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Source: Time Weekly Author: Yan Xiaohan

Oriental Selection (01797.HK) still lost Dong Yuhui.

On July 25, Oriental Selection issued an announcement stating that Dong Yuhui has decided to no longer serve as an employee of the company and senior management of a merged affiliated entity of the company. The resignation was due to Dong Yuhui's career ambitions, commitment to his other careers and personal time arrangements, and took effect on the day the announcement was issued.

The announcement shows that in addition to paying all the promised benefits and compensation to Dong Yuhui, Yu Minhong has sought approval from the board of directors and the board's remuneration committee to distribute all the remaining undistributed profits of Youhui Xingxing to Dong Yuhui. According to the announcement, Youhui Xingxing had a net profit of 141 million yuan from its establishment on December 22, 2023 to June 30 this year.

In addition, according to the listing rules and the company's articles of association, Yu Minhong has made arrangements for the settlement price of Dong Yuhui's acquisition of Yuhui Tongxing. In order to maintain the normal operation of Yuhui Tongxing, the company will provide Yuhui Tongxing with its self-developed information system free of charge.

Dong Yuhui live broadcast screen

Regarding this incident, on July 25, a reporter from the Times Weekly contacted Oriental Selection, and relevant sources said that the announcement should be taken as the final word.

On the day of the announcement, the share price of Oriental Selection closed at HK$12.40 per share, an increase of 4.20%. However, in the long run, the share price of Oriental Selection has fallen by 55.40% since the beginning of the year. As of the close of the U.S. stock market on July 25, the share price of New Oriental (EDU.NYSE) closed at US$70.33 per share, a decrease of 5.46%.

The long-planned departure

The breakup was planned four months ago. Yu Minhong revealed in an open letter released on July 25 that he and Dong Yuhui met several times around March this year to discuss the subsequent development plan of Yuhuixing.

"In order to ensure that Yuhui Tongxing has a better development platform and avoid business conflicts and public opinion disputes, we have repeatedly negotiated and finally decided that after the end of the fiscal year (May 31), I will ask the board of directors for approval to transfer 100% of Yuhui Tongxing's shares to Yuhui himself." Yu Minhong said.

Oriental Selection announces the reason for Dong Yuhui's resignation

Now, Yuhui Xingxing has finally gone solo. According to the announcement, Dong Yuhui acquired 100% of the equity of Yuhui Xingxing for 76.5855 million yuan. Since July 25, Yuhui Xingxing has officially become independent from Dongfang Zhenxuan.

However, Yu Minhong stated in an open letter that Dong Yuhui holds the equity purchase funds required by Huitongxing, which will be arranged for payment in a manner consistent with the rules of listed companies and the company's articles of association.

He explained in the comment section: "What this means is that I arranged the money for Yuhui to buy the company, and the company was given to Yuhui."

Dong Yuhui, another party involved in the incident, also responded on the same day, saying, "Taking into account the current actual situation and development plan, after friendly consultation and unanimous decision by both parties, Huixingxing will start to operate independently."

Dong Yuhui said that Yu Minhong will arrange the settlement of the equity purchase money required for the acquisition of Yuhui Tongxing in a manner that complies with the rules and articles of association of listed companies. Yuhui Tongxing will also be able to maintain the company's operations and expenses such as rent and employee wages for a period of time in the future.

Yu Minhong expressed his sincerity at the beginning of the establishment of Yihui Tongxing. In the above open letter, he said that (for the newly established Yihui Tongxing), no matter how the company operates, Dong Yuhui will be given an attractive guaranteed income (cash + equity). If Yihui Tongxing has a profit, Dong Yuhui can continue to receive half of the company's net profit.

Yu Minhong also said that he and the board of directors had no requirements for the profits of Youhui Xingxing, and Dong Yuhui could focus on recommending books, interviewing writers and promoting cultural and tourism.

Oriental Selection may have already prepared for Dong Yuhui's departure

In December last year, Yuhui Tongxing (Beijing) Technology Co., Ltd. was officially established, with Dong Yuhui as director and general manager, and fully in charge of the company's business decisions. However, the company is still 100% controlled by Dongfang Zhenxuan, and the GMV of Yuhui Tongxing's live broadcast room must be included in Dongfang Zhenxuan's financial report.

At that time, Oriental Selection was in the midst of a public opinion storm over the "Small Composition Incident". An internal conflict of the company was exposed to the public, and even though Yu Minhong came out to explain, he failed to prevent Oriental Selection from losing a large number of fans, stock price fluctuations, and reputation damage. In the end, Sun Dongxu, the former CEO of Oriental Selection, was dismissed, and Dong Yuhui was promoted to senior partner of Oriental Selection and had his own independent account. The incident was initially settled.

On July 11 this year, Yuhuixingxing moved out of the New Oriental headquarters building and chose the new office area in the Internet Finance Center of Haidian District. On the evening of July 21, Yuhuixingxing started its first live broadcast after the relocation in the new office, ranking first on the Douyin live broadcast sales list that night.

Dong Yuhui and Yu Minhong in the same frame

However, the "Small Composition Incident" still caused a rift between Dongfang Zhenxuan and Yuhui Xingtong. Yu Minhong publicly stated that the sudden outbreak of what netizens defined as the "Small Composition Incident" caught people off guard and exposed many problems. "Yuhui and I fell into an awkward situation, and the company also fell into turmoil."

After the "Small Composition Incident", Dongfang Zhenxuan has not been able to truly get out of the turmoil, and the public opinion crisis has always been a sword of Damocles hanging over its head. The impact of public opinion not only stays at the level of the company's reputation, but also spreads to the capital market.

In February this year, Dong Yuhui refused to explain underwear three times. Later, Dong Yuhui, who was caught up in the hot search, cleared the content of his Weibo account, saying that he could not accept being misunderstood repeatedly.

This behavior directly caused the share price of Oriental Selection to fall by more than 3% at the close on February 27. On June 3, Yu Minhong said in a live broadcast that "Oriental Selection is in a mess now", which later became a hot search, and Oriental Selection's share price plummeted by 9.92% that day.

Going solo with Yuhui Xingxing means that its sales data will no longer be included in Oriental Selection’s financial report, which may have a significant impact on Oriental Selection’s performance.

In this regard, Internet analyst Ding Dao Shi told the Times Weekly reporter that Dong Yuhui's personal traffic has a great impact on Oriental Selection. His departure may have a devastating impact on the company, and the impact may further ferment in the future.

Internet analyst Zhang Shule told the Times Weekly reporter that Dong Yuhui's departure will indeed have an impact on Dongfang Zhenxuan's short-term financial report data. However, Dongfang Zhenxuan's real moat is its industrial chain and expansion in the cultural tourism field. Dongfang Zhenxuan can look for the next opportunity for explosion.

However, from another perspective, Oriental Selection may have already begun preparing for Dong Yuhui's departure.

Previously, Oriental Selection has continuously expanded its live broadcast team and strengthened the construction of its brand matrix. At the same time, self-operated products have become the focus of Oriental Selection's layout. According to the financial report, as of November 30, 2023, the number of Oriental Selection's self-operated products exceeded 264, generating revenue of approximately 1.9 billion yuan, accounting for 78.84% of the overall e-commerce business.