Win the Go Pro and pour before the listing.
A few days ago, Liu Jingkang, the actual controller of Shadowstone Innovation, posted on the circle of friends, seeking "fair characterization" of Shadowstone Innovation's IPO, and then said that "it will actively communicate with the regulator to change or withdraw the IPO plan".
Founded in 2015, Insta360 is a provider of intelligent imaging equipment, mainly engaged in the R&D, production and sales of intelligent imaging equipment such as panoramic cameras and action cameras. According to the prospectus (registration draft), Liu Jingkang has a total of 34.0043% of the voting rights of Yingshi Innovation, indirectly holds 27.5653% of the company's shares, and is the actual controller of the company.
Competing with Shadow Stone Innovation are GoPro, the big brother in the action camera industry, DJI, a well-known aerial photography drone player, and Japan's Ricoh panoramic camera.
Five years after its founding, the young company launched a storm into the capital markets. In October 2020, Shadowstone Innovation's application for listing on the Science and Technology Innovation Board was accepted. After many inquiries and two meetings on the exchange, Shadowstone Innovation finally submitted for registration, but there was no result for a long time, and the entire IPO process has taken nearly four years.
This lengthy process has brought certain pressure and uncertainty to the company and relevant stakeholders. In the early morning of mid-August, Liu Jingkang confided in the circle of friends. He said that "in the context of the A-share recession and financial anti-corruption, the association is very understandable and has no complaints about the misplacement of problematic companies", "I do not ask for approval, but only seek fairness and characterization". At the same time, Liu Jingkang also revealed the latest performance of Yingshi Innovation, sensitive shareholders and other information that the outside world is concerned about.
Audit "stuck"
Four years have not yet been granted
Traditional imaging equipment refers to the equipment that uses the principle of optical imaging to form images and records images with negatives, mainly including film cameras, digital cameras, video cameras, etc. Intelligent imaging equipment refers to imaging equipment with computing and processing capabilities, mainly including aerial photography drones, panoramic cameras, action cameras, wearable photography devices, etc. Users are not limited to handheld shooting, but can also present images through the automatic editing and fast editing processing functions of intelligent imaging equipment.
According to the data, the overall size of the global smart imaging equipment market has increased from US$4.120 billion in 2015 to US$8.768 billion in 2019, with a compound growth rate of 20.78% in the past five years.
Among the smart camera devices, there are two brands that are well known to the outside world, GoPro and DJI. GoPro launched the GoPro Hero HD camera in 2010, and the prospectus introduced that after the advent of this product, the action camera began to receive widespread attention from the market and achieved large-scale production. Then, in 2014, DJI launched the Phantom 2 Vision, a consumer aerial photography drone, and the consumer aerial photography drone gradually took shape.
In terms of panoramic cameras, the world's first panoramic camera was launched by Japan's Ricoh Company, and in 2017, well-known brands such as Samsung and Nikon also joined the ranks of panoramic cameras, further promoting the rapid development of this market.
Compared to Japan's Ricoh (founded in 1936), GoPro (founded in 2004) and DJI (founded in 2006), Shadowstone Innovation, founded in 2015, is undoubtedly a young company.
However, since its establishment, Shadowstone Innovation has attracted the attention of many investors. According to the enterprise investigation, before the IPO, Yingshi Innovation has completed 7 rounds of financing. The lineup of investors includes IDG Capital, Qiming Venture Capital, Huajin Capital, China Merchants Capital, Cornerstone Capital and other institutions.
As early as May 2014, Shadowstone Innovation successfully obtained an angel round of financing from IDG Capital, and the founder Liu Jingkang was still in his senior year at the time. IDG Capital has also continuously increased its investment in subsequent Series A and B financings.
In March 2015, Shadowstone Innovation received $8 million in Series A financing; In 2016, it received hundreds of millions of yuan in Series B financing; In the same year, it received strategic investment from Suning Group. In 2018, it completed tens of millions of yuan in Series C financing. In March 2019, it completed hundreds of millions of yuan in Series C+ financing, with investors including McGolf Holdings, Huajin Capital, and Everest Venture Capital. In April 2020, it completed tens of millions of dollars in Series D financing, with investors including CITIC Securities, Goldstone Capital, China Merchants China Fund, Cornerstone Capital, etc.
However, Shadowstone Innovation, which has successfully financed in the primary market, has made slow progress in the secondary market.
According to the official website of the Shanghai Stock Exchange, in October 2020, the IPO application of the Shadow Stone Innovation Science and Technology Innovation Board was accepted. He was first questioned in November of the same year.
In July 2021, Shadowstone Innovation held its first meeting, but the result was a "postponement of deliberation", and the document showed the reasonableness and necessity of the Listing Committee's arrangement of 12 board members for Shadowstone Innovation; An on-site inquiry was made about whether the shares held by Liu Jingkang were clear and unambiguous, and whether there were any entrusted shareholding or other interest arrangements. At the same time, it is required to implement relevant matters.
