Col Group Co.,Ltd. (300364.SZ), a leading player in China’s digital entertainment industry, has officially submitted an application to list on the Hong Kong Stock Exchange. In its prospectus, the company outlined an ambitious vision for an AI-driven digital entertainment platform. However, its persistently deteriorating financial performance in recent years has cast doubt on the credibility of this blueprint.
From 2022 to 2025, Col Group recorded four consecutive years of net losses after excluding non-recurring items. This trend reflects slowing growth in its core online literature segment, while its newly expanded domestic short drama business is also struggling to generate stable profits amid intense market competition. In response, the company has turned its hopes to the still-nascent overseas short drama market. Over the past two years, Col Group has significantly increased promotional spending to capture market share overseas. However, this strategy has led to continuous losses in the segment, dragging down the company’s overall performance. Although Col Group describes the losses as short-term and strategic, uncertainty remains as to whether this aggressive spending will ultimately lead to a sustainable profit model.
Notably, just before the IPO filing, major shareholders and several senior executives of Col Group reduced their holdings, further undermining market confidence in the company’s strategic outlook.
Overseas Expansion Weighs on Performance, 2025 Losses Widen Significantly
According to a company announcement, Col Group submitted its application on February 27 to issue H-shares and list on the main board of the Hong Kong Stock Exchange.
The prospectus shows that Col Group was founded in 2000 and listed on the Shenzhen Stock Exchange in 2015, making it the first digital publishing company to go public on China’s A-share market. After more than two decades of development, the company has transformed into an AI-powered digital entertainment platform. Its current operations focus on online literature and related services, as well as short dramas and IP derivative businesses.
Data from Frost & Sullivan indicates that, based on 2024 revenue, Col Group ranked third among copyright-driven content platforms in China’s online literature market. As of September 2025, it held the eighth position among overseas short drama platforms by revenue.
Despite its move toward a Hong Kong listing, Col Group has faced continued losses in recent years. The company’s performance peaked in 2017, with revenue of 716.8 million yuan and net profit excluding non-recurring items of 45.63 million yuan. Since then, although revenue has generally grown, profitability has declined sharply. From 2022 to 2024, the company accumulated losses of over 700 million yuan after excluding non-recurring items.
This decline is partly due to pressure on both revenue and profit growth in Col Group’s foundational online literature business. Since 2021, the company has ventured into short dramas. However, as competition in the domestic market intensified with the entry of numerous new players, Col Group shifted its focus to the emerging overseas market. Increased promotional spending on overseas short drama operations in recent years has significantly impacted the company’s bottom line.
According to the company’s earnings forecast, net loss after excluding non-recurring items for 2025 is expected to reach 579 million to 699 million yuan, more than doubling year-on-year. Col Group attributed the expanded loss primarily to rising costs associated with increased investment in overseas short drama promotion.
In fact, the company’s performance had already deteriorated noticeably in the first three quarters of last year. During that period, revenue reached 1.011 billion yuan, up 25.12% year-on-year, while net loss after excluding non-recurring items widened by 149.06% to 519.8 million yuan.
Although operating costs fell 17.28% year-on-year to 661 million yuan in the first three quarters, and gross profit still increased, a 93.6% surge in sales expenses to 660 million yuan severely eroded profitability, leading to a significant expansion in losses.
Core Online Literature Business Loses Momentum, Short Drama Operations Remain in the Red
Both of Col Group’s main business segments currently face serious challenges.
According to the prospectus, the online literature and related services segment generated revenue of 670 million yuan in 2023, accounting for 47.5% of total revenue, with a gross margin of 40.6%. However, in 2024, due to intensified competition and rising distribution costs through channels such as mini-programs, revenue for the segment grew only 2.44% year-on-year, while its gross margin plummeted by 16.2 percentage points to 24.4%. As a result, Col Group decided in 2025 to scale back the segment’s operations via mini-programs and shift its focus from a consumer-facing (2C) model to a business-facing (2B) model. Due to this strategic adjustment, although the segment’s gross margin recovered to 31.5% in the first three quarters of 2025, revenue declined by 1.44% year-on-year.
