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When all roads were blocked, Meitu looked at the cryptocurrency circle and purchased virtual encrypted digital currencies worth US$40 million and US$50 million in two batches on March 7 and 17 respectively.
The interviewees believe that Meitu's attempt is too radical in the domestic market environment and is suspected of speculation. At the same time, the cryptocurrency market is extremely volatile, and it is unknown whether it will bring benefits to Meitu in the future.
Cryptocurrency hits $60,000, and Meitu increases its holdings significantly!
On the evening of March 17, Meitu announced that its wholly-owned subsidiary Miracle Vision spent $50 million to increase its cryptocurrency holdings. As of the announcement, Meitu has purchased cryptocurrencies worth about $90 million, or about 580 million yuan.
As to why they bought Bitcoin and Ethereum, a person related to Meitu told the reporter of International Financial News, "The company's announcement is the standard, and the main information is in the announcement." In the announcement, Meitu stated that the investment in Ethereum was to prepare for entering the blockchain industry. The investment in Bitcoin is one of the company's asset allocation strategies.
As an old tool application, Meitu expanded rapidly with the early Internet boom, but its single profit model and low threshold for its main business made it weak in the later period. Data shows that from 2013 to 2019, Meitu's cumulative losses reached 12.126 billion yuan.
The long-term losses in performance also dragged down Meitu's stock price. Since 2017, Meitu's stock price has been falling. For a period of time in the second half of 2019, it hovered around HK$1 for a long time, and only returned to HK$2 in February 2021.
The double-killing of performance and stock price forced Meitu to find a new way out. Meitu began to look for new growth points in social (live broadcast), games, blind boxes, and even medical beauty. Its chairman Cai Wensheng was "in the spotlight" in the cryptocurrency circle. He was the rotating group leader of the "Three O'clock Sleepless Blockchain Group". The Longling Investment he founded also participated in the investment of the cryptocurrency exchange FCoin.
Regarding Meitu's gamble on cryptocurrencies, Jiang Zhaosheng, an analyst at Zero One Think Tank and a researcher at Digital Assets Research Institute, told the International Financial News that the allocation of Bitcoin and Ethereum is another attempt similar to Meitu's previous transformations, and it may be hoping to boost its performance with the help of the rising market of cryptocurrencies. However, this attempt seems too radical in the domestic market environment and is also suspected of speculation.
From a market perspective, on the first trading day (March 8, 2021) when Meitu first announced the purchase of cryptocurrencies, Meitu's Hong Kong stock price once surged by about 14%; but by the close of the day at 16:00, its stock price fell sharply and fell by 6.27%. On the first trading day (March 18) when Meitu announced the purchase of cryptocurrencies for the second time, Meitu's stock price rose by 10.36% to close at HK$3.09.
Jiang Zhaosheng further pointed out that Meitu's allocation of Bitcoin and Ethereum cannot improve its technology and application level in the domestic blockchain field. At the same time, since Meitu purchased Bitcoin at a relatively high price and the cryptocurrency market is extremely volatile, it is unknown whether it will bring benefits to Meitu in the future. Spending 580 million yuan to buy cryptocurrency On the evening of March 17, Meitu issued an announcement stating that its wholly-owned subsidiary Miracle Vision further purchased 16,000 units of Ethereum, with a total consideration of approximately US$28.4 million; and 386.08 units of Bitcoin, with a total consideration of approximately US$21.6 million.
According to the announcement, the average transaction price of Meitu's purchase of Ethereum and Bitcoin was $1,775 and $55,900 respectively. As of the announcement, Meitu has purchased cryptocurrencies worth about $90 million, or about 580 million yuan.
On the evening of March 7, Meitu announced that the Group purchased 15,000 units of Ethereum and 379.1214267 units of Bitcoin (BTC) in open market transactions on March 5, 2021. The total consideration of these two cryptocurrencies was approximately US$22.1 million and US$17.9 million, respectively, totaling US$40 million (approximately RMB 260 million). Subsequently, topics such as #Meitu buys Bitcoin and Ethereum for US$40 million# and #Meitu Chairman responds to buying 260 million yuan of cryptocurrency# became hot searches on Weibo.
Meitu stated in the announcement that the investment in Ethereum is to prepare for its entry into the blockchain industry. The group is currently evaluating the possibility of integrating blockchain technology into its various overseas businesses, including but not limited to Ethereum-based dApps, and looking for suitable overseas blockchain-based projects for potential investment (many blockchain-based projects only accept Ethereum as investment consideration), which may have synergies with its large user base. The purchase of Ethereum is a logical preparation for the two future plans, because when the group may launch its own dAPP in the future, the Ethereum can be used as a fuel reserve; at the same time, it can be used as an investment in blockchain projects that accept Ethereum as consideration.
