High box office does not mean high revenue. Shenzhen Stock Exchange strictly controls "star securitization"

Recently, the Shenzhen Stock Exchange once again revised the information disclosure guidelines for the radio, film and television industry. The reporter noticed that this revision directly points to two hot issues of concern to strengthening supervision.

The rich film and television works and high box office have ushered in a new development boom in 2016. The booming scene of the industry has also made the film and television industry the target of capital pursuit."Star securitization" has made a red mark in this year's A-share market.

However, the madness of capital has given regulators a headache. Faced with constant cross-border acquisitions, the exchange has sent letters asking about mergers and acquisitions in the same industry. The exchange has also raised "100,000 Why" questions about valuation and other questions. Recently, the Shenzhen Stock Exchange once again revised the information disclosure guidelines for the radio, film and television industry. The reporter noticed that this revision directly points to two hot issues of concern to strengthening supervision.

● Revision 1: The relationship between box office and revenue

At present, the domestic film and television industry is developing rapidly, with more and more high-box office works. The cooperation methods between listed companies and producers, directors, actors in terms of business, equity, etc. are constantly innovating."Star securitization" has become a hot spot in the market. Judging from the current situation, the box office of film and television works has a greater role in promoting the stock price of listed companies in the secondary market.

However, since box office revenue is not equal to the company's operating income, if the company's announcement does not clarify the specific impact of high box office on the company's operating income, it may mislead investors. In addition, the cooperation between listed companies and cast members often has a certain impact on the company's future operations and financial statements.

Therefore, taking into account the above situation, the Shenzhen Stock Exchange's revision requires companies to disclose the operating income range derived from high-priced box office movies, emphasizes the difference between box office revenue and the company's actual identifiable operating income, and requires companies to warn of relevant risks. At the same time, this amendment puts forward specific disclosure requirements for the cooperation between listed companies and cast members, including the specific cooperation methods, authorization matters, exclusivity terms, etc. between the two parties.

For example,"Mermaid", which ranks first at the box office in China, the reporter noticed that on February 15 this year, Enlight Media issued an announcement on the box office of the movie "Mermaid", announcing that the box office of its film "Mermaid" as the producer exceeded 1.6 billion yuan., has exceeded 50% of its revenue in the most recent fiscal year. The box office revenue of the film in the mainland of China is based on the statement officially confirmed by movie theaters across the mainland of China. The financial income earned by the company from the film will be calculated based on the box office revenue division ratio and the relevant agreements signed between the company and other partners. It is worth noting that until "Mermaid" hit box office revenue of more than 3 billion yuan, Enlight Media did not make any announcements on the box office. In this only box office announcement, it was impossible to know what impact the "Mermaid" box office would have on the company's revenue, and how much box office can be converted into operating income.

Similarly, the semi-annual performance forecast just released by Enlight Media also pointed out that the company's net profit for the first half of 2016 increased by 277% to 302% year-on-year, and the net profit range was 310 million yuan to 330 million yuan. The increase in net profit was due to the fact that a total of 8 films participated in the investment, distribution and were included in the box office during the reporting period, with a total box office of 4.34 billion yuan. Among them, 6 films including "Mermaid","Who's Youth Is Not Lost", and "Hot Pot Hero" were released during the reporting period, with box office of 3.98 billion yuan.

From the announcement statement of Light Media, we can only see how much the film box office is, but how much is converted into revenue and how much is converted into net profit has not been disclosed. This is always a vague concept, and investors cannot know the impact of specific films on the net profit of listed companies.

Obviously, this amendment is to protect the right to know of small and medium investors. Otherwise, the impact of box office on performance will always be understood only by insiders and will always be a mystery to investors.

● Amendment 2: Strictly control "celebrity securitization"

As early as the original "GEM Industry Information Disclosure Guidelines No. 1-Listed Companies Engaging in Radio, Film and Television Business"(hereinafter referred to as the "Guidelines"), information disclosure has been required for listed companies and actors. Cooperation and performance gambling matters have a significant impact on the operations of listed companies. However, judging from the cross-border acquisitions and inter-bank acquisitions of many listed companies this year, simple cooperation and gambling matters have no longer achieved the effect of information disclosure. There are too many problems in "star securitization" that need to be solved in detail.

Therefore, for the "star securitization" matter that is of general concern to the market, this amendment requires the company not only to disclose the valuation basis, performance commitments, etc., but also to explain the basis for the capital contribution of the cast members when they invest, and compare it with other investors. Share prices and explain whether the cast members have specific cooperation arrangements.

The reporter learned that in fact,"star securitization" has indeed brought many regulatory problems to the exchange this year.

In March 2016, Storm Technology announced the acquisition of a 60% stake in Caocao Xiong Pictures, with Wu Qilong and Liu Shishi as shareholders, with a transaction amount of 1.08 billion yuan; and in April, Tangde Films and Television gave a valuation of more than 700 million yuan to acquire Fan Bingbing's 51% stake in Aimei God. These have attracted the attention of investors and the Shenzhen Stock Exchange. The increasingly outrageous cases of acquiring star companies at high premiums finally made the exchange make up its mind to pay close attention to "star securitization."

Some industry insiders pointed out that although star companies and listed companies have promised high performance and generally signed performance betting agreements, the film and television industry is a high-risk industry, and stars are replacing rapidly. How much benefits can such high-priced purchases bring can only be left to time to test.

Li Na, manager of the asset management department of Datong Securities, recently said that grasping market hotspots and refining the information disclosure supervision of film and television companies in a targeted manner will help curb the hype of film and television concepts, pierce the bubble of high valuation and high price-to-earnings ratios, and is conducive to the value of the market. Guidance and value discovery play a positive role in the stable development of the market; at the same time, it is also conducive to encouraging companies in the industry to focus on their own main development, return the market to healthy competition, and allow real high-quality companies to achieve better development.

The reporter also noted that during the revision of the Guidelines, the Shenzhen Stock Exchange solicited the opinions of more than 3500 investors. The solicitation showed that 83% of investors would pay attention to the box office data disclosed by the company, and 76% of investors would pay attention to the company. Cooperation matters between well-known actors, 86% of investors believe that industry information disclosure guidelines are helpful for their investment decisions, and hope to continue to introduce relevant industry information disclosure guidelines.

Editor: vian