Being questioned, misunderstood, and periodically bearish are inevitable troubles in the growth process of any company. However, if it can endure these challenges, it can continuously achieve progress and create greater value for shareholders.

On July 31st, a rainy day in Beijing, the China National Convention Center was still packed with guests. The annual Internet Security Conference (ISC) is the most important industry event hosted by 360 Security Inc. every year. This year marks the 12th ISC. Qihoo 360 Chairman Zhou Hongyi proposed the bold statement of "advertising for the country," stunning the audience. Subsequently, 360 announced the launch of a new generation of AI products and partnered with 15 large model companies to create "AI Assistants."

The day after the conference, 360's stock rose slightly against the market trend. However, on the evening of August 2nd, 360 Security Inc. announced that Qixin Zhicheng, its largest shareholder, would dissolve and liquidate.

360 stated that although Qixin Zhicheng's dissolution and liquidation have changed the company's shareholder structure, Zhou Hongyi will become the largest shareholder, continue as Chairman, and maintain the stability of the management team.

According to Lu Jiu Business Review, 360 will seize new AI opportunities, focus on its "Security + AI" strategy, and strive to create greater value for shareholders.

Split Was Inevitable

Around eight years ago, in July 2016, 360 successfully delisted from the U.S. stock market and then listed on the domestic A-share market through a backdoor listing, marking a crucial step in its transformation towards network security and serving the country.

Operationally, Tianjin Qixin Zhicheng was merely a shareholding platform for 36 investors, including Zhou Hongyi himself and 35 other minor shareholders. These investors helped 360 delist from the U.S. and provided loan guarantees, essentially acting as white knights. Nowadays, it is reasonable that the 37 investors, through a shareholders' meeting resolution, have decided to dissolve and liquidate, transforming their indirect holdings into direct ones.

As Confucius wrote in the "Great Harmony - Chapter on Ranks," "Public property is the wealth of many people, and management involves its circulation." The ancients understood the essence of management, which remains true today. Companies integrate different shareholders within different cycles to seek the best development path at that moment. Tianjin Qixin Zhicheng is a prime example of this.

Changes in shareholding structure do not affect a company's strategic positioning and business development. Looking back –

After successfully listing on the A-share market, 360 began transforming its business towards network security. According to public information, 360 has been involved in the cybersec work of various domestic ministries, financial institutions, large state-owned enterprises, and major events such as the G20 Summit, military parades, and the Belt and Road Initiative.

Based on technical underpinnings, in March 2020, 360 claimed to have discovered an 11-year-long cyber infiltration attack by the CIA targeting various critical sectors in China, including oil and aerospace, and even disclosed some technical means. Consequently, in May of the same year, the U.S. government imposed various sanctions against 360.

Although 360 has actively sought to boost revenue over the past few years, its share price has struggled due to factors such as U.S. sanctions. Essentially, 360 employs a unique business model, using cash flow from online advertising to support its future cybersecurity business.

Fortunately, according to the dissolution and liquidation announcement of Qixin Zhicheng, the RMB 20 billion in loans jointly taken out by 360 investors have been fully repaid by June 2023. After liquidation, Qixin Zhicheng will split into 36 minor shareholders who will directly hold shares in the listed company, and the largest shareholder will change from Qixin Zhicheng to Zhou Hongyi.

This also signifies that the capital model represented by Qixin Zhicheng, which played a significant role in 360's privatization and return to the A-share market, has finally reached the end of its historical stage.

Compliance, Rationality, and Alignment with Trends

After the announcement, major securities trading platforms were flooded with bearish comments, suggesting that this move might pave the way for subsequent share reductions. However, amidst the clamor, a rational perspective might reveal insights into 360's capital maneuver.

From a compliance perspective, the strictest share reduction policy in history has just been implemented for over two months. Against this backdrop, listed companies' equity changes and share reductions (especially those of well-known enterprises) are undoubtedly well-considered decisions made under the new policy framework. Compliance is paramount for any industry or enterprise.

From a rationality perspective, for 360 itself, the original intention behind establishing Qixin Zhicheng was to facilitate 360's return to the A-share market. Zhou Hongyi's goal has always been 360's future, not short-term profits. To advance the new "Security + AI" strategy, the previous capital model may no longer be suitable, necessitating a new structure.

From a trend perspective, projecting the case of 360 and Qixin Zhicheng onto the broader market, it is not unlikely that a wave of enterprises will adopt capital models tailored to their current growth pace in the coming period. Capital inflows and outflows are normal, and the market should view them objectively.

Notably, this announcement highlights three core points worthy of market attention –

Firstly, 360's operations will remain unaffected, with stable management and board of directors. Zhou Hongyi will continue as the actual controller, facilitating better company management. As Zeng Guofan said, "Profits can be shared but not monopolized, and plans can be made by few but not by many, for exclusive profits lead to failure, while excessive consultation leads to leaks."

Secondly, Qixin Zhicheng shareholders have pledged that regardless of how many times the shares are redistributed after liquidation, the final shareholders will continue to jointly abide by the 1% + 2% share reduction limit.

Thirdly, 360 founder Zhou Hongyi has pledged not to reduce his shareholdings for at least 12 months. Previously, Zhou Hongyi has made multiple "no share reduction" pledges, all of which he has strictly adhered to.

As the founder and Chairman of 360, Zhou Hongyi has remained true to his original aspirations since the company's listing. He has vowed to "walk with 360, excel in our services to the country, and stand firm in safeguarding national cybersecurity."

Eight years later, whether at the macro level, the industrial landscape, or 360's own business development, the world has undergone tremendous changes.

To propel a company towards a second phase of growth in a new cycle, addressing internal issues is paramount, echoing the logic behind 360's privatization and return to the A-share market. This applies not just to 360 but to any enterprise.

Anchoring the "Security + AI" Strategy

Beyond capital considerations, focusing on the business itself, from leading 360 into the B2B cybersecurity space in 2019, to emphasizing visibility as the key capability in cybersecurity as the "Chief Cybersecurity Architect," to advocating for "360 Security Cloud" to empower various industries, and finally, boldly proclaiming "ALL in AI" amidst the global AI trend sparked by ChatGPT...

Zhou Hongyi's recent public appearances have largely revolved around promoting the cybersecurity industry. Whether by consistently hosting the Internet Security Conference (ISC) or finding time to become an influencer as a "new energy vehicle experience officer," his ultimate goal is to leverage his personal influence to attract traffic and drive 360's business growth, particularly in large models.

Some even comment that compared to his past self, Zhou Hongyi now exudes a stronger sense of patriotism.

Based on the outcomes announced at the recently concluded 12th ISC, 360's "Security + AI" strategy has made two significant advancements:

Firstly, leveraging technology and scenarios, 360's Security Large Model is complete, enabling automated attack detection and response. The company is establishing security service platforms in 30 cities to provide automated security services to millions of enterprises. Furthermore, developing the Security Large Model is crucial for advancing towards autonomous driving amidst the trend towards cleaner transportation.

Secondly, the process of using AI to reshape internet products is accelerating. Currently, 360 AI Search ranks first domestically and third globally in terms of visits. The next step for 360 Browser is full AI integration, and the new generation of AI-powered children's watches sold over 10,000 units in a single live stream. Moving forward, the company will launch AI office membership services as soon as possible, bringing intelligent products closer to users.

It is foreseeable that riding the wave of AI Large Models, 360 is poised to create a synergistic effect across security, search, office, and other business areas, enhancing its connections with enterprises of all sizes. Despite potential questions, misunderstandings, or periodic bearish sentiment, enduring these growing pains will lead to progress and continued value creation for shareholders.