A heavy blow! Will the "monster stock" of Baofeng be beaten back to its original state?

According to the announcement released on the official website of the China Securities Regulatory Commission on the 7th, Baofeng Technology's application to acquire three companies by issuing shares was not approved. The China Securities Regulatory Commission stated that the profitability of the target companies is highly uncertain and does not comply with the relevant provisions of the "Regulations on the Administration of Large Asset Restructuring of Listed Companies". This announcement is a blow to Baofeng Technology. Industry insiders said that Baofeng, a demon stock, may be reduced to its original state.

In March this year, Baofeng Technology announced that it planned to acquire three film, television and game companies, namely Gump Technology, Straw Bear Pictures and Lidong Technology, by issuing shares and paying 3.1 billion yuan.

After Baofeng Technology released its corporate restructuring plan, the Shenzhen Stock Exchange issued an inquiry letter to it, pointing out that the performance commitments of the target company were too high and requiring it to provide a feasibility explanation for its profit performance forecast.

According to the restructuring plan, Gump Technology's net profit in 2015 was 25.89 million yuan, and it promised a net profit of 70 million yuan in 2016. Straw Bear Pictures' net profit in 2015 was 28.52 million yuan, and it promised a net profit of 100 million yuan in 2016. Lidong Technology's net profit in 2015 was 4.74 million yuan, and it promised a net profit of 65 million yuan in 2016. The profit growth promised by the three companies all exceeded 100%.

Industry experts analyzed that this incident may reflect that the CSRC is sending three major signals:

1. The film, television, game, and VR industries should cool down, and mergers and acquisitions involving these three industries should be cautious and strict;

2. The valuation of the above three industries needs to re-establish new market expectations and market standards;

3. Practitioners in the three industries should not take advantage of the trend to cash out, and companies like Baofeng Group should not simply increase their market value through mergers and acquisitions based on hot topics.

Regardless of whether the acquisition behavior of Baofeng Technology complies with the relevant regulations of the China Securities Regulatory Commission, for investors who have never understood this monster stock of Baofeng Technology, it is really a gratifying thing to expose it to its original form.

Since its listing on the ChiNext on March 24, 2015, Baofeng Technology has experienced a myth of continuous daily limit increases. Its opening price on the first day of listing was 9.43 yuan, and then in just over a month, the stock price soared all the way to 300.81 yuan. In less than two months, Baofeng Technology has experienced 39 daily limit increases. However, compared with the high stock price, Baofeng Technology's net profit in the first quarter decreased, with a loss of 3.2085 million yuan in the first quarter.

The rise of Baofeng Technology can no longer be described as "crazy". At one time, topics such as "What is it like to own Baofeng Technology stocks?" became the focus of everyone's hot discussion. However, many onlookers also said that Baofeng Technology's old business is third-rate, and the sales volume of its much-vaunted future product VR equipment is not as good as that of a startup company with ten people, and there is no future at all. The soaring stock price is nothing but malicious speculation by capital.

Even Wu Xiaobo, a well-known domestic financial writer, wrote in an article: "Among China's Internet companies, whether in terms of performance or growth, Baofeng Technology can only be ranked outside the top 200. However, its market value today has exceeded that of the largest video site Youku. Chinese investors' 'love' for it cannot be explained by theory or model."

Some analysts said that without fundamental support, Baofeng Technology's continuous surge is more like a monster stock than a god stock. Baofeng Technology's profit model is relatively simple. In the context of intensified market competition, how the company can maintain its user base and convert platform advantages into profits will still face great challenges in the future.

Now that the prophecy has come true, Baofeng Technology will eventually pay the price for its "arrogance and ignorance".

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