Major Shareholder Terminates Share Reduction Early
Clearly a high-position share reduction, yet described as "yielding market participation opportunities," was mocked by investors as a "high-position takeover invitation," and after triggering controversy, the actual controller of Hithink Royalflush Information Network Co.,Ltd. (300033.SZ) voluntarily "voided" the share reduction plan.
Yi Zheng, the controlling shareholder, actual controller, and chairman of Hithink Royalflush Information Network Co.,Ltd., originally planned to reduce holdings of no more than 684,000 shares. Based on the closing price on September 9, these shares had a market value of 238 million yuan. However, after being ridiculed for asking shareholders to "take over at high prices," Hithink Royalflush Information Network Co.,Ltd. announced that Yi Zheng decided to terminate this share reduction plan early.
Huang Jianzhong, Associate Professor in the Finance Department of Shanghai Normal University Business School, stated that Yi Zheng's termination of the share reduction plan might be related to public opinion, or it might be because the current market price has fallen below his expected reduction price after the company's stock price experienced significant correction recently.
Regarding whether the termination of share reduction was related to market controversy, inquiries to Hithink Royalflush Information Network Co.,Ltd. had not received a response as of press time. Since September 24 last year, Hithink Royalflush Information Network Co.,Ltd.'s stock price has surged 239.25%. Previously, multiple shareholders of the company have already cashed out during this rally, with total amounts exceeding 2 billion yuan.
Major Shareholder's Over 200 Million Share Reduction Self-Voided
Hithink Royalflush Information Network Co.,Ltd. disclosed on the evening of September 5 that Yi Zheng planned to reduce holdings of no more than 684,000 shares, while another shareholder Hangzhou Kaishishun Technology Co., Ltd. (hereinafter "Kaishishun") planned to reduce holdings of no more than 699,100 shares, with the reduction ceiling being 0.13% of Hithink Royalflush Information Network Co.,Ltd.'s total share capital.
According to disclosures, Yi Zheng's shares to be reduced were acquired through centralized bidding on April 28, 2022, with an average purchase price of 73.24 yuan per share and a purchase amount of 50.099 million yuan.
Kaishishun's shares to be reduced originated from before Hithink Royalflush Information Network Co.,Ltd.'s listing. According to Tianyancha information, Kaishishun has undergone multiple name changes, initially called Shanghai Kaishiao Investment Consulting Co., Ltd., later renamed to Shishi Kaishiao Investment Consulting Co., Ltd., and after several subsequent name changes, became its current name in February this year.
According to the prospectus, Hithink Royalflush Information Network Co.,Ltd.'s core technical personnel directly held or held company shares through Shanghai Kaishiao, with a total of 44 shareholders at the time. According to Tianyancha information, from 2014 to 2024, multiple shareholders of Kaishishun have exited, and there are currently 7 shareholders, including Ye Qiongjiu, Wang Jin, Yi Xiaomei, and other senior executives and core employees of Hithink Royalflush Information Network Co.,Ltd.
Hithink Royalflush Information Network Co.,Ltd.'s stock price is currently at a high level. On September 5 when the share reduction plan was disclosed, the stock's closing price was still above 360 yuan. It fell back to 348 yuan at the close on the 8th. Even calculated at the latest closing price, the maximum amounts that Yi Zheng and Kaishishun could reduce are 238 million yuan and 243 million yuan respectively, totaling about 481 million yuan. If the share reduction had been completed successfully, Yi Zheng would have made a profit of about 188 million yuan. Kaishishun's portion, having been acquired before listing, could potentially yield even richer returns.
From September 24 last year to mid-August this year, Hithink Royalflush Information Network Co.,Ltd. accumulated a gain of 239.25%, with the stock price soaring from around 102 yuan to over 426 yuan. Market capitalization also surged from around 61.7 billion yuan to over 187 billion yuan currently.
What dissatisfied investors was that Hithink Royalflush Information Network Co.,Ltd. stated in its announcement that Yi Zheng had effectively stabilized the stock price through low-position increases previously, and this share reduction was the implementation of established goals. This reduction would optimize personal resource allocation, thereby focusing more energy on the company's strategic layout and main business development. At the same time, through moderate share reduction, it aimed to yield market participation opportunities, release liquidity, and create more favorable space for subsequent market value management.
