Internet encounters Growth Enterprise Market: Who is the future of Microsoft in China?

After the launch of the Chinese Growth Enterprise Market (GEM), IT enterprises in China will be able to make up for the various shortcomings they encounter when listing on Nasdaq. However, this does not mean that the Chinese IT enterprises can go public.

The promulgation of the Interim Measures for the administration of initial public issuance of shares and listing on the Growth Enterprise Market (hereinafter referred to as the interim measures) in March 31 gave a boost to most Chinese Internet companies. Not to mention how many companies started to dream of becoming "Microsoft" on the Chinese internet after the launch of the Growth Enterprise Market (GEM), more than 300 enterprises were immediately listed on the network to apply for the Growth Enterprise Market (GEM, this proves the enthusiasm of Internet companies for GEM listing.

A few days ago, Lu Bowang, president of Beijing Zhengwang Consulting Co., Ltd., predicted in an interview with Daily Economic News that after the Chinese Growth Enterprise Market (GEM) is listed, it can make up for Chinese Internet companies that encounter weaknesses in national conditions, economy, culture, and language when listed on Nasdaq. However, this does not mean that the road to listing Internet companies in China is very open.

"Growth Enterprise Market is more conducive to local enterprises"

"Chinese companies listed in China will receive better market effects. Although the Nasdaq market can attract more funds, there are also risks that are not recognized by overseas investors ." Liu Ting, CEO of a small and medium-sized online game company, revealed that most Chinese online game companies are interested in the GEM listing.

The release of the interim measures also led Zhang Xiangdong, founder of HiChina, the largest Chinese domain name and website hosting service provider, to measure the company's best choice for listing. Zhang Xiangdong said that although HiChina's names appear in the "list of more than 300 enterprises applying for the growth enterprise market", HiChina is still analyzing which market is more suitable for itself.

"The group characteristics in each market are different. Nasdaq investors are more knowledgeable about technical stocks and are willing to bear risks, which requires higher returns. However, after all, in the United States, it is still difficult to understand the Chinese Internet. "Said Lu Bowang. In fact, overseas listing of Chinese Internet enterprises is not new, but in the actual operation process in recent years, it is found that the overseas growth enterprise market has the disadvantages of lagging news and strict financial system, which leads to huge financial costs.

"Chinese companies that choose to go public on the Chinese Growth Enterprise Market (GEM) will make up for Nasdaq's shortcomings in China's national conditions, economy, culture, and language ." Said Lu Bowang. For a growing enterprise, the risk index also declines. Fang Xingdong, chairman of the Internet Lab, believes that the overseas growth enterprise market once gave birth to international giants such as Microsoft and Hewlett-Packard, and now China also provides such a mechanism.

The embarrassment of virtual world listing

However, the launch of the growth enterprise market does not mean that Chinese Internet companies are already very open on the road to listing.

The Interim Measures for the administration of GEM listing stipulates that enterprises that have logged on to the gem should continuously make profits in the last two years, with a net profit of not less than 10 million RMB in the last two years and continue to grow; or profits in the last year, and the net profit is not less than 5 million yuan, and the operating income in the past year is not less than 50 million yuan. The operating income growth rate in the last two years is not lower than 30%.

Zhao Xufeng, an online game analyst at Yiguan International, said that there are at least 20 ~ 30 online gaming companies are eligible for the growth enterprise market. "Although the growth enterprise market scale is more relaxed than expected, it is not as relaxed as Nasdaq in the United States, and Nasdaq does not have to make profits for listed companies ."

Lu Bowang said that the Internet enterprise development model is different from the traditional industry model. Preemptive opportunities are an important feature of enterprise development. With the technology, business model, and complete teams, enough funds are needed to support enterprises to seize the lead. At this time, enterprises are often not profitable. Therefore, the growth enterprise market has a threshold for financing needs of such enterprises.

Li Weidong, an analyst at ChinaVenture, a Chinese venture capital portal, said that the growth enterprise market will not focus on the diversified profit models of an IT enterprise in the interim measures for listing the growth enterprise market, however, it is emphasized that Internet technology should be closely integrated with the real economy, and it can boost employment and the real economy.

"In a sense, Internet companies' user volume and traffic are relatively virtual indicators, and it is difficult to convert them into data that can be evaluated, the growth enterprise market is more inclined to e-commerce and community-type internet companies after listing. "Li Weidong analysis, whether it is a domain name sales company or online game companies, because the product value mainly relies on the new concept, although the opportunity to obtain the favor of VC and PE, however, whether or not to go public on the growth enterprise market needs to be determined by the government attitude.

It is reported that a large-scale e-commerce website requires more than 300 customer service personnel, but the R & D staff of an online game company is less than people.

LV hopes to worry that, because China's main board market is not sound enough, the stock price does not fluctuate around the value, and this may also affect the growth of the growth enterprise market. In this regard, Lu hopes that the management department should give the Growth Enterprise Market a different policy from the main board market to isolate the two securities markets, which is more conducive to the development of the growth enterprise market.

After the announcement of the gem solution, a list of the first enterprises to log on to the gem was quickly circulated. Daily Economic News reporter screened and found that, apart from some derivative industry companies engaged in R & D and manufacturing of network equipment and development of underlying network technology, five enterprises that truly rely on the profit-making model of China's 0.3 billion net users are Tianya, playing games, Snail Electronics, HiChina, and Xinnet.

Will these five companies be listed on the Chinese startup edition? The reporter interviewed and investigated them a few days ago. Please refer to the following reports