Valuation bubble burst, film and television investors rationally treat film and television asset investment

In the past,"I couldn't squeeze in if I wanted to buy it", but now I couldn't get it if I wanted to sell it. In 2016, the domestic film market encountered a "Waterloo". The valuation of film and television assets fell sharply, the bubble quickly burst, and listing plans were stranded. Many film and television investors who "gambled on listing" fell into an awkward situation.

Original title: Film and television assets are sold at a 50% discount. Investors look disgusted.

On December 22, investor Wang Gang (pseudonym) received a financing invitation letter from a certain film and television asset party who "squeezed his head" last year and failed to obtain a financing share, and received a super discount of "50% discount" based on last year's valuation, but at this time, Wang Gang already looked disgusted.

In the past,"I couldn't squeeze in if I wanted to buy it", but now I couldn't get it if I wanted to sell it. In 2016, the domestic film market encountered a "Waterloo". The valuation of film and television assets fell sharply, the bubble quickly burst, and listing plans were stranded. Many film and television investors who "gambled on listing" fell into an awkward situation.

Valuation defense war

"At the beginning of this year, when the valuation of film and television assets was soaring, everyone worked hard and might not be able to squeeze in; now that the bubble has burst, the valuation is falling continuously, and even a cabbage price may not be there. Someone is willing to accept it." Wang Gang said that in particular, many small film and television assets do not have any core competitiveness in themselves, and are even less popular when valuations fall rapidly.

In fact, in the process of downsizing the valuations of film and television assets, many large-scale film and television assets are also difficult to survive. On November 8, Le.com announced that LeTV Pictures 'injection is not expected to be completed in 2016. Currently, all parties are discussing the valuation and pricing of this material asset reorganization, and does not rule out the possibility of a downward adjustment in the transaction price of this material asset reorganization; On August 1, Wanda Cinema announced that due to changes in the securities market environment, it will suspend the acquisition of Wanda Films and Legendary Pictures and plan to explore the feasibility of reducing the transaction price...

As valuations accelerate, many investors who managed to squeeze in during Series B, Series C and Pre-IPO financing are now facing the risk of shrinking profits or even losing money. "In the past few years, investors who entered the market during the rapid expansion of the film and television valuation bubble have been severely trapped. This is like buying stocks at 6000 points. Can you not lose money?" Famous film and television investor Zheng Peimin told China Securities Journal that even at current prices, the bubble is still very big.

Also affected are the film and television assets themselves. Zheng Peimin said that many film and television assets often make bets with investors about listing within a certain time when financing. Once listing is blocked, they will suffer direct losses. Take Wanda Film and Television as an example. News released in early February this year showed that Wanda Film and Television (including Wanda Film and Television and Qingdao Wanda Film and Television) plans to raise 10 billion yuan before listing. A financing recommendation letter shows that if Wanda Film and Television fails to go public within one year after the investor invests the capital, the investor can choose to withdraw, and Wanda Culture Group will repurchase from the investor at a simple interest rate of 15%.

Against this background, a wonderful war broke out in full swing at the end of 2016. First, Feng Xiaogang and Wang Sicong fought against each other on Weibo around the movie "I am Not Pan Jinlian", and then LeTV Pictures CEO Zhang Zhao and the film critics fought against each other on Weibo around the movie "The Great Wall." Industry insiders pointed out that behind the "fierce war" is actually a "valuation defense war" of "increasing box office revenue-increasing parent net profit-and fulfilling performance commitments."

The bubble burst quickly,

"Wait until the tide recedes, you will know who is swimming naked." This sentence is very appropriate in the current film market.

The domestic film market once developed rapidly. Since entering the era of 10 billion yuan in box office in 2010, China's film market has maintained an annual growth rate of more than 30% for five consecutive years. In 2015, box office revenue of 44.069 billion yuan increased by nearly 50% compared with the box office revenue of 29.6 billion yuan in 2014. In this context, film and television investment is booming. Especially since 2013, many listed companies have acquired and even even hesitated to acquire film and television assets across borders. Many film and television investors have made a lot of money, and the valuation of film and television assets has risen.

However, just as film and television investors were optimistic about the prospects, the valuation bubble quickly burst. As of December 18, the total box office of mainland films in China in 2016 was less than 43.6 billion yuan, which is far from the target of 60 billion yuan expected by many market participants at the beginning of the year. It is still a bit difficult to catch up with last year's total box office of 44.069 billion yuan. Under the new situation, the valuation of film and television assets has accelerated its retreat."There is a possibility that the valuation will return to Round C or even Round B." Lao Zhiming, managing director of Huatai United Securities, told reporters.

