《Golden Research》 Southern Capital Center Written by Wang Shan / Authors: Xi Zhou, Ying Wei, Hong Li / Risk Control

In recent years, the popularity of spin-off IPOs in A-shares has not waned. Among them, as a company under the same control as Yonyou Auto Information Technology (Shanghai) Co., Ltd., Yonyou Financial Information Technology Co., Ltd. (hereinafter referred to as "Yonyou Finance") was also spun off to make a splash in the capital market. However, since planning to list on the Selected Layer in 2021 and subsequently applying to change to listing on the Beijing Stock Exchange, after more than three years, Yonyou Finance pressed the "brake button" and recently withdrew its IPO application.

Looking at the background of this spin-off IPO, from 2021 to 2023, the net profit of the controlling shareholder, Yonyou Network Technology Co., Ltd. (hereinafter referred to as "Yonyou Network"), declined. In 2023, Yonyou Network incurred a loss of over RMB 900 million, while Yonyou Finance achieved a net profit of over RMB 90 million during the same period. The rules for spin-off IPOs state that listed companies need to meet conditions such as consecutive profitability for the last three years and a cumulative net profit excluding the spin-off subsidiary of not less than RMB 600 million. The above-mentioned net profit situation of Yonyou Finance may be difficult to fill the "hole" in the net profit required for Yonyou Network's spin-off IPO. In addition, behind the push for listing, there may be hidden inter-industry competition between Yonyou Finance and its controlling shareholder, Yonyou Network, encountering a "triple question." While Yonyou Finance claims that there is no similarity in business with related parties, it may share the same customers with enterprises controlled by the controlling shareholder, and there may be overlapping service content in winning bid projects.

I. The controlling shareholder's performance declines, incurring a loss of over RMB 900 million, and Yonyou Finance may find it difficult to fill the "hole" in the spin-off IPO

On April 12, 2024, the China Securities Regulatory Commission issued the "Opinions of the State Council on Strengthening Supervision, Preventing Risks, and Promoting High-Quality Development of the Capital Market," pointing out that the entry threshold for issuance and listing should be strictly controlled, and spin-off IPOs should be strictly regulated.

In this regard, from 2021 to 2023, the performance of Yonyou Network, the controlling shareholder of Yonyou Finance, continued to decline, with a loss of over RMB 900 million in 2023. Under these circumstances, Yonyou Network still intended to spin off Yonyou Finance for listing, but Yonyou Finance's net profit in 2023 was less than RMB 100 million.

1.1 The controlling shareholder, Yonyou Network, sees a decline in performance and is questioned, with net profit "diving" to a loss of over RMB 900 million in 2023

Looking back at Yonyou Finance's IPO journey, the Tutoring registration date for Yonyou Finance's listing on the Selected Layer was April 23, 2021.

From November to December 2021, Yonyou Finance planned to list on the Selected Layer and subsequently applied to change to listing on the Beijing Stock Exchange.

According to Eastmoney Choice data, from 2020 to 2023 and January to June 2024, Yonyou Finance's operating revenues were RMB 427 million, RMB 513 million, RMB 598 million, RMB 640 million, and RMB 230 million, respectively. From 2021 to 2023, Yonyou Finance's revenue growth rates were 20.1%, 16.65%, and 6.96%, respectively.

From 2020 to 2023 and January to June 2024, Yonyou Finance's net profits were RMB 78.35 million, RMB 88.30 million, RMB 92.40 million, RMB 97.33 million, and RMB 4.97 million, respectively. From 2021 to 2023, Yonyou Finance's net profit growth rates were 12.71%, 4.64%, and 5.33%, respectively.

It is not difficult to see that from 2020 to 2023, Yonyou Finance's revenue and net profit both maintained growth.

The performance of Yonyou Finance's controlling shareholder has also attracted significant regulatory attention regarding this IPO.

According to the "Response to the Letter on Implementing the Opinions of the Listing Committee's Review Meeting from Yonyou Financial Information Technology Co., Ltd. and Huatai United Securities Co., Ltd." dated September 5, 2023, the regulatory authorities required Yonyou Finance to further disclose the performance decline of its controlling shareholder, Yonyou Network, and its impact on the operational stability of Yonyou Finance, and to provide major event prompts and risk disclosures.

In response, Yonyou Finance stated that after June 2023, Yonyou Network's contract signing continued to maintain a good growth momentum. As of the end of July, the cumulative contract signing amount had increased at a year-on-year growth rate of 5.3%, and it was expected that Yonyou Network's business trend would continue to improve.