In addition, investing in Bitcoin is one of Meitu's asset allocation strategies. The announcement pointed out that the board of directors has seen growing momentum in the process of building consensus recently. For example, some traditionally conservative institutions (such as insurance companies) have begun to invest in cryptocurrencies, and traditional asset management companies have also launched cryptocurrency funds for subscription. More and more listed companies are buying cryptocurrencies as part of fund management and considering accepting cryptocurrencies as a payment method for their goods and services.
Meitu also stated that these purchases were made in accordance with a cryptocurrency investment plan previously approved by the board of directors, pursuant to which the Group may purchase cryptocurrencies with a net amount of no more than US$100 million, funded by the company's existing cash reserves. The Meitu board of directors believes that blockchain technology has the potential to disrupt the existing financial and technology industries, similar to the way mobile Internet has disrupted PC Internet and many other offline industries. The board of directors believes that the blockchain industry is still in its early stages, similar to the mobile Internet industry around 2005. In this context, the Meitu board of directors believes that cryptocurrencies have sufficient room for appreciation, and by allocating part of its cash reserves to cryptocurrencies at this time, it can be used as a fund management to diversify the risks of holding cash.
Cai Wensheng, Chairman of Meitu, said, "Meitu continues to deploy blockchain, and this time we purchased ETH and BTC digital currencies as a value reserve for the long-term development of blockchain strategy."
The Meitu board of directors emphasized that this can show investors and stakeholders the group's ambition and determination to embrace technological innovation, thus preparing to enter the blockchain industry. However, the Meitu board of directors also pointed out that although blockchain has a long-term positive outlook, in general, the price of cryptocurrencies will still fluctuate in the short term, so the board has decided to invest in Ethereum and Bitcoin, the two largest cryptocurrencies by market value, and the board believes that this investment can maximize long-term shareholder value. Huge losses, low stock prices, and poor transformation <br />According to data, Meitu was founded in October 2008 and has received seven rounds of financing from IDG Capital, Qiming Venture Partners, and Sinovation Ventures, with a total financing amount of over US$500 million. Meitu's products include Meitu XiuXiu, Beauty Camera, BeautyPlus (overseas version of Beauty Camera), Chao Zipai, Beauty Camera, Meipai, Meitu Mobile and other software and hardware products.
As of the eve of its listing in December 2016, the total number of monthly active users of Meitu App was about 456 million. On December 15, 2016, Meitu was listed on the main board of Hong Kong with an issue price of HK$8.5 and a market value of more than US$4.6 billion, which caused a sensation.
Despite its high market value, Meitu's performance is a mess. The prospectus shows that before its listing, Meitu continued to lose money in 2013, 2014, and 2015, with losses of 25.81 million yuan, 1.77 billion yuan, and 2.22 billion yuan, respectively. After its listing, Meitu's losses became even more serious. The financial report shows that from 2016 to 2019, the losses were 6.261 billion yuan, 197 million yuan, 1.255 billion yuan, and 397 million yuan, respectively. From 2013 to 2019, Meitu has accumulated losses of 12.126 billion yuan.
The reason is that Meitu has not found a profit growth point. Even the mobile phone business, which contributed the vast majority of revenue, did not bring real profits to Meitu until it was "sold" to Xiaomi in 2019. "Trump" products such as Meitu Xiuxiu and Beauty Camera have the problem of difficulty in monetization.
This dilemma is also reflected in the number of users. Data shows that as of December 2019, Meitu's total monthly active users were 282 million, a year-on-year decline of 7.8%. Except for BeautyPlus (the overseas version of BeautyCam), which achieved year-on-year growth, the number of users of Meitu XiuXiu, Meipai, and BeautyCam are all declining. Among them, Meipai's monthly active users have declined for four consecutive years, with a year-on-year decline of 45.8%.
Long-term losses also caused Meitu's stock price to slump, and its market value plummeted. In March of the second year after its listing (2017), Meitu's stock price once exceeded HK$23, but then fell all the way. From the second half of 2019 to 2020, it hovered around HK$1 for a long time. It only returned to HK$2 in February 2021.
Under the dual pressure of losses and weak stock prices, Meitu had to find new profit points. In 2018, Meitu launched "Meitu and Social", defined as a "photo social platform"; Meitu Wallet also launched financial services such as credit card application, borrowing money, loan supermarket and insurance channel around 2018 (offline in 2020); in 2019, Meitu launched a facial cleanser called "meituspa" and a female mobile game called "Meitu Game Box".