In September 2021, Shadowstone Innovation was questioned again. A few days later, Shadowstone had a meeting with the Innovation. At the end of January 2022, Shadowstone Innovation submitted its registration, and until today, two years later, it has not yet waited for regulatory approval. So far, the first IPO process of Shadowstone Innovation has taken 3 years and 11 months.
(Source: Shanghai Stock Exchange official website)
During this period, the market regulatory environment has also changed. In August 2023, the China Securities Regulatory Commission (CSRC) issued a document to tighten the pace of IPOs in stages and promote the dynamic balance between investment and financing. Since then, the market can feel that the average number of approvals issued and the number of issuances launched per month has decreased significantly. In 2023, 245 IPOs were approved in the Shanghai and Shenzhen markets, and 237 IPOs were launched. Among them, from January to August 2023, 213 IPO approvals were issued and 193 were launched. From September to December, only 32 approvals were issued, and 44 were launched.
In April 2024, the State Council issued the "Several Opinions on Strengthening Supervision and Preventing Risks and Promoting the High-quality Development of the Capital Market" (referred to as the "New "National Nine Articles"), emphasizing a number of important contents such as strict access to issuance and listing. In order to implement the new "National Nine Articles", the China Securities Regulatory Commission (CSRC) and the Shanghai and Shenzhen Stock Exchanges have officially issued a number of rules such as the Rules for the Listing of Stock Issuance and the Guidelines for the Evaluation of Science and Technology Innovation Attributes (Trial), which will improve the quality of listed companies from the source by appropriately improving the financial indicators of enterprises on the main board and the Growth Enterprise Market, and the evaluation standards for the science and technology innovation attributes of the Science and Technology Innovation Board.
Among them, the Science and Technology Innovation Board highlights the "attribute of science and technology", and moderately increases the requirements for R&D investment, the number of invention patents and the compound growth rate of revenue of enterprises to be listed.
With the tightening of listing review and the increasing number of IPO termination review companies, the IPO process of Shadowstone Innovation is also stuck after submitting for registration. From the previous many inquiries and two meetings, it can also be seen that there are many "gray" areas of regulatory concern in the IPO stage of Shadowstone Innovation.
Moments responds to sensitive shareholders' questions
In Liu Jingkang's circle of friends, one of the focuses of attention from the outside world is the issue of "sensitive shareholders".
Liu Jingkang said that sensitive shareholders are not audit posts, and the highest bid (50% higher than Shenzhen Capital Group) is the highest when they buy shares, and there is no benefit transfer; The "Regulations" were issued only half a year after the IPO declaration, and a special verification report was submitted to the regulator within one or two months after the "Regulations" were issued.
The shareholder is most likely the indirect shareholder "Chen Bin" of Yingshi Innovation mentioned by the CSRC.
On May 28, 2021, the China Securities Regulatory Commission (CSRC) issued the Guidelines for the Application of Regulatory Rules – Issuance No. 2, which mentions that for enterprises applying for initial public offerings of shares, depositary receipts and listing on the select layer of the New Third Board, intermediaries should do a good job in verifying the shareholding of employees who have left the CSRC system in accordance with the requirements of the guidelines. The provisions will be implemented from June 1, 2021, and have been accepted for reference by enterprises.
Judging from the timeline, on July 23, 2021, after the implementation of this rule, Shadowstone Innovation held its first meeting, but there was no mention of "shareholding by employees of the CSRC system" in the relevant materials.
In the third round of inquiries by the Shanghai Stock Exchange, Shadowstone Innovation was clearly required to verify shareholder information, but the company still did not disclose the existence of the above situation.
According to media reports, on November 22, 2022, the China Securities Regulatory Commission (CSRC) issued an inquiry during the registration stage, clearly requiring Shadowstone Innovation to provide additional information on the shares held by indirect shareholder Chen Bin at that time, the background and reasons for the transfer of shareholdings since the declaration, the payment of consideration and the authenticity of the transfer, and whether there is any benefit transfer or other benefit arrangement. This is the first time that Chen Bin has been "named" by the regulatory authorities.
However, the word Chen Bin did not appear in the search of other materials submitted by Shadowstone Innovation and the reply to the exchange's inquiry.
According to the prospectus (registration draft), from the perspective of shareholders, Yingshi Innovation has 27 direct shareholders. Among them, "Chen Bin" appeared behind Xiamen Fukai Venture Capital Partnership (Limited Partnership) (hereinafter referred to as "Xiamen Fukai"), which holds 3.7003% of the equity of Yingshi Innovation, and Shenzhen Maigao Huizhi Growth Phase V Equity Investment Partnership (Limited Partnership) (hereinafter referred to as "Shenzhen Maigao"), which holds 1.3001% of the equity of Yingshi Innovation.
According to the enterprise investigation, the legal representative of Xiamen Fukai Haichuang Investment Management Co., Ltd., one of the partners of Xiamen Fukai and a capital contribution of 2%, is Chen Bin, who serves as the chairman and general manager of the company. Chen Bin, one of the partners of Shenzhen Maigao and the largest shareholder of Shenzhen Maigao Holding Co., Ltd., which has a capital contribution ratio of more than 70%, is also Chen Bin, holding more than 38% of the shares.
