Institutional landscape of Bitcoin investment: Spending 260 million to stockpile Bitcoin and Ethereum? Meitu has three "back-ups"

Original source: OKLink

Bitcoin "institutional fever" has officially spread to Hong Kong from overseas.

On March 7, Meitu announced that it had spent 260 million yuan to purchase 15,000 Ethereum and 379.12 Bitcoin, becoming "the first Hong Kong-listed company to purchase BTC" and "the world's first Hong Kong-listed company to use ETH as a currency value reserve."

This is not the first time for Meitu. As early as 2018, Meitu had already entered the blockchain industry and occasionally popped up. Cai Wensheng himself is a "sweeping monk" in the digital asset industry, and has inextricable ties with many leading institutions in the industry.

If you pay close attention to Meitu’s announcement, you may find that the US$40 million is just a small step for Meitu, and their plan to “enter the blockchain industry” has just begun.

260 million coins hoarded, speculation or layout?

Meitu officially became the "first person in Hong Kong stocks" - bringing the "institutional fever" of Bitcoin into the Hong Kong stock market. At around 18:00 last Sunday, Meitu Company issued an announcement, announcing that the group spent US$22.1 million to purchase 15,000 Ethereum and US$17.9 million to purchase 379.12 Bitcoins on March 5. After the announcement, the news once rushed to Weibo's hot search. Afterwards, Cai Wensheng, chairman of Meitu, said in the circle of friends: "This should be regarded as the first Hong Kong listed company to purchase BTC digital currency, and it is also the first listed company in the world to use ETH as a currency value reserve."

This is the first time that Bitcoin and Ethereum have "shown up" in the Hong Kong stock market, which naturally triggered a series of market reactions. After the announcement was released, the digital asset market reacted first - Ethereum reacted strongly, with the price rising from US$1675.25 at 18:00 to US$1754.68, an increase of nearly 5%. At the same time, the price of Bitcoin also saw a slight increase, from US$50,617.6 to US$51,829.9, and the price was US$53,729.6 as of press time. In the Hong Kong stock market, with the opening of Hong Kong stocks on March 8, under the strong stimulation of market news, the share price of Meitu (1357.HK) soared 14%, reaching a high of HK$3.1, but then quickly fell back, and the current price is HK$2.640. This round of stock price fluctuations shows the market's complex attitude towards Meitu's move.

(Data source: Yahoo Finance)

From the perspective of company operations, Meitu was founded in October 2008. It has software and hardware products such as Meitu Xiuxiu and Beauty Camera. On December 15, 2016, Meitu was listed on the main board of Hong Kong. According to the financial report for the first half of 2020, Meitu is in good operating condition, with revenue reaching RMB 557.5 million in the first half of the year, a year-on-year increase of 20.1%. Judging from the financial report, Meitu has no need to hype digital assets and raise its stock price. This time, it spent RMB 260 million to purchase two digital assets, Bitcoin and Ethereum, which seems to be due to the company's new strategic intention.

From the perspective of the digital asset industry, Meituan’s entry this time was slightly insufficient and did not have a strong impact on the Bitcoin market, but it did push up the Ethereum market price to a certain extent and slightly boosted market confidence.

From the perspective of the Hong Kong stock market, this move was more interpreted as speculation and was questioned by ordinary investors. Some even suspected that this operation was because "Meitu Chairman Cai Wensheng was trapped in Bitcoin" and "listed companies used the company's money to invest in high-risk targets. The worse their main business is, the more they want to make quick money."

Cai Wensheng: The "Sweeping Monk" of the Digital Asset Industry

Meituan is not a newcomer to the digital asset industry, and Cai Wensheng is not a newcomer. According to the Daily Economic News, as early as the beginning of 2018, Cai Wensheng and his friends formed a WeChat group called "3 o'clock sleepless blockchain", which is known as the first practical group of blockchain. People like Sequoia Capital Shen Nanpeng, 360 Chairman Zhou Hongyi, Xue Manzi, Distributed Capital Partner Shen Bo, and even celebrities such as Gao Xiaosong and Tong Liya are all members of the group. At the same time, Meitu also launched a blockchain white paper, stating that it would create a "blockchain ecosystem based on AI technology" and establish a decentralized identity pass for users - Meitu Smart Pass.

In February 2018, Meitu began to lay out its management team and appointed Professor Zhang Shousheng as an independent non-executive director. Zhang Shousheng has passed away. He was a Chinese-American physicist and a tenured professor at Stanford University. He was also the founder of Danhua Capital and was deeply involved in blockchain industry investment. Meitu's layout in the blockchain industry has begun to take shape since then.

