Some steel e-commerce companies are awkwardly shouting IPO slogans, and Gangang.com's investment and financing stories repeatedly fail 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, involving the termination of the company's stock issuance, the termination of major asset restructuring proposals, the signing of a refund agreement with investors who have paid funds for the third stock issuance in 2015, and the proposal to authorize the board of directors to handle the termination of the company's stock listing on the New Third Board.

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

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 platforms, by 2016, there were over 300 steel e-commerce platforms in China. The thirst for capital 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 landing on the A-share market, many steel e-commerce companies, including GangGang.com, have chosen to list on the New Third Board, which has a relatively lower threshold, and then seek to open the door to the A-share market.

At present, the differentiation among these steel e-commerce companies is quite obvious. 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, Zhonggang.com reported losses, while GangGang.com has not even disclosed its 2016 annual report, and had to terminate its listing according to relevant regulations.

On the other hand, since its listing on the New Third Board in November 2014, becoming the first steel e-commerce company, GangGang.com has been engaged in dazzling capital operations. On one hand, it has been raising large amounts of funds. From April to October 2015, GangGang.com issued four additional issuance plans, with a planned total fundraising amount of no more than 1.92 billion yuan. On the other hand, it has made large investments. From May 2015 to May 2016, it successively announced plans to invest 50 million yuan and 2 billion yuan respectively in the additional issuance of A-share companies Hangang Shares and Shougang Shares, and planned to subscribe for 20 million shares of Zhonggang.com for 120 million yuan.

However, most of these investment and financing stories have come to nothing. In August 2016, due to relevant regulations and the company's financial situation, GangGang.com only completed the subscription of 5 million yuan, and the matter of participating in the Hangang Shares additional issuance project and constituting a restructuring was aborted. In March this year, GangGang.com terminated its subscription of Zhonggang.com's shares, giving the reason as changes in policy and the company's overall plan. According to this announcement, due to the termination of the additional issuance of Shougang Shares, GangGang.com terminated its third stock issuance in 2015, and the plan to subscribe for Shougang Shares' equity was completely aborted.

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 are actively preparing and carrying out matters related to the company's IPO. As a result, on the same day, Guoxin Securities, the lead underwriter of GangGang.com, issued a risk warning announcement stating that the above-mentioned agreement is a framework strategic agreement, and there are still uncertainties regarding specific cooperation matters, and the signing of the agreement does not mean that GangGang.com currently meets the requirements of relevant laws and regulations regarding issuance conditions.

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 make a push for listing. According to publicly available financial data, its revenue in 2016 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 at present. Some companies have already been listed on the New Third Board or have shouted the slogan of IPO, but many companies obviously have not focused their attention on their business, putting forward and packaging various concepts, while the actual business has not been implemented, and has not brought value to upstream and downstream customers, and there are shortcomings in the development of the entire industry chain business," Yue Yang said, if you can't produce real business, and there is no real operational data, even if you package it for listing, it can be delisted in the future, and the cases of A-share delisting in recent years have well interpreted this problem.

The capital war 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 level. But on the other hand, listing is a means, not an end. Enterprises with good "internal strength" will not be inferior to listed companies in terms of market recognition and financing scale, even if they are not listed.

In fact, among the top steel e-commerce companies in China, Ouyi Cloud Business and Zhaogang.com have not yet been listed, but their financing capabilities have always been strong. Ouyi Cloud Business has introduced investments from Ben Steel Group, Shougang Fund, GLP, China Construction Bank Trust, Sagang, and Mitsui & Co., while Zhaogang.com has received over 2 billion yuan in investment from more than 10 investment institutions, including IDG, Xifeng Huaxing, Sequoia Capital, and the Sino-Russian 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 operational data, and providing a high-quality customer experience, such enterprises 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 expanding scale and traffic and attracting popularity to strategic layout in supply chain finance and logistics, and building a closed-loop operating model across the entire industry chain.

At present, several leading steel e-commerce companies are also stepping up their efforts in this direction. Take Ouyi Cloud Business, for example, it has already set up several sub-platforms, including e-commerce, logistics, finance, and data. However, Ouyi Cloud Business 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 "matching + self-operation," while also integrating logistics, warehousing, and processing, providing systematic solutions for the steel trade circulation industry chain. It is reported that Zhaogang.com achieved overall profitability in 2016, with total revenue exceeding 30 billion yuan last year and net profit in the 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 large and small steel e-commerce companies will inevitably have a round of integration, just like consumer goods e-commerce, in the end, only a few giants will remain in the market. Whoever can quickly integrate the industry chain and find an effective profit model will be the last one to laugh," Yue Yang said.