On August 2, listed company 360 (hereinafter referred to as "360") released an announcement. Many investors might initially form negative opinions due to the inclusion of terrifying terms like "liquidation" and "reduction in holdings." However, there's no need for alarm as this matter does not significantly impact the listed company or investors.

[More Form Than Substance]

Firstly, it's crucial to clarify that this liquidation is not bankruptcy liquidation, nor is it due to financial difficulties or insolvency of the controlling shareholder, Qixin Zhicheng. It's simply fulfilling an agreement made years ago.

360 is China's largest cybersecurity firm. In 2016, to contribute to national cybersecurity and respond to the national call, the company delisted from the US stock market and returned to China. During this process, 36 investors contributed and loaned 20 billion yuan to help complete the delisting. Qixin Zhicheng was established as a "shareholding platform" to share the repayment responsibility. According to the agreement, shareholders could dissolve the company after repaying the loan. By June 2023, the 20 billion loan had been fully repaid, making dissolution reasonable.

From a broader perspective, this share split is more of a formal change with limited substantial impact, transforming collective shareholding into individual shareholding. The company's core issues, such as equity structure and governance, remain unchanged. Regarding investors' concerns about post-adjustment share reductions, the company has made proper arrangements.

According to the announcement, Qixin Zhicheng shareholders must comply with regulations on major shareholder share reductions, pre-disclosure, etc. For centralized bidding transactions, the total reduction cannot exceed 1% of the company's shares within any continuous 90 days. For block trades, it cannot exceed 2%.

Simply put, before liquidation, all Qixin Zhicheng shareholders' total reduction could not exceed 3% of the company's shares within 90 days. After liquidation, the combined reduction limit remains the same, indicating no change in the pace of reduction. Although the 36 investors can decide to reduce their holdings, their actions and pace will be strictly regulated, preventing large-scale reductions in a short period.

In summary, this adjustment does not affect normal operations or the company's foundation. Even if shareholders withdraw later, it won't fundamentally impact the company's development.

[Intrinsic Value Determines a Company's Future]

In recent years, A-share investors have increasingly viewed all share reductions and sales as catastrophic, a significant misconception.

The essence of capital markets is resource allocation, inherently fluid. Buying, selling, entering, and exiting are normal. For large companies, financial investors entering and leaving is common, and it doesn't significantly alter the company's future trajectory. Sometimes, the departure of old investors and arrival of new ones can revitalize a company. Globally, companies like Apple, Microsoft, Google, Amazon, Alibaba, and Tencent have seen early investors withdraw, yet they continue to thrive.

Ultimately, a company's future depends on its intrinsic value. Instead of focusing on shareholder changes, pay more attention to the company's value and prospects.

Years ago, China's top leaders emphasized that "without cybersecurity, there is no national security" and vigorously promoted the development of China's cybersecurity industry. According to IDC data, China's cybersecurity market accounts for about 1.8% of the information market, less than half the global average of 3.7% and far below the US's 4.7%.

This shows China's cybersecurity industry has vast untapped potential. The recent Microsoft blue screen incident serves as a reminder that this field must be firmly controlled.

As a leader in China's cybersecurity sector, 360 undertakes critical national research tasks and serves as a cybersecurity service provider for cities, governments, enterprises, and critical information infrastructure. Over the past decade, 360 has invested nearly 30 billion yuan to help establish China's cyberspace "early warning and anti-missile system," addressing key challenges. To date, 360 has independently detected tens of thousands of advanced threat attacks from 54 foreign state-sponsored hacker groups, accounting for 98% of the industry. Consequently, 360 is the only cybersecurity company subject to dual sanctions by the US Commerce Department and Department of Defense, listed on both the "Entity List" and "Chinese Military Companies List."

360 excels in both cybersecurity and AI.

On August 1, at the opening of ISC.AI 2024, Zhou Hongyi officially launched the "AI Assistant." Built into 360's flagship products, users can access AI features without installing additional plugins. They can also switch between 16 domestic mainstream AI models with a single click.

Individually, domestic AI models struggle to compete with OpenAI, but collectively, they pose a formidable challenge. 360's genius lies in integrating China's strongest AI resources, leveraging each model's strengths. The latest evaluation shows that the 360 CoE AI-powered AI Assistant Beta outperforms GPT-4 in 11 individual ability tests, boosting China's AI industry.

To plan for long-term growth, 360 has made substantial strategic investments in cybersecurity and AI, temporarily impacting short-term profitability amidst a challenging capital market environment. However, this state is unsustainable. As the Fed nears interest rate cuts, global capital markets will recover, and 360 will enter a harvest period, enhancing profitability.

Despite rumors, since 360's listing, founder Zhou Hongyi has never sold a single share, demonstrating commitment and confidence. After liquidation, he pledged not to reduce holdings for at least 12 months, expressing continued confidence in the company's future.

The founder is the soul of a company. As long as Zhou Hongyi is at the helm, 360 remains promising. If even the Americans struggle with this company, why shouldn't we be optimistic?

Disclaimer

This article involves listed companies based on publicly disclosed information (including but not limited to temporary announcements, periodic reports, and official interaction platforms). The information or opinions herein do not constitute investment or other business advice. Market Value Observation assumes no responsibility for any actions taken based on this article.

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