It is reported that Meitu is also testing the waters in the fields of medical beauty and e-commerce live broadcasting. Since 2019, Meitu has successively launched products in the sub-sectors such as skin testing, e-commerce, online doctor diagnosis, and mini-games. It also acquired the social recruitment platform Dajie.com in November 2019, trying to empower Dajie.com with its traffic advantage. In 2020, when blind boxes were hot, Meitu also applied for multiple trademarks such as "Beauty Blind Box" and "Beauty Blind Box MT". Unfortunately, the above transformations of Meitu ultimately failed to boost its performance and stock price. Is gambling on cryptocurrency the way out?
When all roads were blocked, Meitu looked at the cryptocurrency circle. Cai Wensheng, chairman of Meitu, had been in the cryptocurrency circle for a long time and invested in the cryptocurrency exchange OKEx in 2014. In early 2018, Cai Wensheng became the rotating group leader of the "Three O'clock Blockchain Group". Longling Investment, founded by Cai Wensheng, also invested in the cryptocurrency exchange FCoin.
Also in early 2018, Meitu launched a blockchain wallet product Beautychain, and then Beautychain's token "BEC" was listed on OKEx. Meitu was accused of being the issuer of BEC tokens. In April, BEC tokens, which had been online for two months, saw abnormal transactions. Hackers generated tokens infinitely through the batch transfer method of the contract, triggering a sell-off and the price of the token almost returned to zero. Meitu then stated that "it has not and will not issue any digital currency."
Gao Chengshi, a member of the Blockchain Committee of the China Computer Society, said in an interview with the International Financial News that Meitu's products are relatively single, and although there will be further room for growth in performance in the future, the growth rate and growth rate may be difficult to reach higher values. Therefore, as a listed company, Meitu urgently needs to find growth points for further growth. Before finding a new track for its own business growth, how to maintain and increase the value of its own revenue in the context of global currency flooding has become a problem that the company's management needs to face. Against this background, Meitu purchased virtual encrypted digital currencies worth US$40 million and US$50 million in two batches on March 7 and 17, respectively.
"Although the company announced that this is for the purpose of both maintaining and increasing the value of assets and further expanding the company's technology field," Gao Chengshi believes that this behavior is more for the purpose of maintaining and increasing the value of assets, and there is still a big gap between this and expanding Meitu's business.
Jiang Zhaosheng analyzed and pointed out that Meitu has recently purchased Bitcoin and Ethereum at relatively high prices. On the one hand, the encrypted digital currency market represented by Bitcoin and Ethereum has continued to rise since mid-2020, and the price of Bitcoin has repeatedly set new highs, successfully attracting attention from all walks of life including mainstream commercial institutions such as Tesla, PayPal, and Goldman Sachs, becoming one of the best performing assets in the world from 2020 to 2021.
In addition, from the internal perspective of the company, Jiang Zhaosheng said that Meitu's main business has not performed well for many years. Despite multiple attempts to transform in recent years, none of them have been successful so far. Although it has a huge amount of data, it is difficult to find a suitable channel for monetization. In the process of transformation, Meitu has always been at the forefront of the market, from its early layout of mobile phones and e-commerce tracks to its transformation into medical beauty and other fields in 2020. However, these fields are either mature tracks with clear patterns and fierce competition, or emerging markets that require heavy investment and continuous trial and error, which cannot bring considerable economic benefits to Meitu in the short term.
"Meitu's allocation of Bitcoin and Ethereum this time can essentially be seen as another attempt similar to its previous transformations. It may hope to boost its performance with the help of the rising market of cryptocurrencies. However, this attempt seems too radical in the domestic market environment and there is also suspicion of speculation. At the same time, since Meitu purchased Bitcoin at a relatively high price and the cryptocurrency market is extremely volatile, it is unknown whether it will bring profits to Meitu in the future." Jiang Zhaosheng said.
Jiang Zhaosheng further analyzed and pointed out that according to the statement in the announcement by Meitu, the investment in Bitcoin is only one of the corporate asset allocation strategies, while the investment in Ethereum is Meitu's preparation for entering the blockchain industry. However, in the domestic market environment, the allocation of Bitcoin and Ethereum does not mean that Meitu is increasing its investment in blockchain. The currency circle and the blockchain circle have always been clearly divided in China, and Meitu's allocation of Bitcoin and Ethereum cannot improve its technology and application level in the domestic blockchain field. |
