No longer putting new wine in old bottles, Xunlei Transformation Concept submits IPO application again

On May 24, it was reported that Xunlei had resubmitted an IPO application to the U.S. Securities and Exchange Commission (SEC) on Friday, planning to raise up to US$100 million and start a new round of listing in the United States.

It is understood that this IPO application is not Xunlei's first attempt to go public in the United States. As early as June 2011, Xunlei, a Chinese download acceleration software service provider, submitted an F-1 listing application to the U.S. Securities and Exchange Commission, planning to go public on NASDAQ. However, due to the poor conditions of the U.S. capital market, it failed to succeed and announced the cancellation of the listing in October of that year.

The main reason why Thunder's application for listing was rejected was not simply because it was restricted by the conditions of the US capital market, but because Thunder's listing conditions in many aspects were not mature.

Xunlei was founded in 2003. In 2004, it launched its core product, download acceleration software, which has occupied 78.7% of the Chinese download acceleration software market. In 2007, it launched the online video service Xunlei Kankan. In that year, more than half of Xunlei's revenue came from advertising services for video viewing and downloading, which proved that Xunlei is actually a video company and content company.

However, in its F-1 filing three years ago, Xunlei positioned itself as a consumer Internet platform for digital media content, operating based on cloud computing to help Internet users access and manage digital content. According to industry insiders, this positioning, because there is no ready-made foreign model, has caused Xunlei to encounter the problem of being unable to create a clear concept to the capital market.

More importantly, Xunlei also had "material weaknesses" and "significant deficiencies" in its financial reporting controls, and used a corporate structure called a "variable interest entity" (VIE), which complicated the company's efforts to attract investors.

It is understood that the operation of variable interest entities is in a legal gray area. Under this structure, foreign investors can share part of the income of Chinese companies listed in the United States without holding shares.

At the same time, some Internet companies would face difficulties in going public as the Chinese government cracked down on companies with variable interest entity structures. As investors became increasingly concerned about financial fraud in Chinese companies and whether these companies could withstand scrutiny, Chinese concept stocks listed in the United States fell sharply and were rejected.

Unlike its failed IPO three years ago, the focus of Thunder's packaging this time is no longer video, but Xiaomi, routers and forward charging to users.

Just last August, Zou Shenglong disclosed to the media that 60%-70% of Xunlei's business at the beginning of this year was charged to users, and membership fees and cloud acceleration products were Xunlei's main paid products.

According to iResearch, Xunlei Cloud Accelerator had approximately 142 million monthly active users as of March 2014, accounting for 81.4% of the Chinese market share. Xunlei Kankan, which has a pay-per-view service, had approximately 136 million monthly unique users and approximately 155,000 paying users in March 2014.

With cloud acceleration technology and value-added services based on cloud acceleration technology, Xunlei turned its net profit from loss to profit in three years. The prospectus shows that Xunlei's net profit in 2013 was US$10.7 million, an increase of more than 20 times from US$503,000 in the previous fiscal year. In the first quarter of 2014, the total revenue was US$41.19 million and the net profit was US$397,000.

The biggest confidence of Xunlei, which has undergone a makeover, actually comes from the new money-maker Xiaomi. Xiaomi not only invested $200 million in Xunlei's E round of financing in March, holding 27.2% of the shares and becoming Xunlei's largest shareholder, but also fully integrated Xunlei into Xiaomi TVs and Xiaomi boxes, using Xunlei's copyright and acceleration technology to solve the problem of not being able to purchase copyrights in-app.

It is believed that Xunlei is no longer what it used to be. Although it is not 100% sure of success in its listing in the United States, after telling Wall Street its story over the past three years, it can at least prove that Xunlei is no longer a simple video company.

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.