However, in 2023, Yonyou Network's performance may have been "unsatisfactory."

According to Yonyou Network's annual report, from 2019 to 2023 and January to September 2024, Yonyou Network's operating revenues were RMB 8.512 billion, RMB 8.528 billion, RMB 8.932 billion, RMB 9.262 billion, RMB 9.796 billion, and RMB 5.738 billion, respectively. From 2020 to 2023, Yonyou Network's revenue growth rates were 0.19%, 4.73%, 3.69%, and 5.77%, respectively.

From 2019 to 2023 and January to June 2024, Yonyou Network's net profits attributable to shareholders of listed companies were RMB 1.181 billion, RMB 985 million, RMB 708 million, RMB 219 million, RMB -967 million, and RMB -1.455 billion, respectively. From 2020 to 2023, Yonyou Network's net profit growth rates attributable to shareholders of listed companies increased by -16.58%, -28.18%, -69.03%, and -541.28%, respectively.

It can be seen that for the entire year of 2023, the controlling shareholder, Yonyou Network, experienced a sharp decline in net profit and fell into a loss.

As a listed company, Yonyou Network planned to spin off its subsidiary, Yonyou Finance, for listing on the Beijing Stock Exchange. The requirements for the relevant spin-off IPO are worthy of attention.

1.2 The rules for spin-off IPOs state that listed companies need to meet conditions such as consecutive profitability for the last three years and a cumulative net profit excluding the spin-off subsidiary of not less than RMB 600 million

According to the "Rules for the Spin-off of Listed Companies (Trial)" (hereinafter referred to as the "Rules for the Spin-off of Listed Companies") promulgated by the China Securities Regulatory Commission on January 5, 2022, and still in effect, the spin-off of listed companies should, in principle, simultaneously meet four conditions: (1) The listed company's shares have been listed domestically for at least three years.

(2) The listed company has been consecutively profitable for the last three fiscal years.

(3) After deducting the net profit of the subsidiary to be spun off based on equity, the cumulative net profit attributable to shareholders of listed companies shall not be less than RMB 600 million for the last three fiscal years of the listed company (for the calculation of net profit involved in this rule, the lower value before and after deducting non-recurring gains and losses shall be used as the basis).

(4) The net profit of the subsidiary to be spun off based on equity in the consolidated financial statements of the listed company for the most recent fiscal year shall not exceed 50% of the net profit attributable to shareholders of listed companies; the net assets of the subsidiary to be spun off based on equity in the consolidated financial statements of the listed company for the most recent fiscal year shall not exceed 30% of the net assets attributable to shareholders of listed companies.

1.3 In 2023, Yonyou Finance earned a profit of over RMB 90 million, which may be difficult to "fill" the "hole" in Yonyou Network's spin-off IPO

Regarding the condition that "the listed company's shares have been listed domestically for at least three years," Yonyou Network's shares were listed on the Shanghai Stock Exchange on May 18, 2001, over 23 years ago, meeting the requirement of "listed domestically for at least three years."

Regarding the condition that "the listed company has been consecutively profitable for the last three fiscal years," Yonyou Finance began planning to list on the Beijing Stock Exchange at the end of 2021. At that time, the most recent three fiscal years may have been 2019-2021, during which the controlling shareholder, Yonyou Network, achieved positive net profits for all three years. However, as of November 5, 2024, Yonyou Finance had not yet successfully listed on the Beijing Stock Exchange, and the most recent three fiscal years at that time were 2021-2023, during which Yonyou Network incurred a net loss in 2023 and failed to achieve profitability, potentially not meeting the requirement of "consecutive profitability for the last three fiscal years."

It should be noted that since 2024, several listed companies have successively withdrawn their spin-off IPO plans.

Among them, according to public information cited by the China Futures Association on April 16, 2024, on March 30, 2024, Shanghai Automotive Industry Corporation Limited announced the termination of the spin-off and listing of its subsidiary on the STAR Market; on March 12, 2024, Shenzhen Topband Co., Ltd. announced the termination of the spin-off and listing of its subsidiary on the ChiNext Board.

It is not difficult to see that from 2021 to 2023, Yonyou Network's net profit continued to decline, with a net loss of over RMB 900 million in 2023. Under these circumstances, Yonyou Network failed to achieve consecutive profitability for the last three years, namely, 2021-2023.

