China's Tesla? Meitu becomes the first Chinese listed company to bet big on Bitcoin, but Cai Wensheng's history is criticized

Wu said author | Colin Wu

Editor of this issue | Colin Wu

Will the Tesla story be repeated in China? It is foreseeable that Meitu's stock price will soar after the opening, but it may cause suppression from regulators in Hong Kong and Beijing. The attitude of regulators will determine whether other companies will follow suit and whether it will trigger an explosion in the Asian investment market.

On March 7, Hong Kong-listed Meitu announced that it had purchased 15,000 units of Ethereum and 379.1214267 units of Bitcoin in open market transactions on March 5, 2021. The total consideration for these two cryptocurrencies was approximately US$22.1 million and US$17.9 million (US$40 million), respectively. Meitu founder Cai Wensheng once said in 2018 that he had 10,000 Bitcoins.

According to the cryptocurrency investment plan approved by the board of directors, Meitu can purchase cryptocurrencies with a net value of no more than US$100 million, with the funds coming from the company's existing cash reserves. This means that Meitu can purchase another US$60 million in cryptocurrencies. Due to the sharp rise in the price of cryptocurrencies on March 7, it has already generated a profit of about 15%-20%.

As for the reason for the purchase, the announcement stated:

Blockchain technology has the potential to disrupt the existing financial and technology industries, similar to the way mobile Internet disrupted PC Internet and numerous other offline industries. The Board believes that the blockchain industry is still in its early stages, similar to the mobile Internet industry around 2005.

In this context, the Board believes that cryptocurrencies have sufficient room for appreciation and that allocating part of its cash reserves to cryptocurrencies at this time can be used as a means of diversifying the risks of holding cash in fund management (due to the depreciation pressure caused by the substantial increase in money supply by central banks around the world in fund management).

More importantly, the Board believes that this will demonstrate to investors and stakeholders the Group's ambition and determination to embrace technological innovation, thereby preparing to enter the blockchain industry. Although blockchain has a long-term positive outlook, overall, 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.

Details of the announcement can be read:

Meitu has not developed well since its listing. It once bet on smart hardware but later split and sold it off. However, in recent years, it has focused on the female market, and its performance and profits have improved. After announcing its 2020 semi-annual results on February 25, with both revenue and profit growing, its stock price began to rise sharply, and its current market value is HK$11.7 billion. However, it is still a long way from the HK$36 billion when it was first listed.

As a medium-sized Internet company, Meitu's purchase of cryptocurrencies is likely to be due to the recognition of cryptocurrencies by its founder and largest shareholder, Cai Wensheng, who currently holds 26.2% of the shares.

Cai Wensheng, a native of Fujian, dropped out of school at the age of 15. He accumulated wealth through early Internet entrepreneurship and later became one of the most famous Internet investors in China. In 2014, Cai Wensheng invested in OKEx and bought the first Bitcoin. In early 2018, Cai Wensheng became the rotating group leader of the Three O'clock Blockchain Group.

However, the subsequent relationship between Cai Wensheng and the BeautyChain token BEC caused controversy.

According to Tencent Deep Net: BEX surged more than 4,000% at the opening of OKEx, with a market value of $28 billion, four times that of Meitu. However, in less than three months, a major loophole appeared in the BEC contract, and hackers generated unlimited tokens through the contract's batch transfer method. A huge amount of BEC was transferred from two addresses, triggering a sell-off. On that day, the value of BEC was almost zero. Cai Wensheng called Tencent's article "low-level defamation." Bianews reported that Cai Wensheng was behind BEC.

Cai Wensheng also responded in an interview with Wang Feng that there are only 9 million BECs in circulation in the market, with a market value of only a few million US dollars. The hacker only transferred 20 bitcoins, and the other 40 were frozen by the exchange in time. The BEC Foundation assumed all transaction losses and compensated users 10%.

Deep Web articles can be read:
https://tech.qq.com/a/20180424/013334.htm

Wu Blockchain believes that no matter what the history between Cai Wensheng and Meitu is, as a listed company, Meitu is undoubtedly the first Chinese listed company to publicly announce a large-scale purchase of Bitcoin and Ethereum, which will have a very significant impact on the industry.

Currently in the United States, whether it is Microstrategy, which continues to buy cryptocurrencies, or Tesla, which has purchased $1.5 billion worth of Bitcoin, cryptocurrencies have become a routine operation for U.S. listed companies to hype up stock prices or diversify investments. Since China's attitude towards cryptocurrencies is still unclear, Tesla's trend has not spread to China.

As the "Tesla of China", it is foreseeable that Meitu's stock price will soar after the opening, but this may also cause warnings and suppression from the regulatory authorities in Hong Kong and Beijing. The attitude of the regulatory level will determine whether other Hong Kong stocks and Chinese companies will follow suit. At present, the channels for purchasing various cryptocurrencies in Hong Kong are relatively complete. If large-scale imitation occurs, it may completely detonate the investment demand for Bitcoin by Asian listed companies and high-net-worth individuals, thereby pushing the price to the next level.

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