The New Third Board Steel Network faces delisting; the China Steel Network continues to suffer losses

In 2015, the steel industry experienced a comprehensive downturn, but a sub-sector, steel e-commerce, quietly rose that year. Data shows that in 2016, the number of Chinese steel e-commerce platforms exceeded 300. Due to a business model similar to the "money-burning" model of the traditional internet industry, many steel e-commerce companies, pressured by funding issues, began seeking listings, with the New Third Board becoming their first choice.

However, it is worth noting that after the unilateral upward trend in 2016, the steel Price in the first half of 2017 did not continue the 2016 trend, showing a fluctuating pattern. This poured cold water on the steel e-commerce companies that had just announced profits in 2016, and the differentiation among steel e-commerce companies has gradually become apparent.

According to the 2017 mid-year report, Baochun E-commerce achieved operating revenue of 213 million yuan, an increase of 6036.83% year-on-year; the Achievements of China Steel Network plummeted, with revenue of 1.14 billion yuan in the first half of the year, a year-on-year decrease of 62.85%, and a net loss of 5.2752 million yuan; while Ganggang.com, one of the first steel e-commerce companies listed on the New Third Board, faced delisting for failing to release its 2016 annual report on time.

Ganggang.com may face delisting

The rapid rise of steel e-commerce is rare among China's bulk commodity e-commerce. Although the development speed is fast, the overall steel e-commerce industry is in its early stages of development, focusing on increasing the transaction volume of online platform businesses, grabbing customer resources and market share, and basically operating at a marginal profit or loss. Naturally, there are many steel e-commerce companies on the New Third Board. In terms of business model, New Third Board steel e-commerce companies mainly obtain operating income by providing information, facilitating transactions, and engaging in proprietary trading. Due to the special attributes of the industry, the development path of New Third Board steel e-commerce seems rather bumpy.

In July 2015, Ganggang.com was listed on the New Third Board, becoming the first steel e-commerce platform to do so. Within three trading days, Ganggang.com pushed its stock Price to 26 yuan before beginning a three-year suspension. During the suspension, Ganggang.com has been engaged in capital operations.

In May 2015, Ganggang.com planned to subscribe for 9.4697 million shares of Hangang Shares' non-public offering at a Price of 5.28 yuan per share, with a total transaction amount of approximately 50 million yuan. In October of that year, Ganggang.com launched a major restructuring plan: the company planned to continue subscribing for shares of listed companies in the steel industry with 2 billion yuan, this time targeting Shougang Shares.

On May 13, 2016, Ganggang.com announced that it planned to invest 120 million yuan to subscribe for 20 million shares of China Steel Network's targeted issuance at a Price of 6.00 yuan per share. In August 2016, the matter of participating in the Hangang Shares' additional issuance project and constituting a restructuring fell through because Ganggang.com did not subscribe for the agreed amount in full, only subscribing for a total of 5 million yuan.

On March 8, 2017, Ganggang.com announced that it would terminate its subscription for China Steel Network shares.

Unfortunately, the above-mentioned capital operations all ended in failure. In addition, due to the failure to disclose its 2016 annual report in a timely manner, Ganggang.com faces the risk of delisting.

China Steel Network's first-half loss exceeds 5 million yuan

As another typical representative of New Third Board steel e-commerce companies, when China Steel Network was initially listed, its chairman publicly stated in July 2015 that it would achieve a transaction volume of 50 billion yuan and operating revenue of 10 billion yuan in 2015; 20 billion yuan in revenue in 2016; and profits exceeding 50 million yuan in 2017.

On October 27 of that year, China Steel Network announced that it planned to publicly transfer 6 million shares on the New Third Board at an issuance Price of 12 yuan per share, raising 72 million yuan, with Tianxing Capital subscribing for 36 million yuan. On October 26, the adjusted Price of China Steel Network was 7.67 yuan/share, the highest point in recent years, while before the suspension this year, the company's stock Price on August 3 was only 1.26 yuan/share.

In terms of Achievements, when reviewing the company's financial reports, it was found that in 2015, the company's operating revenue was 7.408 billion yuan, although there was some gap with the target of 10 billion yuan in revenue, it was not much. However, the company's 2016 annual report shows that operating revenue was 4.077 billion yuan, a significant decrease, and the company's net profit showed a loss of 38.1329 million yuan, which is far from the initial target of 20 billion yuan in revenue.

According to the company's semi-annual report released in early August, the company's operating revenue in the first half of the year was 1.14 billion yuan, a decrease of 62.85% year-on-year, and the net profit was a loss of 5.2752 million yuan. If it wants to achieve the previous annual net profit target of 50 million yuan, China Steel Network needs to achieve net profits exceeding 55.27 million yuan in the next two quarters, which is not easy for China Steel Network, which was still losing money when the steel industry experienced a comprehensive recovery in 2016.

According to China Steel Network, the poor Achievements in the first half of the year were mainly due to the large fluctuations in steel Prices during the comparable period, resulting in higher operating risks for the company. The company optimized its sales structure to control risks, increased the proportion of end customers, and gradually increased its supply chain services, increasing the gross profit margin from 0.34% in the previous period to 1.85%, hence the decrease in operating revenue.

However, some industry insiders said that the decline in China Steel Network's Achievements was mainly due to the fact that the company was questioned about "irregularities" in its transactions in the previous two years. After being exposed, China Steel Network said it would prohibit such transactions. After that, China Steel Network's Achievements began to decline.

Although there are various problems, it is necessary to see that at the beginning of 2015, due to profitability, many steel e-commerce companies set their sights on New Third Board companies, hoping to find their own capital market entry point and obtain continuous funding support. Now, two years have passed, and the results are mixed. Companies that focus on their business have seen steady growth in Achievements and increasing attention; while companies that are speculative or take shortcuts are beginning to face delisting, sharp stock Price drops, and financing difficulties. How will they proceed in the future? Some industry insiders said that if various New Third Board steel e-commerce companies want to have a bright future, they must be down-to-earth and improve their internal skills.