Why did Xunlei’s market value shrink by nearly 2.2 billion after its listing?

Although you are listed, your continued decline has caused investors to suffer endless losses!

In June this year, Xunlei, an Internet veteran, realized its dream of going public and successfully landed on the Nasdaq in the United States. It closed at $14.90 on the first day of listing, up 24.17% from the issue price. Calculated by the closing price, Xunlei's market value at the time was $1.03 billion. Just when people thought that the hard work was over, this victim who had gone through a bumpy road to listing did not go smoothly all the way, but instead went downhill. It is understood that Xunlei's market value has fallen by 18% since its listing in June, and its market value has shrunk from the initial $1.03 billion to $686 million, a shrinkage of up to $350 million (nearly RMB 2.2 billion). What is the reason for such a large shrinkage? It all started with the difficult listing.

The difficult road to listing, two attempts at IPO

Xunlei went public in the United States for the first time in 2011. It submitted its listing application twice in June and July of that year, but due to "some problems", its IPO was postponed four times in two months, which was rare. The reasons were, on the one hand, the chain reaction of negative events in the asset market that year; on the other hand, the copyright dispute of its own video business led to Xunlei's "value being seriously underestimated". Xunlei gave up the listing.

Three years later, Xunlei restarted its listing plan and tried IPO again. Although Xunlei had completed five rounds of financing before listing, with a total financing amount of more than US$500 million, it failed to win a decent valuation. However, due to the fear that the IPO road would be far away after missing the opportunity, Xunlei finally compromised and listed with a market value of only about US$1 billion.

Lack of copyright and insufficient internal strength

Copyright issues have always been the primary obstacle for Xunlei to go public. At the end of October 2013, the American Film Association established a blacklist of illegally distributed films and TV programs worldwide, and Xunlei was on the list. With the success of this listing, coupled with the strong awareness of copyright protection in the American capital market, Xunlei has obviously made a "sacrifice": Xunlei has carried out a major cleanup of its products with copyright risks. Before going public in early June, it signed an agreement with the American Film Association, announcing that it would increase the protection of genuine content and prohibit users from illegally downloading films and TV programs from members of the association, and the two sides have reconciled.

However, the copyright protection of Xunlei led to the ban of resources, but paying users were unwilling to be "sacrificed". They paid for the "resources". The sudden reduction of resources damaged their "interests", causing dissatisfaction among users and members. Looking back at that time, the Xunlei forum was full of complaints and calls for withdrawal, which was undoubtedly bad news for Xunlei, which occupies half of the market with membership fees.

Not only that, looking at Xunlei itself, it is incomparable to Tencent, Youku, Sohu and other video websites in terms of copyright, and Xunlei has never made any efforts in self-produced dramas. A video website without attractive content, coupled with the disappearance of the "piracy bonus" and the commitment as a listed company, Xunlei's internal strength is also insufficient.

Internet cleaning campaign, external pressure remains

The collapse of eDonkey and Qvod is still fresh in our memory. In mid-April this year, China launched a new round of special operations to combat pornographic and obscene information online, the "Net Cleaning 2014". Xunlei Cloud Broadcast, which relied on "skirting the edge", was swept away, and Xunlei Quick Transfer, which is similar to Qvod, is also in danger. The anger accumulated by Xunlei members has reached a climax. In response to this crisis, Xunlei launched the "member account suspension" function at this time, but it is only a "delaying tactic" that can only save the surface but not the inside - as of now, the impact of this incident has not been reduced, and Cloud Broadcast and other products are still taking a break.

Xiaomi's success is not yet apparent

Xunlei knows its own shortcomings, and has also joined Xiaomi as an investor, holding 31.8% of the shares, making it Xunlei's largest shareholder. Xunlei and Xiaomi have carried out in-depth cooperation around the "cloud", and at the same time have entered the hardware field to participate in the "living room battle". However, facing Alibaba, LeTV and Tencent, which have been eyeing this field and have taken action, Xiaomi is still in a fierce battle. At the same time, from recent news, it can be seen that Xiaomi's Lei Jun's focus this year and for the next four years will still be Xiaomi mobile phones. In addition to the supervision of radio and television, it may extend to other products after the supervision of Internet TV boxes. For this reason, it is still unknown what role Xunlei will play after integrating into the Xiaomi ecosystem, and whether Xiaomi's effect can enable Xunlei to smoothly transform.

Epilogue: Entrepreneurs all have a dream of going public, but after going public, it is particularly important to think clearly about the future and remove the sword of Damocles hanging over their heads. Just like Xunlei, his sword is as Zou Shenglong himself said: "I hope to give Xunlei some time to see the result."

As of press time, Xunlei's closing price was 10.01.

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.