GangGang.com's investment and financing stories repeatedly fail to deliver and will be delisted

Recently, GangGang.com, known as the "first steel e-commerce company on the New Third Board," released a latest announcement showing that at the temporary shareholders' meeting held on August 24, the company passed a number of resolutions concerning the termination of the company's stock issuance, the termination of major asset restructuring proposals, the signing of a refund agreement with investors who had already paid for the 2015 third stock issuance, and the request for the shareholders' meeting to authorize the board of directors to handle the company's termination of its New Third Board listing in its entirety.

This means that GangGang.com's investment and financing story has once again failed, and its attempts to connect with the capital market have also suffered a setback, making the company's previous IPO slogan seem more like a self-contradiction.

In the view of industry insiders, at a time when the steel e-commerce industry is experiencing a surge in listings, the plight of GangGang.com is worth reflecting on. Yue Yang, deputy general manager of Dalian Guochuang Investment Management Co., Ltd., said in an interview with reporters that some steel e-commerce companies are keen on storytelling and packaging concepts, but neglect to cultivate their internal strengths. "Some steel e-commerce companies should shift their attention away from the capital market, focus on the present, do a good job in their business, and build a closed-loop across the entire industry chain."

Awkwardly shouting the "IPO" slogan

As the fastest-growing sector among domestic bulk commodity e-commerce companies, by 2016, there were over 300 steel e-commerce platforms in China. The thirst for funds and the need for capital withdrawal have also led steel e-commerce companies to seek entry into the capital market. In addition to some industry pioneers successfully listing on the A-share market, many steel e-commerce companies, including GangGang.com, have chosen to list on the New Third Board, which has relatively lower barriers to entry, and then seek to enter the A-share market at an opportune time.

Currently, the differentiation among these steel e-commerce companies is quite apparent. Among the six steel e-commerce companies on the New Third Board, GangZhiJia, GangYin e-commerce, GangBao shares, and BaoChun e-commerce all achieved profitability in the first half of this year, while ZhongGang.com reported losses, and GangGang.com has not even disclosed its 2016 annual report, and according to relevant regulations, it had to terminate its listing.

On the other hand, after winning the first place among steel e-commerce companies on the New Third Board in November 2014, GangGang.com began dazzling capital operations. While raising capital on a large scale, from April to October 2015, GangGang.com issued four additional issuance plans, with a planned total amount of no more than 1.92 billion yuan. While making large investments, from May 2015 to May 2016, it successively announced plans to invest 50 million yuan and 2 billion yuan respectively to participate in the additional issuance of Hangang shares and Shougang shares, and to purchase 20 million shares of Zhonggang.com for 120 million yuan.

However, most of these investment and financing stories have failed. In August 2016, due to relevant regulations and the company's financial situation, GangGang.com only completed the purchase of 5 million yuan, and the matter of participating in Hangang shares' additional issuance and constituting a restructuring fell through. In March of this year, GangGang.com terminated the purchase of Zhonggang.com's stocks, giving the reason as changes in policy and the company's overall plan. And according to this announcement, due to the termination of Shougang's additional issuance, GangGang.com terminated its third stock issuance in 2015, and the plan to purchase Shougang's equity has also completely failed.

Although its capital operations have frequently been frustrated, on June 20 this year, GangGang.com further announced that it had signed a "Cooperation Framework Agreement on Guidance and Initial Public Offering of Stocks" with Kaisyuan Securities, and both parties actively prepared and carried out matters related to the company's IPO. As a result, Guoxin Securities, GangGang.com's lead underwriter, issued a risk warning announcement on the same day, stating that the above-mentioned agreement was a framework strategic agreement, and that there were still uncertainties regarding specific cooperation matters, and the signing of the agreement did not mean that GangGang.com currently met the requirements for issuance in relevant laws and regulations.

It is also worth noting that, as a former investment target of GangGang.com, this reporter learned that Zhonggang.com also recently held an IPO countdown planning meeting, planning to strive for listing. Public financial data shows that in 2016, its revenue was 4.077 billion yuan, with a loss of 38.1329 million yuan; in the first half of this year, its revenue was 1.14 billion yuan, with a loss of 5.275 million yuan.

There are many steel e-commerce companies in China. Some companies have already listed on the New Third Board or shouted the slogan of IPO, but many companies obviously have not focused their attention on their business, proposing and packaging various concepts, while actual business has not landed, has not brought value to upstream and downstream customers, and there are deficiencies in the development of full industry chain business," Yue Yang said, if you cannot produce real business, there is no substantial operating data, even if the packaging is listed, it can be delisted in the future, the cases of A-share delisting in recent years have well interpreted this problem.

The capital battle still depends on internal strength

In Yue Yang's view, steel e-commerce companies need to rationally view the listing boom. For enterprises, listing can open up new financing channels, obtain better Brand image and reputation, and improve governance levels. But on the other hand, listing is a means, not a goal. Enterprises with good "internal strength" can achieve market recognition and financing scale that is no less than that of listed companies, even without listing.

In fact, among the top steel e-commerce companies in China, Ouyi Yunshang and ZhaoGang.com have not yet been listed, but their financing capabilities have always been strong. Ouyi Yunshang has introduced investments from companies such as Ben Gang Group, Shougang Fund, GLP, China Construction Bank Trust, Sagang, and Mitsui & Co., while ZhaoGang.com has received more than 2 billion yuan in investment from more than a dozen investment institutions including IDG, Peak Hill Capital, Sequoia Capital, and China-Russia Investment Fund.

ZhaoGang.com and Ouyi, these two companies are not inferior to listed companies in terms of corporate governance, standardized operation, and public relations management, and obtaining direct financing is also the capital market's recognition of their past efforts," Yue Yang said, focusing on doing a good job in their main business, being able to produce impressive operating data, and providing a quality customer experience, only such companies can truly win the favor of capital.

He believes that steel e-commerce companies should refer to the development paths of JD.com and Suning.com, focusing on upgrading their operating models, gradually shifting from focusing on increasing scale and traffic and attracting popularity to strategic layouts in supply chain finance and logistics, creating a closed-loop operating model across the entire industry chain.

Currently, several leading steel e-commerce companies are also accelerating their deployment in this direction. Take Ouyi Yunshang, for example, it has already set up several sub-platforms including e-commerce, logistics, finance, and data. However, Ouyi Yunshang has not yet achieved profitability, with a net loss of 111 million yuan in the first half of this year. ZhaoGang.com's profit model is mainly "matchmaking + self-operation," while at the same time opening up logistics, warehousing, and processing and other industry chains to provide systematic solutions for the steel trade circulation industry chain. It is reported that ZhaoGang.com achieved comprehensive profitability in 2016, with a total revenue of more than 30 billion yuan last year and a net profit of tens of millions of yuan.

Although the scale of the steel e-commerce industry is large, the current industry profit margin is not high, and hundreds of steel e-commerce companies of all sizes will inevitably have a round of integration, just like consumer e-commerce, in the end, only a few giants will remain in the market. Whoever can quickly open up the industry chain and find an effective profit model will be the last laugh," Yue Yang said.