It was precisely the share reduction reason of "yielding market participation opportunities" that caused market controversy, being perceived as asking retail investors to take over at high positions. On September 8, Hithink Royalflush Information Network Co.,Ltd.'s stock price fell 4.95%.
"Major shareholder share reductions are usually considered bearish news. The company's contrarian sharp decline on the first trading day after the announcement, while the continuous decline before the announcement was related to the overall market adjustment during the same period, other factors cannot be ruled out," Huang Jianzhong said.
After the controversy fermented, Hithink Royalflush Information Network Co.,Ltd. issued an emergency announcement in the early morning of September 9, stating that considering various factors, Yi Zheng decided to terminate this share reduction plan early. It also stated that since the company's listing on December 25, 2009, Yi Zheng had never reduced company shares in nearly 16 years.
Investors' reaction was not unrelated to Hithink Royalflush Information Network Co.,Ltd.'s current stock price. This rally of Hithink Royalflush Information Network Co.,Ltd. started on September 24 last year, with a closing price of 114.93 yuan per share that day, then continued to rise with fluctuations, reaching a historical high of 426.88 yuan per share on August 18 this year. Although there has been some correction currently, it remains at historical highs.
Three Shareholders Previously Cashed Out Over 2 Billion in More Than a Year
This was not the first time Hithink Royalflush Information Network Co.,Ltd. shareholders reduced holdings at high positions.
According to disclosures, from December 23 last year to February 26 this year, Hithink Royalflush Information Network Co.,Ltd. shareholder and director Ye Qiongjiu reduced holdings of 2 million shares, with a reduction ratio of 0.37% and an average reduction price of 318.87 yuan per share. At that time, Hithink Royalflush Information Network Co.,Ltd.'s stock price was already at high levels.
Kaishishun's quantity was even larger. From June 2019 to December 2024, Kaishishun cumulatively reduced holdings of about 5.566 million Hithink Royalflush Information Network Co.,Ltd. shares, accounting for 1.04% of the company's total share capital. Announcements show that during December 2-30 last year, Kaishishun reduced a total of 2.688 million shares with an average reduction price of 322.72 yuan per share.
Earlier in 2023, when Hithink Royalflush Information Network Co.,Ltd. was rising, there were also shareholders reducing holdings. Disclosures show that during June 13-14, 2023, company director Wang Jin reduced holdings of 2.5862 million shares with an average reduction price of 182.48 yuan per share.
Calculated by average reduction prices, the three shareholders Ye Qiongjiu, Kaishishun, and Wang Jin have cashed out approximately 636 million yuan, 867 million yuan, and 472 million yuan respectively in just the recent two-plus years, with total cash-out amounts exceeding 2 billion yuan.
Industry insiders believe that Yi Zheng and Kaishishun chose to reduce holdings at this time partly because Hithink Royalflush Information Network Co.,Ltd. is at high levels, and partly because after the sharp rise, the company's valuation remains high. Since September 24 last year, the company's stock price has cumulatively surged 239.25%, with the peak increase approaching 280% during this period. However, after reaching the highest point since listing on August 18, there have been signs of decline. Based on the closing price on the 9th, since August 19, the company's stock price has cumulatively fallen 14.05%.
The rise in Hithink Royalflush Information Network Co.,Ltd.'s stock price is largely related to the bull market in A-shares over the past year, which has dual-driven the company's performance and stock price.
Disclosures show that in 2022 and 2023, the company's net profit showed a declining trend, and this trend had not been reversed by the third quarter of 2024. It was only after the A-share surge in September last year that the company achieved year-on-year growth in full-year net profit. In the first half of this year, the company achieved operating revenue of 1.779 billion yuan, a year-on-year increase of 28.07%; net profit of 502 million yuan, a year-on-year increase of 38.29%.
However, whether such performance is sufficient in the face of persistently high valuations remains questionable. The total market capitalization still reaches 187.1 billion yuan, with a P/E ratio (TTM) of 95.3 times and a price-to-sales ratio exceeding 40 times. According to Wind data, the median P/E ratio (TTM) for comparable A-share companies in the software industry is 82.21 times.
Huang Jianzhong believes that Hithink Royalflush Information Network Co.,Ltd.'s current valuation is higher than the median of comparable companies, and its growth potential can hardly support the current P/E ratio and stock price. Investors need to be cautious about the signals released by major shareholder share reduction announcements.
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