In addition, in 2023, Yonyou Finance's net profit was over RMB 90 million, while Yonyou Network incurred a loss of over RMB 900 million during the same period. During the same period, even considering the extreme values of various factors such as internal transaction offsets, investment ratios, and equity distributions, combined with the net profit situations of Yonyou Finance and Yonyou Network, it may still be difficult to fill the "hole" in Yonyou Network's spin-off IPO. Whether Yonyou Network can meet the requirements of the above-mentioned spin-off IPO rules remains questionable.

II. Behind the claim that there is no similarity in business with related parties, there are the same customers and potentially overlapping service content

During the process of a company's IPO application, the existence of inter-industry competition can affect the business independence of the company planning to list, making it difficult for the company to effectively and independently conduct business, thereby posing a potential risk of damage to the interests of shareholders.

Looking at Yonyou Finance, during the reporting period, it not only shared contact information with companies under the same control but may also have had the same customers, and the project content won by both parties was also highly similar.

2.1 Inter-industry competition faces a "triple question," claiming potential competition with related parties but denying similarity and asserting significant differences

According to public information from the Beijing Stock Exchange, as of the inquiry date of November 5, 2024, Yonyou Finance had issued three rounds of inquiry responses. In all three versions of the inquiry responses, the regulatory authorities required Yonyou Finance to explain whether there was significant adverse inter-industry competition with its controlling shareholder, Yonyou Network, and its subsidiaries.

Specifically, according to the "Response to the Third Round of Review Inquiry Letter Regarding the Application Documents for the Public Offering of Shares and Listing on the Beijing Stock Exchange of Yonyou Financial Information Technology Co., Ltd." dated July 12, 2023 (hereinafter referred to as the "Third Round of Inquiry Response"), Yonyou Finance stated that software and information services in the financial industry have obvious industry barriers, and there are substantial obstacles for Yonyou Network and other subsidiaries it controls to replace the issuer's related products; for customers within Yonyou Finance's business scope, the products of Yonyou Network and other subsidiaries it controls cannot replace Yonyou Finance's products.

From 2020 to 2022, among Yonyou Network and other subsidiaries it controls, there were cases where contracts were signed with financial industry customers attributed to Yonyou Finance as stipulated in the Business Scope, mainly including the following situations: to ensure orderly business operations and maintain good customer relationships, Yonyou Network and other subsidiaries it controls provided follow-up operation and maintenance services or upgrade and renovation services to existing financial industry customers (hereinafter referred to as the "Existing Customers Scenario").

In addition to the above situations, there were also a small number of cases where Yonyou Network and other subsidiaries it controls signed contracts with new projects providing enterprise management software products and services for financial industry customers within Yonyou Finance's business scope (hereinafter referred to as the "New Projects Scenario").

The Existing Customers Scenario usually belongs to the continuation of previous projects, and there is no similarity or significant similarity with Yonyou Finance's business, which will not have a significant impact on Yonyou Finance's business. Out of prudence, it is strictly determined that there is a certain potential competition between the above situations and Yonyou Finance's business, but it does not constitute significant adverse inter-industry competition.

The products involved in the New Projects Scenario are not the same as Yonyou Finance's products and have significant differences. Out of prudence, it is strictly determined that there is a certain potential competition between the above situations and Yonyou Finance's business, but it does not constitute significant adverse inter-industry competition.

It is not difficult to see that Yonyou Finance stated that whether it is the Existing Customers Scenario or the New Projects Scenario, it is strictly determined that there is a certain potential competition between related parties and Yonyou Finance, but Yonyou Finance claimed that there is no similarity and there are significant differences between the two parties' businesses.

However, another company controlled by the controlling shareholder, Yonyou Network, shares contact information with Yonyou Finance.

2.2 Shared contact information with YouTai Business Services, a company under the same control, from 2022 to 2023, and the corporate email holder shares the same name as a supervisor of Yonyou Finance

According to the "Prospectus of Yonyou Financial Information Technology Co., Ltd." dated September 12, 2023 (hereinafter referred to as the "Prospectus dated September 12, 2023"), as of July 2023, YouTai (Beijing) Business Services Co., Ltd. (hereinafter referred to as "YouTai Business Services"), controlled by the controlling shareholder, Yonyou Network, specializes in life insurance technology services.

According to market supervision and administration data, YouTai Business Services was established on December 20, 2019. As of the inquiry date of November 5, 2024, YouTai Business Services remained a subsidiary controlled by Yonyou Network.

From 2020 to 2023, the number of employees of YouTai Business Services who paid social security contributions was 32, 72, 28, and 20, respectively.