Afterwards, as an investor, Cai Wensheng participated in a number of important investments in the digital asset industry, especially in the digital asset trading platform sector. According to Blue Whale Finance, FCoin, a digital asset trading platform that was popular in 2018, was invested in by Longling Investment, founded by Cai Wensheng. He is also behind some other leading trading platforms.

(Source: Meitu Company Announcement)

This time, Meitu spent 40 million US dollars to purchase Ethereum and Bitcoin. According to the announcement, it was because "the board of directors believes that blockchain technology has the potential to subvert the existing financial and technology industries. The blockchain industry is still in its early stages, similar to the mobile Internet industry around 2005", "cryptocurrency has sufficient room for appreciation, and at this time, by allocating part of its cash reserves to cryptocurrencies, it can be used to diversify the risks of holding cash in fund management." At the same time, this move is also to "show investors and stakeholders the ambition and determination of the Group to accept technological innovation, thus preparing to enter the blockchain industry."

It can be seen that this announcement has a very obvious Cai Wensheng color, and also upholds his consistent enthusiasm for the blockchain industry.

US$100 million invested in digital assets? Meitu has three "back-ups"

"Listen to what they say and watch what they do" - Meitu seems to have many tricks up its sleeve. First of all, Meitu may have plans to purchase digital assets in the future.

According to the announcement released by Meitu on March 7, "these purchases were made in accordance with a cryptocurrency investment plan (the "Cryptocurrency Investment Plan") previously approved by the Company's Board of Directors (the "Board"), pursuant to which the Group may purchase cryptocurrencies with a net purchase amount not exceeding US$100 million." At present, Meitu has only spent US$40 million, and there is still a lot of room for maneuver from the US$100 million resolved by the Board of Directors. Whether Meitu will continue to purchase digital assets in the future is also an important signal to test whether its digital asset strategy is speculation or layout.

Secondly, unlike other listed companies, Meitu attaches more importance to Ethereum than Bitcoin. Meitu invested $22.1 million to purchase 15,000 Ethereum, while Bitcoin only invested $17.9 million. In the announcement, Meitu explained the reason and touted Ethereum, "The Ethereum network has the largest number of decentralized applications ("dApps"), which is attributed to its developer-friendly interface that reduces programming time to quickly start projects, and a strong and growing global developer community network dedicated to upgrading the network and promoting its adoption. dApps across multiple fields such as finance, games, social media, and art and collectibles have adopted the Ethereum protocol."

Meitu has plans to enter the blockchain and launch "its own dAPP". For Meitu, Ethereum is both an investment tool and a "reserve fuel".

Finally, Meitu's investment in Bitcoin is both the result and the cause of "institutional enthusiasm". As Bitcoin gradually becomes a mainstream asset, insurance companies and asset management companies begin to embrace Bitcoin, "more and more listed companies are buying cryptocurrencies as part of their fund management", the accessibility of digital assets has improved, and "regulators have also begun to license cryptocurrency trading platforms". Only then did the Meitu board of directors pass a resolution to invest in this "institutional enthusiasm", acting as both fuel and train.

On March 8, Norwegian holding company Aker (AKER.OL) announced the establishment of Seetee AS and invested approximately US$58.6 million to purchase 1,170 bitcoins. As of press time, according to OKLink data, 27 listed companies hold a total of 175,162.94 bitcoins, with a market value of nearly US$9.4 billion and an average purchase price of US$25,100.84 per bitcoin.

(Data source: OKLink)

Despite arousing a lot of market doubts, listed companies' holdings of Bitcoin have become a trend that continues to receive positive feedback - listed companies' purchase of Bitcoin has activated the overall confidence and potential of the digital asset market, painted a more magnificent blueprint for digital assets from the perspective of "narrative economics", accelerated the mainstreaming process of digital assets such as Bitcoin, and in turn stimulated the stock market performance of listed companies.

As the first listed company in Hong Kong to publicly hold Bitcoin and Ethereum, Meitu has important precedents and exploratory significance. It breaks the regulatory concerns of Hong Kong-listed companies about holding Bitcoin, Ethereum and other digital assets, and provides listed companies with more development and innovation possibilities. At the same time, after Meitu opened the door to Hong Kong-listed companies, the growth potential of digital assets has also been greatly improved.

This article is from a contribution and does not represent the views of BlockBeats