Shell Looking for Real Estate was successfully listed on the New York Stock Exchange under the stock code BEKE.
Shell Search House’s initial public offering was issued at a price of US$20 per share, with a diluted market value of US$23.3 billion and a total raised capital of approximately US$2.44 billion.
China Renaissance Capital acted as the lead underwriter in this transaction. Bao Fan, chairman of China Renaissance Capital, issued the "Letter to Shells Looking for Real Estate Listings". He said that it is very difficult to restructure industry rules, requiring a period of "no output" and even facing a lot of external disputes and doubts. But Huaxing supports Shell to "do the hard and right things".
Huaxing’s judgment logic at the time was that from the perspective of A fund of future, Huaxing invested in new economic enterprises such as Meituan Dianping and Didi Chuxing in the field of “clothing, food, housing and transportation”. And in the huge track of "live", there will also be a super platform company.
He also mentioned the scene of the first meeting with Zuo Hui, "Zuo Hui didn't talk much, and his thinking was extremely meticulous. He answered every question I raised in a special place, and he had already thought very much about the future of the industry. Thoroughly, combined with the huge strength displayed by Lianjia at that time, I am basically sure that Lianjia is the super platform we are looking for."
The income is increasing, but the expenditure is more. Shells have lost money for three years in a row. The prospectus shows that in 2017, 2018 and 2019, the company's net losses were 540 million yuan, 430 million yuan, and 2.18 billion yuan, respectively. In the first quarter of 2020, Shell's net loss of housing search was 1.23 billion yuan. In the first half of this year, it has just turned losses into profits, with a net profit of 1.61 billion yuan.
Shell Looking for Real Estate officially launched its U.S. IPO global roadshow on August 8, 2020. A total of 106 million American depositary shares were issued in this transaction. The financing amount will be used for R&D investment, expansion of new house transaction services, development of diversified service products and general corporate purposes.
According to Shell Search, the total turnover (GTV) of Shell Search Platform in 2019 reached 2.13 trillion yuan. As of June 30, 2020, Shell Platform has stationed in 103 cities across the country, connected with more than 456,000 brokers and 42,000 brokerage stores from 265 new brokerage brands, and has 39 million monthly active mobile terminals.
Sources of income come from three sources
Second-hand housing transaction income comes from three aspects: (1) Lianjia second-hand house trading and rental commissions; (2) Lianjia's Deyou brand franchise fee, and other real estate brokerage companies entering the Shell platform and paying service fees; (3) Transaction Value-added services such as settlement. Commissions accounted for the bulk of second-hand housing transaction income, accounting for over 90%.
According to the prospectus information, Shell Group’s total real estate and lease transactions (GTV) reached 2.1 trillion in 2019. In terms of revenue, Shell Search's revenue in 2017, 2018, and 2019 were 25.5 billion yuan, 28.646 billion yuan, and 46 billion yuan respectively.
Shell pointed out in the prospectus that about 30% of the IPO proceeds will be used for our research and development, and continue to invest in platform functions and infrastructure technologies, including big data, artificial intelligence and virtual reality; about 30% will be used to expand our new houses Transaction services; about 25% is used to diversify the services we provide and expand our business to new geographic areas; the remaining part is used for general corporate purposes, which may include working capital requirements and potential strategic investments and acquisitions, although currently No specific investment or acquisition opportunities have been identified.
The prospectus shows that in 2018, Shell GTV (Gross Transaction Volume, total transaction volume) achieved 1153.1 billion yuan, which increased to 2,127.7 billion yuan in 2019, a year-on-year increase of 84.5%.
According to data in the second quarter of this year, Shell’s GTV in a single quarter reached 999.2 billion yuan, revenue was no less than 19.7 billion yuan, up 72.4% year-on-year, and net profit was no less than 2.7 billion yuan, a year-on-year increase of 589.3%.
In the media meeting on August 13, Zuo Hui said that there may be two changes in the future. The first is that there are more resources to enter the industry, including human resources; the second is that more and new competitors may emerge.
Zuo Hui said: "We want to use a long-term perspective to do organizational operations. The core issue is that the money must be thick enough, and only enough funds can the company remain in a stable state."
Tencent’s $800 million investment was hit by the industry
It is reported that Shell and Tencent’s $800 million financing was finalized as early as the first half of 2018, and Tencent also opened a traffic portal for it on WeChat Jiugongge to show its importance.
Tang Daosheng, senior executive vice president of Tencent, once said that, driven by the national strategy, the residential industry is also accelerating its digital strategy. The residential industry chain, including residential services, building management, and community management, is deeply integrated with the industrial Internet to realize the leap from traditional residence to smart new residence.
With the help of the collective "favor" of the luxury capital group, the value of Shell Search for a house reached 14 billion U.S. dollars (about 98.9 billion yuan). According to this calculation, if Shell can successfully complete the fundraising of more than 1 billion US dollars, a new 100 billion yuan (RMB)-level "unicorn" enterprise will be born in China in the near future, which will also become the first after Tencent Music Entertainment Group. Two Chinese companies with over US$1 billion in IPO financing in the United States.
The journey was smooth and smooth, and when the IPO was only close to the door, Shells encountered “natural disasters and man-made disasters” one after another when looking for a house.
The so-called "man-made calamity" refers to the emergence of multiple "anti-shell alliances" in the industry since 2019, all aimed at "anti-shell monopoly and unfair competition."
Among them, the most influential one is the alliance led by 58 Group CEO Yao Jinbo. I love my home, Zhongyuan Real Estate and other real estate intermediary brands. The common goal is "I don't want the shells to be dominant."