From 2022 to 2023, YouTai Business Services' contact numbers were ***32541 and ****6688, respectively, and its email address was 752***592@qq.com, with its correspondence address located in Beijing.

"Coincidentally," from 2022 to 2023, Yonyou Finance shared contact information with YouTai Business Services.

According to market supervision and administration data, from 2022 to 2023, Yonyou Finance's contact number was 010-62432541, and its email address was 752***592@qq.com. Moreover, the phone number 010-62432541 was used by Yonyou Finance first.

It is not difficult to see that from 2022 to 2023, YouTai Business Services, a company under the same control, shared contact information with Yonyou Finance.",

According to the "Announcement of the Bidding Results for the 2022-2023 Group New Media Operation Project of the People's Insurance Company of China" released by the Business Operation Platform of the Gold Purchasing Committee on November 18, 2022, the bidder (hereinafter referred to as "PICC") is YouTai Business Services, with a bid price of 2.601 million yuan. The winning bid includes the operation services of new media platforms, including but not limited to content production and operation maintenance of group official WeChat, video numbers, Weibo, Douyin, Kuaishou, and other platforms.

According to the "Announcement of the Bidding Results for the Construction and Operation Project of the 2023 Digital Customer Management System of PICC Life Insurance" released by PICC on February 24, 2023, the bidder is PICC, and the winning bidder is YouTai Business Services with a winning bid price of 3.225 million yuan. The winning bid includes the construction and operation services of the digital customer management mechanism on the WeChat platform.

It can be seen that from 2021 to 2023, YouTai Business Services has successively provided services such as internet marketing promotion and new media platform operation services to China Life, PICC Life, and PICC.

The aforementioned clients of YouTai Business Services may be important clients of UFIDA Finance.

2.4 There is overlap between the clients of UFIDA Finance and YouTai Business Services, and UFIDA Finance has also won the bid for internet content operation service projects

According to the prospectus dated September 12, 2023, and the 2023 annual report, classified by the financial institutions to which clients belong, UFIDA Finance's revenues in the insurance industry from 2020 to 2023 were 28.1671 million yuan, 14.8743 million yuan, 25.1368 million yuan, and 69.1669 million yuan, respectively, accounting for 6.6%, 2.9%, 4.2%, and 10.83% of the total primary business revenue, respectively.

It should be noted that the prospectus's "Regular Overall Planning for Customer Management" shows that UFIDA Finance conducts overall planning for the management of its major clients, including customer culture research, customer business research, customer marketing planning, and customer demand exploration.

According to the "Response to the Inquiry Letter on the Application Documents for the Public Offering of Shares and Listing on the Beijing Stock Exchange of UFIDA Financial Information Technology Co., Ltd." dated July 12, 2023, the prospectus dated September 12, 2023, and the 2023 annual report of UFIDA Finance, during the reporting period from 2020 to 2022, China Life, PICC Life, and PICC were important clients of UFIDA Finance.

Moreover, there may be overlap between the services provided by UFIDA Finance to these clients and those provided by YouTai Business Services.

According to the "Announcement of the Bidding Results for the 2023-2024 Group Integrated Platform Internet Operation and Promotion Project" released by PICC on April 7, 2024, the bidder is PICC, and the winning bidder for content operation in Package 01 is UFIDA Finance.

According to the previous bidding announcement for this project, the bidding qualification for this section requires that the bidder should have cases of internet content operation services in the financial or insurance industry in the past three years (from January 1, 2021, to February 7, 2024), including experience in content marketing copywriting services and promotion for C-end clients on platforms such as official accounts, Xiaohongshu, Zhihu, and APPs, including but not limited to graphic and video content.

From the above situations, it can be seen that during this IPO, UFIDA Finance has been questioned three times about whether there is horizontal competition between it and the enterprises controlled by its controlling shareholder. In response, UFIDA Finance stated that strictly speaking, there is a certain potential competition between the controlling shareholder and its controlled enterprises and UFIDA Finance, but there is no similarity in their businesses, which are significantly different.

However, as an enterprise under the same control as UFIDA Finance, YouTai Business Services shared contact information with UFIDA Finance from 2022 to 2023, and the contact phone number was used by UFIDA Finance first. Moreover, from 2021 to 2023, YouTai Business Services won bids for projects providing marketing and internet operation services, and the bidders were also clients of UFIDA Finance. In 2024, UFIDA Finance also won a bid for an internet content operation service project for one of these clients, where potential business competition may warrant attention.