Why is it so difficult for sports companies to go public| special column


The tiger pounced on the halberd, Rhine was frustrated and dumped the pot of sports listing to straight men. Is this logic reliable?

Dismantling 13 A-share sports companies + 14 Hong Kong stock sports companies, let's talk about the way behind the "difficult listing of sports companies".

Wen / Su Yi

Editor / Luo Da

On June 14, The listed company Rhine sports (sh000558) issued an announcement—— "The company originally planned to buy 63.34% shares of Chengdu Wen Lu by issuing shares. COVID-19 has made a great impact on the ski resorts nationwide, resulting in the continuous deterioration of the performance of Chengdu Wen brigade. After deliberations with the trading partners and careful study by the company, the company intends to suspend the major asset reorganization from now on, and when the conditions are ripe, the company will start selecting related matters again."

The day after the announcement, Rhine sports fell by the limit and continued to fall in the next few days.As one of the few A-share listed sports companies, although it ushered in the new owner of adult investment in March 2019, two years later, Rhine sports has dropped nearly 50% from the high point after restructuring, and during this time period, the small and medium-sized board index has increased by 40%.

Less than ten days later, on June 23, CICC announced that in view of Hupu's plan to adjust the listing plan, CICC, Dongfang wealth securities and Hupu agreed to terminate the counseling agreement and terminate the counseling work for Hupu's initial public offering and listing.

Compared with the growth history of Rhine tiger, it is obvious that the man who is not famous in the world is more famous. However, such analysis logic obviously simplifies the problem of "sports company listing". We might as well complicate the problem——Is there any deeper problem behind the failure of the merger and acquisition of Rhine sports and the termination of the listing of Hupu sports?

27 listed sports companies, 6 cognitive consensus

Before answering the above important questions, let's scan A-share and Hong Kong stock sports companies——

Based on the above data, we make a basic observation on Sports listed companies and simply sort out six perceptions——

1. The profits of A-share sports listed companies are generally low, because the traditional rules of A-share IPO require income, profit, performance stability and shareholder identity restrictions, and the audit of listing is very strict.

The early sports equipment brand management was extensive and barbaric,Therefore, from 2004 to 2009, China's major sports equipment brands chose to list in Hong Kong, and Hong Kong stocks gave a more tolerant valuation to the consumer goods industry as a whole,Therefore, together with the world's largest garment enterprise, fast retailing (UNIQLO) also chose to be listed in Hong Kong;

2. The A-share industry is the sports equipment industry. Most of these enterprises are dominated by government orders and foreign trade orders, so they comply with the A-share IPO rules, but the growth of such enterprises is very weak.For example, after the listing of Jinling sports, the income and profit are basically unchanged, while yingpais decreases year by year. Shuhua sports and Gongchuang lawn, which have a good stock price performance, are just listed and catch up with the big market. If there is no new breakthrough, they will still go to the old road.

3. The A-share sports equipment companies were all listed after 2009, and it was an opportunity to be listed that year. However, from the perspective of market influence and performance, they were all second and third rate enterprises, which basically caught up with the bull market in 2015 and accumulated a certain capital operation ability,However, most of them have carried out non main business expansion at the same time, so they are facing great pressure from 2017 to 2019 when the capital market is tightened, and now they are struggling;

4. The companies operating stadiums and gymnasiums are small in both a shares and Hong Kong shares. Our common large players, such as Huaxi style, jiazhaoye style, Jiushi sports and huati shares, are non IPO independent companies. Although these large players are also very uncomfortable under the epidemic, the listed companies can not become a typical representative of this industry;

5. Sports event services include copyright, marketing and event operation. The bloody listing of endeavor, the global leader of the industry, in the United States this year and the delisting of Wanda sports in the United States have proved that the industry has been seriously devastated by the epidemic.

Of course, without considering the epidemic situation, sports event service is the branch with the most stable profit and the most obvious growth. We can see that Weimei's performance (including the acquisition of cash cow UFC) has a high growth.At the same time, several event service enterprises in a shares and Hong Kong shares are very weak. For example, the slightly radical contemporary sports have been forced to change ownership, while the conservative Lisheng racing has also increased income without increasing profits in recent years, and has made several mergers and acquisitions in recent years without much performance;

6. The company with a large number of Companies in the sports industry is the sports education and training industry. At present, there is no listed company in this industry. The world is typical of chain gyms focusing on adult training, but China's education and training industry has been born, such as tal, New Oriental and listed companies of various education groups, so this industry is also worthy of attention;

Sports capitalization = sports Marketization

Back to the initial question:Where is the capitalization path of the sports industry? Is the market wrong, the enterprise wrong, or the straight man wrong?

First, when it comes to the sports industry, most of the views point to - generally, the profits of enterprises in the industry are not high and the income scale is not large; Even if a certain scale of income and profits are achieved, the growth is weak; China's sports market is still in the early stage of the transformation from professional sports to professional sports, etc;

But we might as well throw out a sharp but realistic point of view - the capitalization of sports is actually the marketization of sports. In the final analysis, the projects that cannot be capitalized are not marketized enough.Years of practical experience tells me that capital votes with its feet. No matter whether the reason is from the national system or consumption capacity, capital will make a "wise" choice. There is no doubt about this.