In addition, there are regional "anti-shell alliances" jointly established by real estate agencies in Jinhua, Shaoxing, Nanchang and other places. Take Jinhua, for example, representatives of one hundred local real estate intermediary agencies jointly signed the Anti-Shell Alliance Treaty in September last year. The alliance includes 530 stores, covering a wide range of local small, medium and micro brokerage companies.
The following is the full text of Bao Fan's article:
Pay tribute to the shells, do the hard and right things
——A letter to Shell’s listing
Today is the highlight of Shell’s search for a house. Congratulations to Shell, Zuo Hui, Huaxing Investment and the investment bank team, and congratulations to all colleagues who have created this historical chapter together!
"Doing the hard and right thing" is Zuo Hui's original intention for Shell to find a house. After 19 years of hard work, Zuo Hui has led the team to complete the complete transformation of the residential service industry from standardization to online, and create China's only large-scale online and offline real estate transaction and service platform-Shell-Renew Construct the development trajectory of China's residential service industry, and gradually realize the mission of "Better Living".
As Shell’s most determined comrade-in-arms, Huaxing is fortunate to have the company’s unswerving trust and become the only institution that provides Shell with “cross-chain financial services” from investment to investment banking. Looking back at the past, Huaxing and Shell’s past together can be vividly remembered. We are proud to see what Shell has achieved today!
Huaxing's investment business was launched in 2013, and we invested in Lianjia in 2016 (Lianjia was upgraded to Shell in 2018). At that time, a number of emerging online real estate intermediary platforms were developing very well, and many organizations were squeezed out of their heads. In contrast, everyone expressed very little understanding of Huaxing’s “countercurrent” re-injection of Lianjia.
In fact, our judgment logic was very clear. First of all, from the perspective of A fund of future, in the field of "clothing, food, housing and transportation", we have successively invested in outstanding new economy enterprises such as Meituan Dianping and Didi Travel. And in the huge track of "living", we conclude that there will also be a super platform company.
For this reason, the Huaxing investment team has done a very in-depth industry research and found that to become an industry leader, three core conditions must be met in essence:
1. Although the investment logic of the Internet changing traditional industries prevailed at that time, we believe that offline residential service companies with a large number of housing and data are more transformative. With the popularization of new technologies such as big data and VR, such companies will usher in the best window period for building super platforms.
2. We judge that the real estate industry will inevitably switch from "manufacturing as driving" to a new era of "downstream service as driving", which means that who can reach end users first, understand their needs and provide good services , Whoever is likely to occupy more market share.
3. In China, the growth contradictions in many industries are mainly concentrated on two issues-productivity and production relations. We firmly believe that new technological changes can bring productivity improvements to the residential service industry. However, as an organization that cannot do without "people", how to maintain the interests of consumers, service providers, and platforms is crucial.
Zuo Hui and I met for the first time in a coffee shop in Shunyi. Zuo Hui didn’t talk much, his thinking was extremely meticulous, and he answered every question I raised in particular in place, and he had already thought thoroughly about the future of the industry at that time. Combining with the huge strength shown by Lianjia at that time, I It is basically certain that Lianjia is the "super platform" we are looking for.
Therefore, when Lianjia opened the B round of financing, the Huaxing investment team made rapid investment decisions without any hesitation, and finally had the honor to become the only lead investment institution in Lianjia's B round.
After that, I will meet with Zuo Hui almost every quarter to discuss many issues in depth. From the perspective of industry changes and the company's long-term development, we all agree that "shells" must be done.
However, it is very difficult to reconstruct industry rules. It requires a period of "no output" and even faces a lot of disputes and doubts from the outside world. Huaxing and I have always stood firmly behind the shell, because the shell is the embodiment of the "long-term value" that we all believe in, and it is also the practice of "doing the hard and right".
In the process of accompanying the company's transformation, we clearly saw Zuo Hui and his team's patience and courage to change. It is true that the industry is slowly becoming orderly because of shells.
Adhering to the concept of being the most solid supporter and water giver of a great company, Huaxing has successively added Lianjia C round and Shell D round investment, and our investment bank team is also very honored to be the lead underwriter in this company's IPO. , Help Shell to reach a new level.
Shell can achieve today's results, inseparable from an excellent core management team. Stanley (Peng Yongdong) is a leader with great talents. At many key moments in the company's upgrade, his amazing learning ability and strong strategic vision are amazing.
Zuo Hui's wisdom and Shell's excellent organization and talent structure provide young people with an excellent growth platform, enabling Shell's continuous talents to innovate and strive to continue this great cause.
I always believe that entrepreneurs and investment institutions are a two-way choice, and transactions begin with trust and loyalty to trust. Here, I would like to thank Zuo Hui and the team for their long-term trust and choice. This is the foundation of Huaxing’s life and our most precious wealth.
Zuo Hui said in the prospectus "A Letter to Shareholders" that Shell may not be a cool company in today’s perception, but Shell uses cool concepts and methods to deal with traditional, heavy, dirty Tired business, vertical drastic transformation and organizational upgrade. I very much agree with this, and I am proud of being able to work with such an excellent company.
Today, the successful listing of Shell is one step closer to the vision of "Better Living". As an investor, we hope that Shell will create more new business miracles under the leadership of Zuo Hui and an excellent management team in the future; we also act as Shell The most solid comrades in arms will, as always, uphold the investment philosophy of "continuously creating value", accompany Shell, accompany more great companies, and do the right, beautiful and valuable things.
Bao Fan
August 13, 2020 in Beijing