Where should the real estate Internet platforms such as Aiwujiwu and Pingan Haofang go in terms of death and injury, frequent change of track and continuous decrease of employees?
“Investment line 1” Yang Chunxia
After five years, Fang Duoduo is going to be listed.
On October 9, Fang Duoduo formally submitted a prospectus to the US SEC, with a planned transaction code of “Duo” and a planned fundraising of 150 million US dollars. If the listing is successful, Fang Duoduo will become the first share of SaaS in China’s industrial Internet.
In fact, since 2014, there have been news that fangduo is about to go public. There are rumors that fangduo is coming to the market. Why did fangduo choose to go public at this time? What’s the future? “Investment line 1” sent a letter to Fang Duoduo in Tianyan’s open email, but no reply was received by the time of publishing.
In this regard, Zhang Dawei, chief analyst of Zhongyuan Real estate, thinks that it’s a cold winter for capital now, and the environment will be worse when it’s no longer listed. It can be proved that, almost at the same time, Qingke apartment also submitted the prospectus to the US SEC, and the free apartment and eggshell apartment were also reported to be going public in the US in the near future.
Lu Wenxi, an analyst at Zhongyuan Real Estate in Shanghai, told investment line one that Internet companies like this are basically maintained by burning money. The more eager they are to go public, the more likely they are to be unable to survive, so they must speed up the pace of going public.
Frequency variant track
According to the prospectus of fangduo, it is “the first real estate intermediary company with SaaS (software service) mode in the domestic industry”. In the words of Duan Yi, its founder, “fangduo will insist on being an independent platform, not self-employed a broker, not an offline store”.
Before that, the positioning of fanduo has experienced new housing e-commerce platform, real estate finance platform and second-hand housing trading platform. In 2011, fanduo was officially established, focusing on online transactions of new houses. In 2014, fanduo achieved a turnover of 200 billion yuan, which is equivalent to the second-hand house transaction volume of Lianjia in that year. Until 2015, the regulation and control of the real estate market increased, and many houses began to turn to the second-hand housing market.
After entering the second-hand housing market, Duan Yi proposed the second-hand housing “direct purchase and direct sale” mode, trying to use this mode to break the information barrier and achieve accurate matching of housing sources. “Direct purchase and direct sale” means bypassing the real estate intermediary, the buyer and the seller directly agree to see the real estate transaction, and the buyer and the seller will charge 2999 yuan of service fee and 0.3% of the price transaction guarantee fee.
In addition, fanduo has developed financial business. At the end of 2014, Xiao Li, former vice president of Vanke, joined fanduo and started to focus on promoting its financial service business, finding cheap funds for developers, accelerating down payment loans and other businesses. However, the good times are not long. At the end of July 2016, the “down payment” Internet financial product was characterized as illegal and officially stopped.
Frequent changes in business model reflect that fanduo has no stable profit model, which is also reflected in its performance in the past nine years. Fang Duoduo said in the prospectus that the company had a net loss from 2011 to 2016 when it was founded, including a net loss of 332 million yuan in 2016, which was not turned into profit until 2017.
According to the prospectus data, in 2017, fanduo made a profit of about 650000 yuan, with a revenue of 1.798 billion yuan. Since then, fanduo’s profit has continued to increase. In 2018, it achieved a revenue of 2.282 billion yuan and a net profit of 104 million yuan. In the first half of 2019, its net profit was 103 million yuan, an increase of 166.6% over the same period of 2018.
It needs to be noted that some insiders believe that behind turning losses into profits, it is Fang Duoduo’s large-scale layoffs and a large reduction in administrative costs. According to the prospectus, the three fees of fanduo in 2016, 2017 and 2018 were 592 million yuan, 386 million yuan and 407 million yuan respectively. Among them, the general administrative expenses are 311 million yuan, 156 million yuan and 145 million yuan respectively.
The drop in administrative costs of fanduo means more layoffs. A group of data can be proved that as of 2016, 2017 and 2018, fanduo has 2754 employees, 1402 employees and 1353 employees respectively. That is to say, in 2017, nearly 50% of the jobs of fanduo were cut, and in 2018, about 3.5% of the jobs were further cut. Downsizing to save money is key to turning housing into profit.
