Zhang Chaoyang does not regret it.
Editor’s note: This article is from WeChat public account “letter list” (ID:wujicaijing ), author Tan Yuhan.
Investors ran?
Seeing the trajectory of Sohu’s stock price one hour after the opening on August 5, Zhang Chaoyang was a little surprised. This does not meet his expectations. Just announced the financial report, Sohu’s second-quarter loss-making results are good, Zhang Chaoyang thought that the outside world would look at Sohu, and did not expect investors to flee.
“Last night everyone ran panic, as if you had a word with a bad-tempered person, he was furious.” Zhang Chaoyang so speculated about the psychology of investors: the second quarter earnings did not look carefully, the third The quarter did not care, and only saw the initial information and threw the stock.
After the announcement of the financial report the next afternoon, Zhang Chaoyang attended the media meeting. “Everyone will come to me with some numbers first.” At the opening, Zhang Chaoyang was busy smashing the good data in the financial report to prove Sohu’s second quarter. Good performance – second quarter revenue of 475 million US dollars, estimated in the first quarter of the range of 469 million US dollars – 494 million US dollars; if the quarterly bankruptcy liquidation of Changyou subsidiary Jingmao Cinema assets impairment, Sohu Group losses Reduced to 38 million US dollars, also in line with the first quarter’s estimated loss of 38 million -48 million US dollars; per share ADS net loss is the same, analysts expect the figure is 1.14 US dollars, if not counting Jingmao, the number is 0.95 Around the dollar; there is also an expectation for the next quarter, which is a loss of 22 million US dollars – 32 million US dollars, the chain is also reduced.
“The stock will come back tonight.” He predicted.
On August 6, Sohu’s share price still fell slightly, but it rose by 12.16% the next day, and also led the Chinese stocks, but the market value has not rushed to 400 million US dollars, which is already lower than Sohu’s book. cash.
As of June 30, 2019, Sohu Group held cash and cash equivalents of $375 million, short-term investments of $1.323 billion, current assets of $2.072 billion, current liabilities of $1.202 billion, and total liabilities of 15.09. Billion dollars, not too strictIt is calculated that even if Sohu loses all liabilities with current assets, the remaining assets are higher than the current market value.
This does not include Sohu’s most discussed assets, several buildings that were bought many years ago.
At the end of 2006, Sohu used about 30% of the cash reserve to purchase some of the properties of Wudaokou Beijing Weixin International Building at a price of 16,000 yuan per square meter. At the same time, it also purchased the building naming rights and 10 parking spaces. A total of 277 million yuan.
At the end of 2009, Sohu disclosed that it has reached a purchase agreement with a developer and will spend 750 million yuan to entrust its office building with a total construction area of 40,000 square meters, which is the Sohu of the Zhichunli Rongke Information Center. Media building.
Sohu subsidiary Changyou also joined the buy-in action. In 2009, Changyou announced that it is expected to purchase 15,000 flat office buildings and renovation costs of 43 million US dollars; in 2010, according to Goldman Sachs report, Changyou has purchased an office building in Beijing for about 146 million US dollars as the company headquarters.
In the consolidated financial report of Sohu Group, as of June 30, 2019, the net value of fixed assets including these buildings was $485 million. This is the result of Sohu’s current purchase price and depreciation, but in fact, the price of these buildings has far exceeded the value of the financial report. In 2017, some insiders estimated that the assets in the two buildings of Wudaokou and Zhichunli held by Sohu had exceeded 4 billion yuan.
Look at it this way, There will be huge arbitrage space for privatizing Sohu. The company’s market value and book assets, fixed assets do not match the multi-year continuation, also let Sohu plunged into privatization rumors.
In 2013, Hong Kong’s “South China Morning Post” reported that Sohu had contacted a number of banks including Credit Suisse, with the goal of raising funds to achieve privatization and delisting. Yu Chuyuan, who was then CFO of Sohu, later responded, saying that The rumor was false; at the end of 2015, the media quoted Sohu as saying that Sohu received a preliminary privatization offer from Zhang Chaoyang of $600 million, and Sohu subsequently responded that this misunderstanding should be a “preliminary non-binding guidance offer”, but The action was still seen by the outside world as a prelude to Sohu’s privatization. When interviewed by the media early next year, Zhang Chaoyang explicitly denied that Sohu would be privatized, and the offer was later abandoned; in 2018, Sohu moved the registration to Cayman. And said that after the completion of the liquidation, Sohu Group will no longer pay the US corporate income tax, this action is seen as paving the way for privatization.
“The group is still not privatized, or staying on the Nasdaq.” In the interview in early August, Zhang Chaoyang gave the same answer.
The market value of Focus Media before its delisting in 2013 was only 2.646 billion US dollars. In 2015, it successfully returned to A shares. In mid-2017, the market value has exceeded 100 billion. In 2016, 360 completed privateIn fact, the market value before delisting was 9.3 billion US dollars. In 2018, the A-shares were listed on the back of the A-share market. The market value once approached 400 billion yuan. Even if it falls below a few, it will have a market value of over 100 billion.
There is a huge return. Why is Sohu not tempted, or why not now?
Sohu’s newly disclosed shareholding structure comes from its annual report submitted in May this year. Zhang Chaoyang is the largest shareholder with a shareholding ratio of 24.83%, including 75,000 shares of common stock and holding through its investment entity Photon Group Limited. share.
