The company owned by Stanley Ho, the son of gambling king Stanley Ho, may become the first stock of Chinese esports after its IPO.
Recently, the parent company of well-known esports clubs eStar and Ninjas in Pyjamas (NIP), NIP Group, plans to list and trade on the NASDAQ Stock Exchange under the stock code "NIPG". The underwriters for this IPO include Deutsche Bank, CICC, Tiger Securities, and GF Securities.
What has attracted widespread attention from the outside world is the owner of Xingjing Weiwu Group, He Youjun. According to the Tianyancha APP, Xingjing Weiwu is a comprehensive digital sports group with electronic sports club business as its core, and diversified businesses such as esports events and esports MCN are developed in parallel. It belongs to Wuhan Xingjing Weiwu Cultural and Sports Development Co., Ltd., which is 100% owned by Wuhan Muyecun Network Technology Co., Ltd.
Wuhan Muyecun Network Technology Co., Ltd. is a company with He Youjun as the legal representative, executive director, and manager, and is 100% owned by Xingjing Weiwu (Hong Kong) Co., Ltd. According to the prospectus, Xingjing Weiwu Group conducts business in China through Wuhan Muyecun Network Technology Co., Ltd. He Youjun is the largest shareholder of Xingjing Weiwu Group, holding a 14.2% stake.
Two years of net loss of nearly 20 million US dollars
As a top graduate from Massachusetts Institute of Technology, He Youjun has been digging gold in the esports track for many years. According to public information, Ho You jun entered the esports track in 2018, founded the V5 esports club, and became the president of the Macau Esports Association.
However, the initial record of the son of the gambling king was not satisfactory: in 2020, the V5 team suffered a disastrous defeat of 0 wins and 16 losses in the LPL spring tournament, creating the worst record in LPL history in a single season, and also making the inexperienced He Youjun aware of the complexity of the esports industry.
Afterwards, He Youjun decided to take the path of industrial integration and achieve ecological integration through mergers and acquisitions. He chose to collaborate with his competitor, Sun Liwei, the founder of Wuhan eStar Esports Club, to merge V5 and eStar through a stock exchange, thus establishing the Star Sports Weiwu Group.
Sun Liwei was once one of the famous Chinese esports athletes and a famous player from the previous World of Warcraft III. He founded eStar Esports Club in Wuhan and initially served as the head coach, helping the team win their first championship in the KPL league. The prospectus shows that he holds 8.7% of the shares in Xingjing Weiwu Group and serves as the CEO.
At present, Xingjing Weiwu Group owns two well-known e-sports club brands, eStar and NIP. EStar Esports Club has multiple gaming divisions, including QQ Speed Mobile, CrossFire Dual End, and Call of Duty Mobile. The Honor of Kings division has won the Honor of Kings Challenger Cup in 2019 and 2021. NIP Esports Club has a League of Legends division, which won the LPL Summer Six in 2020 and the Spring Season Army in 2022.
In terms of revenue model, Xingjing Weiwu calls its model "e-sports+": supplementing e-sports business with talent management, event production, creative studio, and advertising business, creating diversified revenue sources, promoting sustained growth, and actively exploring opportunities in e-sports education and training, fan universe (B2C monetization and metaverse), digital collectibles, e-sports technology real estate, and IP licensing.
However, from the perspective of revenue performance itself, Xingjing Weiwu Group has been suffering losses for two consecutive years: from 2022 to 2023, Xingjing Weiwu Group's net income increased from $65.835 million to $83.668 million, mainly due to increased revenue from talent management service fees and event production. But from 2022 to 2023, the net loss expanded from $6.306 million to $13.258 million.
Xingjing Weiwu Group stated that the expansion of losses is mainly due to increased costs and decreased other income. In 2023, the operating expenses, sales and marketing expenses, general and administrative expenses of Xingjing Weiwu Group have all increased compared to 2022, with year-on-year growth of 85.59%, 20%, and 142.86%, respectively.
The prospectus also mentions that the company still faces significant profit risks after going public: Xingjing Weiwu Group will continue to invest in the development and expansion of its business, including sales and marketing, and will incur general management fees, including legal, accounting, and other fees, after completing this product. In the future, it may not be able to maintain profitability.