In 2018, fanduo began to try to change from o2o platform to tob business model, and established software such as “sell more houses” for brokers and “sell more cloud” for brokers’ management.
However, there are many competitors in the real estate brokerage market, and the competitive pressure faced by fangduo in this track is not small. Zhang Dawei, chief analyst of Zhongyuan Real estate, thinks that the current mode of fangduo is mainly to integrate small intermediary companies, while shell and 58 Tongcheng are also doing this business, and fangduo’s scale is relatively small.
In addition, according to the “2019 real estate SaaS software ranking” released by Sina home furnishing in August, the top 10 management systems do not have software names such as multi selling and multi cloud selling. That is to say, in the real estate brokerage market, fangduo not only has competitors such as anjuke and shell, but also needs to establish an earlier SaaS software company to seize the market share of b-end intermediary companies and brokers.
Where is the way?
There is no doubt that in the face of the peer’s pursuit and market pressure, Fang Duoduo needs to take the lead in opening up the capital market, especially after the peer shell search for housing has spread the news of listing, and has completed the D round of financing in July this year. According to the previous report of investment line 1, shell has successively cooperated with large brokerage brands such as real estate in the 21st century and central Internet in Nanchang in order to expand its scale and pave the way for its listing in 2021.
Of course, the more common view in the industry is that Fang Duoduo’s rush to go public may be more related to its lack of external capital “blood transfusion” for many years. “Investment line 1” learned that in addition to obtaining short-term bank loans of 295 million yuan from some Chinese banking institutions, fangduo has had four rounds of financing since its establishment, and the last financing was four years ago. In September 2015, fanduo completed round C financing, raising 223 million US dollars.
In addition, it should be noted that fangduo also faces the problems of high debt ratio and high accounts receivable. According to the prospectus, from 2016 to 2018, fangduo’s asset liability ratio was 57.98%, 73.59% and 69.44% respectively, while in the first half of 2019, fangduo’s asset liability ratio rose to 81.81%.
In terms of accounts receivable, in the first half of 2019, the accounts receivable of fangduo was US $269.8 million, which was about RMB 1.9 billion according to the current exchange rate, far exceeding the total amount of RMB 1.4 billion in 2018, accounting for 67.52% of the total current assets, while the accounts receivable reflected the ability of an enterprise to collect funds.
According to the prospectus, the maximum fundraising is $150 million, a decrease of $650 million from its rumored maximum of $800 million, or even less than its 2015 round C financing. In this regard, there are views in the industry that the decrease in the amount of fundraising means that the outside world’s expectations for housing are falling.
Yan Yuejin, a financial commentator, told investment line 1 that the reduction of similar expectations is also affected by the adjustment of the real estate industry, policy control and trade relations, and generally requires such enterprises to evaluate the listing value scientifically. “The decline in the scale of funds raised after listing is related to the listing environment and the current cooling of the real estate trading market,” Yan said.
“If there is an opportunity to go public, many follow-up houses will play a positive role in business innovation and market share expansion in the future by virtue of such listing resources and financing capabilities. At least some of their business concepts will be more mature in the future, and they will be more recognized in the market,” said Yan Yuejin.
In fact, fanduo’s listing plan has been planned since 2014. In that year, fanduo set up a wholly foreign-owned enterprise named Shenzhen fanduo Information Technology Co., Ltd. and operated fanduo entity through equity pledge, thus establishing the vie structure for overseas listing.
In the same year, Fang Duoduo also included Xiao Li, the former vice president of Vanke, in its “preparation” for listing. Xiao Li also confessed to the media that “going to Fang Duoduo is to help it get listed”. In this regard, many people think it’s only a matter of time before fanduo goes public. It needs to be mentioned that before the formal submission of the prospectus to the United States, Fang Duoduo has repeatedly heard about the listing, and even has heard about going to Hong Kong for listing.
However, there was a flash in the pan of Real Estate Internet Unicorn such as Aiwu Jiwu and Pingan Haofang. It remains to be tested whether fanduo can successfully go public and pass the customs, and create the myth of Real Estate Internet industry. (investment line 1 product) ■