Given the highly competitive landscape, Col Group expects to gradually phase out domestic 2C online literature operations via mini-programs and concentrate on domestic 2B online literature services.
In the short drama and IP derivatives segment, after nearly three years of development, revenue reached 622 million yuan in 2023, accounting for 44.2% of total revenue, with a high gross margin of 44.6%. However, the domestic short drama market also faces fierce competition. In 2024, Col Group shifted its domestic short drama operations toward the premium segment, but revenue still fell sharply by 35.98% year-on-year.
Against this backdrop, the company accelerated its expansion into overseas markets. In the first three quarters of last year, revenue from the segment surged 62.93% year-on-year, driven by rapid growth overseas. However, the gross margin dropped to 34.4%, down 10.2 percentage points from 2023. Moreover, due to significantly increased investment in overseas markets, costs and expenses rose rapidly, keeping the segment in the red in both 2024 and 2025.
Although Col Group stated that losses in the short drama business are temporary and that it plans to improve performance by controlling sales and marketing expenses overseas, many investors remain concerned that rising competition and customer acquisition costs in the overseas short drama market may make it increasingly difficult for the company to achieve profitability.
Persistent losses coupled with aggressive spending on overseas expansion have put noticeable pressure on Col Group’s liquidity.
As of the end of the third quarter last year, the company held cash and cash equivalents of 294.4 million yuan, while short-term borrowings and current portions of non-current liabilities totaled 330.5 million yuan, indicating that liquid assets were insufficient to cover short-term debt. In this context, a Hong Kong listing has become an urgent measure to alleviate financial pressure.
According to the prospectus, proceeds from the Hong Kong IPO will be used not only to repay bank loans and supplement working capital but also primarily to develop and enhance AI technology, build an overseas short drama ecosystem, and strengthen the content ecosystem.
Major Shareholders and Executives Reduce Holdings Ahead of IPO Filing
Notably, just before Col Group filed its IPO application, major shareholders and several key executives reduced their holdings.
On February 3, the company announced that Director Zhang Fan, holding 726,400 shares (0.0997% of total shares), Director and Executive Vice President Xie Guangcai, holding 959,400 shares (0.1317%), Vice President and Board Secretary Wang Jingjing, holding 913,900 shares (0.1254%), and Chief Operating Officer Yang Ruizhi, holding 31,800 shares (0.0044%), planned to reduce their holdings by 25% of their respective share totals within three months starting 15 trading days after the announcement.
Together, the four executives intended to sell a total of 657,900 shares, representing 0.0903% of the company’s total equity. The reason cited for the reductions was personal financial needs.
In fact, the same four individuals had already reduced their holdings once between June and August of the previous year, also citing personal financial needs. At that time, they also sold 25% of their respective holdings, totaling 876,900 shares, or 0.1204% of the company’s total equity.
In addition to the executives’ reductions, a major shareholder of Col Group also recently cut its stake.
In September last year, Shenzhen Litong Industrial Investment Fund Co., Ltd. and Shanghai Yuewen Information Technology Co., Ltd., each holding 4.49% of Col Group’s shares, announced plans to reduce their holdings by 1% of the company’s total shares, equivalent to 22.27% of their respective stakes.
Prior to the reduction, both Shanghai Yuewen and Shenzhen Litong were the second-largest shareholders of Col Group. Shanghai Yuewen is one of the operating entities in China of Yuewen Group, and Shenzhen Litong holds 100% of Shanghai Yuewen, indicating an affiliated relationship. The two completed their reduction in November last year, lowering their combined stake from 8.98% to 6.991%.
The February 3 announcement of planned executive share reductions sparked considerable controversy. Many investors questioned the timing, noting that密集 selling by key personnel during a critical window for the IPO not only undermines confidence in the company’s governance stability and strategic prospects but also contrasts sharply with the optimistic narrative presented in the prospectus.
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