Therefore, if enterprises in the sports industry want to choose capitalization, they must first make themselves market-oriented. This marketization includes at least three points:

First, do not or do less business that depends on the government; Second, we should keenly explore the market rules and find businesses that consumers are willing to pay for; Third, have a clear understanding of the road of capitalization, because IPO is not the only way of capitalization. From the process of global sports development, a large number of mergers and acquisitions and asset securitization are also good choices.

"It's not the wrong answer, it's the wrong question."

On the issue of how to list sports companies, we will review Rhine and Tiger flutter again. The previous one is not market-oriented. Needless to say, it is obviously "the answer is wrong";

The latter one is likely to be wrong - does Hupu have to choose the path of independent IPO to prove the success of capitalization? Being merged and operating independently in a group enterprise may be the real version of this examination question.

2021 sports company capitalization strategy

Extending the discussion, which kind of sports enterprises are more suitable for IPO, and how can other types of sports companies realize capitalization?

In addition to sports equipment companies, there are several categories of sports tracks, namely events and clubs, event service companies, education and training companies and venue operation companies. They have their own development characteristics:

Equipment company:

Both manufacturing and sales can produce enough enterprises, because fundamentally, this is a consumer goods manufacturing and sales industry. With the change of lifestyle, this industry is an obvious upward trend, so it has become the darling of the open market;

Events and clubs:

Holding the rights and interests of events and clubs, an obvious feature of such companies is that their operating income and profits are not high, but IP itself contains high value, which ensures the sustainability and stability of their performance.

For example, Alexander, the former owner of the famous Houston Rockets, spent $85 million on buying the club in 1993 and $2.2 billion in 2017, with a return of 23 times. Moreover, during the 24 years of holding the Rockets, Alexander has operated various businesses in the United States and China and obtained a lot of economic returns.Therefore, the capital withdrawal of such companies is often mergers and acquisitions; Cai Chongxin, the God of wealth of Alibaba, acquired Brooklyn basketball net for us $2.35 billion, which is also a typical case;

Event service company:

Such companies are closest to money. Because sports is a good communication tool and media content, brands are often willing to convey brand or product information through sports events and athletes. However, such companies are also limited by the scale of customers and the non standardization of services, so they are often unable to achieve a large scale through their own development; Look at endeavor, Yingfang, lagardel and even top 4A advertising companies,They are gradually expanding through mergers and acquisitions, and then form synergy within the system to better serve customers;

Venue operation company:

Such companies are essentially commercial real estate operating companies. Some hold real estate property rights, and some only operate lightly on assets. There are standard processes to follow in commercial operation, property management and capital operation, but the difference is that the location and specific form of real estate will make great differences in the results of commercial operation;Such asset management companies rely on asset securitization and mergers and acquisitions to expand their scale. Because of their stable income and good cash flow, they have become important assets purchased by global mutual funds and alternative private equity funds;

Education and training company:

In brief, there are no sports education and training companies listed in China. Recently, the adult gym industry and fitness equipment field are also large-scale financing. In fact, fitness equipment is just a tool, behind which is a social and lifestyle connector.

The education and training industry is always standardized + AI as much as possible to create scale advantages, so it can be capitalized. However, sports education and training is a "handicraft industry" that focuses on offline experience. Once offline, the training and supply of coaches is a hard core ability. Standardized replication is the difficulty. Without standardization, there is no scale.

Therefore, education and training companies in the sports industry first consider how their products can be standardized, then copy them when a single store runs through, and carry out mergers and acquisitions after reaching a certain scale, and finally they can IPO;

To sum up, we can see that once these companies reach a large scale, the alternative capitalization path is probably:


rom a more macro perspective, the development trend of China's sports industry has released more signals conducive to sports capitalization.

The cultivation of Chinese sports consumers is a process from quantitative change to qualitative change with different stages of economic development. The epidemic has promoted China's national health awareness. From the perspective of national strategy, the integration of sports and education to promote the development of physical education and training industry is also the general trend. In addition, China's original national professional sports mechanism will gradually turn into more market-oriented behavior, which has many development opportunities.

We always say that sports is a long industry, and the development of China's sports industry needs a long process. But the law behind it is actually clear. Long-term ism does not mean silly persistence. What kind of seed to sow and what kind of fruit to bear. If industry participants do not have a clear understanding of the development of capital and market in the process of entrepreneurship and development, it is easy to go astray or lose direction.

In our eyes, sports is a lovely industry. Vitality, competition, sweat and life are all in this big industry. The future of a sports company does not necessarily take the road of capitalization. The choice of capitalization is not necessarily an independent IPO. I hope this article can give some enlightenment to sports practitioners and investors who still insist on it. I also hope that we can still love sports after recognizing the truth of sports.

Special author: Su Yi (bob19765555)

Sports industry investors