According to Chen Bin's profile, from August 1999 to March 2012, he worked in the Shenzhen Stock Exchange, successively serving as senior manager, assistant director of the comprehensive research institute, and deputy chief researcher.
The earlier announcement of Maigao Holdings, a listed company on the New Third Board, also showed that the actual controller Chen Bin has worked in the Shenzhen Stock Exchange since 1999, and has successively served as a senior manager, assistant director of the comprehensive research institute, deputy chief researcher, etc., and has also served as the chief representative of the Shenzhen Stock Exchange in Fujian Province and the head of the research group of listed companies on the Shenzhen Stock Exchange. From 2007 to 2009, Chen Bin was also seconded to the Issuance Department and the Listed Companies Department of the China Securities Regulatory Commission.
At present, the regulatory regulations on the entry of listed companies by employees of the CSRC system are becoming more and more stringent. On September 6, the China Securities Regulatory Commission (CSRC) issued the "Regulatory Provisions on the Shareholding of Former Employees of the CSRC System in Enterprises to be Listed (Trial)", which added three new provisions: First, the prohibition period for departing personnel to become shareholders is extended. The second is to expand the scope of strict supervision over those who have left their posts. The third is to put forward higher verification requirements.
Instead of explaining the relevant content in a formal and public way, Shadowstone Innovation clarified it in the form of Moments, which may not be conducive to building the trust of investors and regulators, and may also affect the company's public image and market confidence.
The IPO of the post-90s founders
Liu Jingkang, the man at the helm of Shadowstone Innovation, is a post-90s technology enthusiast who has embarked on a journey of self-taught programming since the sixth grade of primary school, and is full of a strong interest in decompiling tools and deciphering the source code of websites, often studying it all night. In 2010, Liu Jingkang entered Nanjing University to study software engineering. During his university years, he not only continued his education in the field of technology, but also became popular on the Internet.
As a 2010 student at Nanjing University's School of Software, Liu Jingkang is known for several technical "pranks".
He once used 7,000 photos of his classmates to create the "standard face" of various departments of Nanjing University, and this idea earned him the title of "standard brother". In addition, Liu Jingkang also successfully deciphered the mobile phone number of Zhou Hongyi, the chairman of 360 Company, by analyzing the key sounds in a video on the Internet, and this technical prank not only attracted widespread attention, but also won the appreciation of Zhou Hongyi, who publicly expressed his recognition of Liu Jingkang's ability through Weibo. Zhou Hongyi also posted two Weibo posts in a row to "recognize", and generously said "This classmate is really capable". In another incident, Liu Jingkang published an article titled "How to Get Final Exam Papers and Revise Grades by Hacking into a Teacher's Mailbox", which verified the vulnerability of the mailbox, but was almost expelled.
Liu Jingkang's entrepreneurial journey began with "live broadcast of famous schools", through video collection and editing technology, the university lectures were broadcast live in real time. In one year, the project carried out more than 200 live broadcasts in six major cities and nine famous schools across the country, not only achieved success in the field of education, but also further expanded to the enterprise market with the launch of the "V Live" service.
However, Liu Jingkang found in practice that when using mobile phones for live broadcasting, only a part of the scene can be captured, and the video definition is insufficient, which affects the user's viewing experience and makes it difficult to effectively convey the complete experience of the scene. This challenge prompted him to seek a better solution.
Liu Jingkang saw a 360° panoramic video on the Internet, and he was deeply impressed by this new perspective and strong visual impact. Although there were panoramic cameras launched by Samsung, Ricoh and other brands on the market at that time, these products usually needed to connect the camera to the smartphone via WiFi, and users needed to wait for the photos to be transferred to the mobile phone and stitched for a long time before they could view the panoramic effect, which was not convenient to operate. Liu Jingkang realized that there was room for innovation and improvement.
Liu Jingkang came up with the idea of developing a small, one-click camera that could take panoramic video photos. This idea led him to reorient the company and devote himself to the development of a VR panoramic camera, which was later named Insta360. Shadowstone's innovative product line includes consumer and professional smart imaging devices, accessories, and other products that cover multiple market segments, from panoramic cameras to action cameras.
According to Liu Jingkang's disclosure in the circle of friends, the performance is good, and the company has grown 4 times during the 4 years of the IPO declaration, from 1/40 of the industry leader GoPro in 2017 to the first half of 2024.
In the IPO journey of Shadowstone Innovation, the company faced challenges in the review process, and the four-year wait has not yet ushered in the final approval, which is undoubtedly a period full of tests. In Liu Jingkang's follow-up post on Moments, he said, "When a company declares A-shares, a fundraising project is about to be completed by relying on the company's operating income in the past few years, and we will actively communicate with the regulator to change or withdraw the IPO plan."