost money as soon as they went public. Baofeng's performance changed less than a month after its listing, and this impression cannot be shaken off. I believe that its financial performance is unlikely to perform well in the next three quarters.

However, this does not affect its wealth creation effect. Its market value has exceeded 10 billion yuan. You can see that Feng Xin is very happy. Before the opening of the market on the 24th, before the call auction, he said in his circle of friends: "Today is 100, a number I told myself a few years ago."

This statement cannot help but show a sense of pride. This shows that he had been thinking about going public a few years ago, and a market value of 10 billion yuan was his goal for a long time. For a small Internet company with very limited revenue, the founder had always been thinking about a market value of 10 billion yuan a few years ago. It was really utilitarian. However, I am a little puzzled, why didn't he want to be worth 10 billion US dollars?

Baofeng's previous products were very good. Compared with its peers in the same market, it was an early player and had considerable differentiation advantages. The player is actually an entrance that can integrate content, advertising, and services, and can be implemented to form an O2O model. Therefore, its profit model is relatively stable. However, it has not yet demonstrated its amazing power in the mobile Internet era.

I believe that Baofeng has its own story logic. But I am not optimistic about its new virtual reality business. This is just a story it tells in its IPO. Although it can attract other famous companies to participate and attract attention through the financing case, it is more like covering up the unfavorable short-term performance. If it suffers losses again in Q2 or performs poorly, don't doubt that it will continue to use virtual reality as an excuse.

Virtual reality is a long story. If I were to tell it, I could provide a few story topics. It could be like this: first package a vertical integration model, and then make a fuss about content, distribution, advertising, O2O model, other services, and smart hardware. Among them, the concept of Internet+ must not be wasted, and some traditional industries and enterprises must be found to establish strategic cooperation. If that doesn't work, it's best to make non-industry investments through continuous capital operations like hatching chicks, and then Feng Xin must learn to stand up like Steve Jobs.

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.