At the same time, the regulatory authorities 'attention to the "high valuation" of film and television assets has also accelerated the process of film and television assets squeezing the bubble. In May, it was reported that the regulatory authorities had tightened the reorganization review of four types of M & A targets, including film and television. Although the above news cannot be corroborated, Storm Group's previous reorganization plan for M & A targets such as Wu Qilong and Liu Shishi Caocao Bear Films was rejected, which already reflects the attitude of the regulatory authorities.

There are also masters who make money amid ups and downs. Zheng Peimin is a typical example. In 2009, Zheng Peimin invested in Great Wall Film and Television; in 2014, Great Wall Film and Television went public on a backdoor basis; in 2015, at the peak of the stock market, Zheng Peimin sold Great Wall Film and Television shares and made a profit of 40 times. In 2013, Zheng Peimin invested in Kaixin Mahua, which started as a drama; during the National Day period of 2015, Kaixin Mahua launched the movie "Charlotte Worry" and became a hit, and its valuation increased significantly; currently, Zheng Peimin has invested in Kaixin Mahua (listed on the New Third Board in 2015). A floating profit of 20 times has been achieved.

"When it comes to film and television investment, I have always adhered to three principles: a good business model, a good execution team, and a good price. The most important thing is the third one. When investing in Great Wall Film and Television, the valuation was only 200 million yuan; when investing in Kaixin Mahua, the valuation was only 300 million yuan. But now any film and television asset is valued at 50 to 1 billion yuan, and the better ones are often worth several billion yuan. It is difficult for film and television investment to obtain the same high return as before." Zheng Peimin said.

New direction for investment

"For many film and television investors, it used to be 'you can't squeeze in if you want to buy', but now it's 'you can't return'." Wang Gang said frankly that many film and television investments in the past few years have turned sour."Investment in film and television assets is all aimed at listing. As long as film and television assets are related to listed companies and have major star shareholders, there is a possibility of listing, even if they have just been established, Even if the basic business has not yet been launched, they can still raise sky-high prices in a short period of time. This is no different from gambling."

After the valuation bubble burst, everyone began to rationally treat investment in film and television assets and return to fundamentals. "Investment depends on the price. What is a good price? My principle when investing in film and television assets is that if it is listed in the future, it will be an unexpected surprise; if it is not listed, it will be very comfortable to hold it for a long time. In the process of investing in film and television assets, I have never gambled with the asset party on listing within a certain period of time. I still have to pay attention to the fundamentals of film and television assets." Zheng Peimin said.

The domestic film market is undergoing a process of "squeezing water" and developing towards a more rational market. According to industry insiders, the "box office subsidy" in China's film market in 2015 was about 4 billion yuan to 5 billion yuan, accounting for about 10% of the total box office. In order to boost the box office, the "ghost field" phenomenon has occurred frequently. This can be seen from the punished movie "Ip Man 3" this year: the box office of the film announced 155 million yuan on its premiere day, and the cumulative box office in less than half a month reached 790 million yuan. After the scam was exposed,"Ip Man 3" was found to have a fake box office of 32 million yuan, and the publisher subscribed for 56 million yuan at the box office itself. However, the actual box office of the film is still difficult to say.

The ceiling of the film market has caused many investors to turn. "Film and television investment was once the main battlefield of cultural industry investment, and it was also the first half of cultural industry investment. Now film and television investment is a red sea, and it is difficult to have opportunities to 'pick up leaks' like investing in Great Wall Film and Television and Happy Mahua. I have rarely invested in traditional film and television assets, but I still have many layouts in online content such as big online movies, online dramas, and online variety shows. This is a future trend, and there is already a very mature profit model. It is also an important part of the second half of cultural industry investment." Zheng Peimin said.

Many film and television investors who managed to squeeze in during Series B, Series C and Pre-IPO financing are now facing the risk of shrinking their profits or even losing money. "In the past few years, investors who entered the market during the rapid expansion of the film and television valuation bubble have been severely trapped. It is like buying stocks at 6000 points. Can you not lose money?" A well-known film and television investor believes that even at current prices, the bubble is still very large.

Editor: yvette