Palm fun Technology exposed that shareholders reduced their holdings and senior executives frequently changed and "swept away" 6 billion in two years.

it has been exposed that shareholders reduce their holdings and senior executives frequently change their holdings.

behind the seemingly good semi-annual report, the main shareholders of palm technology cashed out nearly 3 billion yuan in 2016. Over the past two years, major shareholders and management have "swept away" more than $6 billion, and more than a dozen management have resigned

"tie Dai's applause, flowing shareholders and executives." This is the industry's joke about palm fun technology. Although the performance is good, the industry also has a lot of doubts about it.

on July 14, 2017, palm fun Technology released a semi-annual results forecast that the company is expected to make a profit of 209 million to 335 million in the first half of 2017, down 20 to 50 percent from the same period last year. It is not easy for listed companies to achieve 200 million profits within half a year, but this performance is not optimistic in the industry. This is mainly due to a year-on-year decline and the realization of earnings more through mergers and acquisitions rather than endogenous growth from the main business. in addition, the large-scale cash out of shareholders has also attracted market attention.

however, palm fun technology said to the outside world that before, the company had to take the road of technological research and development through mergers and acquisitions, and the frequent changes of executives and shareholders made way for more professional people.

< strong > the problem of goodwill in frequent mergers and acquisitions remains to be solved < / strong >

in the A-share market, palm fun technology is a typical enterprise that develops and grows through frequent mergers and acquisitions.

since its listing in 2012, Palm fun Technology has successively acquired mobile network pioneer, play crab technology, upstream network, Tianma time and space and other industry leaders, and strategically invested in Unity Software Inc and Huanrui. Among them, according to the announcement information, listed companies have a very high premium for the acquisition of mobile pioneer, play crab technology, upstream network and Tianma time and space, and the direct problem brought about by billions of acquisitions is the high goodwill. As of March 31, 2017, the amount of goodwill of palm fun technology is 5.6 billion yuan, and the total assets are 10.5 billion yuan. Goodwill accounts for 53% of the total assets.

the so-called goodwill refers to the potential economic value that can bring excess profits to the operation of an enterprise in the future, or the capitalized value that the expected profitability of an enterprise exceeds the normal profitability of identifiable assets (such as the social average return on investment). Generally speaking, the goodwill generated in M & An is actually the part paid by the purchaser that exceeds the fair value of the net assets of the acquiree. And there is often the possibility of impairment in this part.

Palm fun Technology launched large-scale mergers and acquisitions in 2013, 2014 and 2015. According to the announcement issued by listed companies on April 25, 2017, only the performance commitments of the three companies, namely, play Crab Technology, upstream network and Tianma time and Space, have not been fulfilled. According to the "impairment Test Audit report" released by listed companies on the same day, play Crab Technology and upstream information have successfully passed the impairment test of Dahua Accounting firm, and no impairment has occurred.

the announcement reminds investors that palm fun Technology achieved a net profit of 418 million in the first half of 2016, while its full-year net profit was 509 million, that is, only 90 million net profit in the second half of 2016. And according to the announcement, some of the acquired companies did not live up to their promised performance, which also requires the attention of investors.

but palm fun technology has its own views on acquisitions. Hu Bin, CEO of palm fun technology, said in an interview, "Goodwill is an accounting product that must be attached to M & A. if we give up investment in M & An in order to avoid the risk of impairment of goodwill, how can we grow if the scale of the enterprise can only stay at the level of 'small workshop'? Especially in such a rapidly changing market as mobile games, (giving up mergers and acquisitions) is tantamount to giving up eating for fear of choking. "

the revenue of palm fun technology has expanded year by year, and the net profit has also increased from 82.3 million yuan in 2012 to 509 million yuan in 2016, with an average annual net profit growth rate of 63%. Since the public disclosure of financial data in 2008, revenue and profit have also maintained nine years of rapid growth, never declining, with an average annual net profit growth rate of 120.58%. Therefore, it is true that mergers and acquisitions in the past, as CEO Hu Bin said, promoted the rapid development of palm fun technology, but whether this road can continue remains to be seen.

< strong > different interpretations of management changes < / strong >

Yao Wenbin, former chairman of Palm fun Technology, once said that the gaming industry has undergone earth-shaking changes from PC to mobile games, from 2G to 5G, and from games with millions of monthly flow to more than 100 million daily flow. Compared with a decade ago, the industry has developed from an era of capital operation to an era of product-driven operation. Only by adapting to its changes can the development of enterprises remain invincible forever.

according to industry insiders, the general environment of the game industry today is different from the extensive development in 2012 and 2013, when capital-driven mergers and acquisitions of good teams were possible, but now a company is worthless if it is not product-oriented. If the management represented by Yao Wenbin is the first generation of leaders of palm fun, with a 12-year cycle, then the next generation of leaders must be product-and business-oriented talents.

at present, the mobile game R & D market is a duopoly, with Tencent and NetEase accounting for more than 60% of the market share in 2016. Dongxing Securities Research News pointed out that the mobile game industry research and transportation integration, the layout of the whole industry chain has become a trend. With the concentration of user traffic to a small number of high-quality games, the industry has entered the stage of boutique competition.

in this context, Yao Wenbin says that he no longer has the ability to lead the team in R & D, so he will give his talents to people with stronger abilities, and there will also be an employee stock ownership plan.

Qunyi Securities issued a research report saying that the company plans to set up an employee stock ownership plan, and Yao Wenbin, the actual controller, intends to transfer no more than 52 million shares (1.88% of the total share capital) to the employee stock ownership plan through block transactions. And provide financial support for the employee stock ownership plan. The implementation of the employee stock ownership plan is conducive to stabilize and motivate the core talents of the company and promote the sustainable development of the company.

Hu Bin said in an interview that the news of collective reduction and resignation circulated on the Internet is not entirely true. The vast majority of senior executives are on the job, single-handedly set up almost all the business executive team, the replacement of key positions such as the chairman is a smooth transition for the younger leadership.

< strong > large shareholders reduce their holdings and cash out billions < / strong >

according to Huayi Brothers' announcement on July 26th, Huayi Brothers sold a total of 27.11 million palm fun technology stocks on July 24 and 25, earning a net income of 97 million yuan. By the end of 2016, Huayi Brothers had sold palm fun technology shares 20 times and gained a total of 2.377 billion yuan, cashing out 1.276 billion yuan in 2016 alone, equivalent to 92.2% of Huayi Brothers' net profit in fiscal year 2016. So far, Huayi Brothers has sold Palm Technology shares 21 times, cashing out 2.474 billion yuan, with only 0.42% of its holdings left.

Yao Wenbin, the actual controller of the company, also reduced his holdings. According to the Oriental Fortune client, the main shareholders of Palm fun Technology cashed out nearly 3 billion yuan in 2016. Over the past two years, major shareholders and management have "swept away" more than $6 billion, and more than a dozen management have resigned one after another.

Hu Bin said in an interview that the topic of reducing holdings has been fired for a long time, and it cannot be generalized. For Huayi Brothers, palm fun technology is based on the return on investment in its early layout game industry, which may be due to the capital needs of the company's development. This also proves that palm fun technology has its own strong profitability, from 180 million yuan in revenue before listing to more than 1.1 billion yuan in 2015, which is a very considerable return on investment. On the one hand, the reduction of Mr. Yao Wenbin's holdings is due to the demand for personal funds; on the other hand, taking into account the need to provide certain financial support for the company's strategic development, he provides the company with an interest-free loan of up to 300 million yuan.

Edit: mary