The second largest shareholder is the Canadian Pension Fund Public Sector Pension Investment Board, with a shareholding ratio of 10.7%; the third largest shareholder is Macquarie Investment Management Business Trust, with a shareholding ratio of 10.44%; the fourth largest shareholder is Orbis Investment Management Ltd., the shareholding ratio is 7.6%.
“Zhang Chaoyang’s shareholding ratio is about 25%, and the other three major shareholders are about 28%. If you want to make a privatization offer, the price is likely to be close to the net assets.” A securities investor analyzes the alphabet, privatized A common way is to make a tender offer. If the tender offer is to be raised to a certain percentage, the legal provisions can be used to force the minority shareholders to sell at a price higher than the market price. In the process of collecting chips, the company is very likely to be targeted by the arbitrage.
“The result of the final game may be privatization failure or the purchase price is close to the net assets.” The above said that the reason for the near net assets is that Sohu’s asset structure is cash or cash equivalents, Short-term investment is the mainstay. If it is another company, it will generally be discounted on the basis of net assets. The more complex the asset structure, the more the historical assets will increase, and the greater the discount.
In addition to the Public Sector Pension Investment Board, which became a major shareholder of Sohu in the middle of last year, Macquarie and Orbis are long-term shareholders who hold Sohu stock for many years. The holding cost may be high and will affect the privatization offer. Pricing.
If these three major shareholders and Zhang Chaoyang are not acting in concert, it is a long game. Now Sohu has not been privatized. Perhaps this game is too time-consuming and laborious. Zhang Chaoyang has no time to take care of it. Perhaps it is the management who has ideas, but the game is not over yet.
The current time node doesn’t seem to be suitable for privatization either.
The above analysis shows that compared with the Internet industry, the traditional industry business is relatively stable. After privatization at a price lower than the net assets, the major shareholders continue to operate these assets, and the total income will remain the same. EquityConcentrate and increase. But Sohu’s future is not stable, relying on trial and error to achieve breakthroughs.
The cash and cash equivalents on the books of Sohu Group and short-term investments are partly from Sogou and Changyou. As of June 30, 2019, cash and cash equivalents, Sohu after the consolidated statement was 375 million US dollars, Sogou was 184 million US dollars, Changyou was 132 million US dollars; short-term investment, Sohu after the consolidated statement was 1.323 billion The US dollar, Sogou is 948 million US dollars, and Changyou is 80.2 million US dollars. After calculating the number of the two subsidiaries, Sohu’s cash and cash equivalents are not many.
“There is a lot of money on the account, but in different pockets, in the Sogou, in the swim.” Zhang Chaoyang also explained in response to the reasons for the group’s stock dividends.
Changyou has made a dividend last year. In April, Changyou announced special cash dividends to all shareholders, totaling approximately US$ 503 million. This is an operation to supplement the group with ammunition. Sohu has obtained a cash dividend of approximately US$337 million from Changyou 68% to support its business investment.
Sohu’s media and video business still needs to rely on Changyou and Sogou blood transfusion. In the second quarter, Sohu Media and Sohu Video lost $68 million. Although the loss was narrowed year-on-year and the chain was narrow, they were for a long time. It will also continue to consume the company’s cash flow.
In addition, Sohu’s current profitability may not be suitable for A-share demand, and most of the companies currently listed on the Science and Technology Board are emerging industries such as biomedicine and new energy. Internet companies do not seem to be favored too much. .
In fact, if you don’t consider the company’s operations, Zhang Chaoyang can sell or clean up the media and video business. It’s easy to get into the stocks of Sogou and Changyou stocks, but it’s obviously not an entrepreneur’s. idea.
The actual controller’s mindset may be more important than technical issues.
“A privatization offer that is difficult to determine, and a high probability will cause Zhang Chaoyang to lose most of the ammunition.” The above analysis shows that Zhang Chaoyang may wish to use these ammunition to re-buy a track in the next round of technological changes. .
For him, saving Sohu is looking for new growth points, allowing investors to see new development space, instead of still following the old path of the PC era; but not too radical, so that investors have not yet been found. The story of surprises consumes too much book assets.
In June of this year, Sohu launched a social product Fox Friend, but the future is unpredictable. This is not a brand new product. It was the embedded function of Sohu News client earlier, but it was officially released three days later and was released until it was released this month.
The headline of the original CEO Chen Lin asked questions in the Goku question and answer before the launch of the multi-flash. “Is the social field in China already in the end? In the future, the social fieldWhat developments and innovations might there be? “At that time, the new social product toilets and bullet text messages seemed to be making footnotes for Chen Lin’s challenge. However, in the past few months, these products, not to mention the streets, are not optimistic about development. The strength of the development of social products is still difficult, Sohu is entering the final stage, the future is difficult to be optimistic.
“We have limited resources, we will not open a lot of business lines to try and invest. We are all top-down, set several directions, and constantly iterative innovation. Fox Friends, Sohu News Client, Sohu The videos are constantly innovating, and I personally lead.” Zhang Chaoyang explained to the alphabet list about the incubation of new business. Overall, Sohu is conservative, but it has always been innovative.
At the end of last year, Zhang Chaoyang returned to the front line and rectified one department at a time to reduce costs and increase income. Even he started to see advertisers to mobilize the rear resources.
He wants to make the company profitable. As for the stock price, “It’s gone.”
Zhang Chaoyang has changed. I began to invest more and more time in this company, reflecting on the detours that have passed through these years, and even the management has become strict.
“Are you a little culture before regretting?” A reporter asked him.
“Life can’t regret it.” Zhang Chaoyang said, “Life is a process. Past experiences are a fortune. We have different stages of understanding the world, and we don’t regret it.”