On March 22nd, Beijing Yuehua Yuanyu Entertainment Company (YH Entertainment) published a statement on Xin San Ban (New Third Board) announcing that the company’s shares will be no longer be publicly traded on the National Equities Exchange and Quotations (NEEQ).
In fact, earlier on January 31st, YH Entertainment had already released a statement titled “Announcement Regarding the Possible Request to End Public Trading on the NEEQ.” In the statement, YH explained the decision as a result of “adjusting to the company’s growth and long-term strategy, as well as the current slow-moving stock market and the high cost of public funding. This decision will help us operate more efficiently, lower costs, and gain a competitive edge.”
Yuehua Entertainment was founded in 2009 and quickly became one of the fastest-growing entertainment companies. According to the company’s website, it has signed big-name artists including Han Geng, Bibi Zhou, Huang Zheng, UNIQ, An Youqi, A-do, Zhang Yao, Xiao Fei, After School, and NU’EST-M. At the beginning of last year, YH also introduced a very young boy band called YHBOYS, members of which were all between the age of 10 and 13. However, many questioned the group’s originality due to its similarities to the popular TFBOYS.
Recently, YH came under the public spotlight thanks to its artists’ appearances in popular variety shows: Fan Chengcheng (Fan Bingbing’s brother) and Zhu Zhengting were participants on Idol Producer, and Han Geng was selected as team leader on Street Dance of China. Just a few days ago, the company also stood up to Weibo user “只嗑金瓜”, who spread harmful information regarding many of the company’s artists, by taking legal actions against the troll.
The CEO of YH Entertainment, Du Hua, is seen by many as a successful businesswoman. Before entering the entertainment industry, she spent six years working in internet-related sectors. In 2003, she joined 8848 as a PR manager at the age of 22. In September of 2004, she joined Hurray Digital Media and left the company in July of 2009. During her time at Hurray, the company successfully developed from a small private company to one that has successfully gone public on the US stock market. In 2010, Du helped facilitate the signing of Han Geng to YH Entertainment.
On the capital front, YH has also enjoyed good luck. Before being traded on the New Third Board, the company had already received Series A funding worth tens of millions of RMB from Lebox Capital and Rong Xi Venture Capital. In September of 2014, China Media Capital invested another ¥254 million RMB in its Series B funding. On September 22nd, 2015, YH Entertainment officially entered the New Third Board. During its time on the Board, the company has attempted multiple times to enter A-Stock–Shandong Gettop Acoustic Co has tried to purchase 100% of YH’s shares, twice–but failed both times.
Additionally YH is one of the earliest companies to leverage artist loyalty by giving them stock options. When YH was still on the New Third Board, Han Geng, Bibi Zhou, and Huang Zheng all saw huge boosts in their popularity, which in turn increased the value of the shares. Han is the largest celebrity shareholder, with 3 million shares totaling over ¥100 million RMB. Zhou and Huang both each hold 420,000 shares, equaling ¥13.35 million RMB.
During Gettop Acoustic’s attempts at purchasing the company, YH Entertainment’s valuation had gone south, and the industry was going through a period of massive change. Combined with increasingly strict policies, the company wasn’t successful in its efforts to enter A-Stock. During an interview, Du Hua expressed that her vision was to have YH launch publicly as an independent company.
YH’s exit from the New Third Board has a deeper meaning behind it. The Board was seen by many to be a platform for SMBs without much capital to develop before entering A-Stock. However, external restrictions have become increasingly limiting in recent years, and many promising companies are being constantly undervalued on the market, leading to industry experts questioning the purpose of the New Third Board in today’s environment.
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