If profitability is not maintained or improved, business and operational performance may be adversely affected, and additional equity or debt may need to be raised to finance operations, which may have a dilution effect on shareholders.
In addition, Xingjing Weiwu Group already has teams in Asia and Europe, and will expand to the Middle East, North Africa and other places in the future. Therefore, policies, market environment, etc. may bring risks to the development of the enterprise.
Wuhan state-owned assets hold 8.5% of the shares, with Huya contributing nearly half of the net income
According to the prospectus, He Youjun serves as the Chairman and CEO of Xingjing Weiwu Group, and is the largest shareholder of the company, holding a 14.2% stake.
Equity structure
In Series A financing, ZhenGe Fund subscribed 1.53 million shares for a consideration of 8 million; After the merger in 2023, ZhenGe Fund subscribed 87000 shares for a consideration of 8.115 million yuan. SIG China subscribed 1.16 million shares and 66900 shares respectively in 2021 and 2023; Shenzhen Guojin Angel Fund also subscribed 2.819 million shares and 162000 shares at prices of 40 million and 15.02 million during the aforementioned period.
Douyu, who once stood at the forefront of public opinion, was also an important shareholder. In 2021 and 2023, it subscribed to 2.9863 million and 17.16 million shares at prices of 35 million and 15.91 million yuan, respectively. However, the arrest of Douyu CEO has affected Douyu's operations.
In response, Xingjing Weiwu Group stated in its prospectus that as a game live streaming platform, revenue from Douyu accounted for 51.1% and 12.8% of Xingjing Weiwu Group's net revenue in 2022 and 2023, respectively. However, Fish will no longer be a top customer in 2023, and the company has begun to reallocate resources from Fish to Huya to cope with the operational adjustments that Fish is undergoing in 2023. As of 1231, 2023, revenue from Huya accounted for 49.2% of the net revenue for the same year.
It is worth noting that behind the IPO of Xingjing Weiwu in the United States, there is an important state-owned asset figure: Shanghai Yuyun Enterprise Management Partnership (Limited Partnership), which appears among the top ten shareholders of Xingjing Weiwu Group, with a shareholding ratio of 8.5%. According to the prospectus, Shanghai Yuyun Enterprise Management Partnership (Limited Partnership) is directly wholly-owned by Wuhan Tourism and Sports Group, with the actual controller being Wuhan State owned Assets Supervision and Administration Commission.
According to Frost&Sullivan's report, the global esports gaming industry's market size in 2022 was $57.9 billion (approximately RMB 420 billion), and is expected to grow to $10.4 billion (approximately RMB 740 billion) by 2027. The 2023 China Esports Industry Research Report shows that the size of the Chinese esports market in 2023 is approximately 166.4 billion yuan.
According to Zhang Shule, an analyst in the entertainment industry, the overall profit scene of the esports industry is not clear at present. Whether it is the competition or the derivative chain (esports equipment, esports pan entertainment physical products, esports concept entities such as esports hotels), they have not truly formed effective interconnection. It is still difficult to break through their scenes, and due to the lack of intense physical collisions in ball games such as football and basketball, the viewing value of esports events is not strong, making it difficult to break through the circle of esports fans. At the same time, esports enthusiasts also need to bear the criticism of "playing games" and "losing interest in playing games", making it a popular sports event that is more difficult than traditional sports.
However, this market with a potential value of billions of yuan has already lurked many seed players. At present, there are several A-share listed companies deeply involved in the esports industry chain, including game developers, live streaming platforms, and equipment manufacturers upstream and downstream, including Giant Network (002558), Sanqi Interactive Entertainment (002555), Rhine Sports (000558), Youzu Network (002174), and Wanmei World (002624), among others.
Previously, at the annual conference of the esports industry, Sun Shoushan, Chairman of the China Audio Video and Digital Publishing Association, stated that China currently has the most esports game and event IPs, the largest single market, the most developed industrial ecology, and the highest level of competition in the region. It has become a key participant in the global esports market and an accelerator of industry development.