news

tencent news "perspective"

author｜xie zhaoqing

editor｜liu peng

li xiaojia, 63, is a new entrepreneur and has just been in the industry for three years.

before starting his own business, li xiaojia served as the chief executive of the hong kong stock exchange for ten years. earlier, he wasjpmorgan chase, merrill lynch, two top international investment banks in china.

in february 2021, he and his partner zhang gaobo started a business in hong kong and established drip tong company. the company has created a new investment model: investing in physical chain stores, sharing revenue based on daily turnover, and collecting investment returns. this money is not equity or debt, but a daily cash flow share of each store connected through the system.

in the past three years, drip irrigation has invested in a total of 13,000 stores, involving a capital of 4.4 billion yuan. during this period, due to the innovative nature of the revenue sharing model, li xiaojia was once questioned by outside investors about the "non-stock" and "non-debt" nature of his project. he was also questioned by the outside world when the company made structural and personnel adjustments in may this year. misunderstanding.

after nearly four months of internal adjustments, on september 26, li xiaojia and zhang gaobo once again stood in the spotlight in macau and officially launched the drip irrigation connect macau exchange (mcex) "drip irrigation star" overall system and series. exchange products, this is an upgrade of the exchange's business strategy, and it also once again expresses to the market diguantong's determination to completely end early self-operated investments.

prior to this, on the afternoon of september 23, tencent news "perspective" had an exclusive conversation with li xiaojia in central, hong kong. although a lot has happened in the past and the current entrepreneurial environment is still severe, xiaojia li has not changed much from before. when talking, he still does not look like a person with burdens and pressure.

looking back on his entrepreneurial journey over the past three years, li xiaojia said without hesitation, "i carried away for a while (note, i was overconfident and complacent)." in his words, when the outside world said that drip investment was doing well, li xiaojia habitually believed that he could continue to invest more.

he originally planned to put the brakes on drip irrigation in october 2023. he knows very well that self-operated investment is just to test the market, but when the company's investment scale becomes large, there will be a kind of inertia. li xiaojia told tencent news "perspective" that this kind of inertia will expose the weaknesses of human nature and start to make him believe in the original genes. things that i don’t believe in, such as investing.

li xiaojia admitted that before and after this, he knew that he was not good at investing.

“it would have been better if we stepped on the brakes earlier (note, it refers to stopping self-operated investment).” li xiaojia pondered for a moment and told tencent news “perspective”, “but i still feel that the time we put on the brakes is a little bit late, not too late.”

after applying the brakes completely, li xiaojia thought it would stop quickly, but to his surprise, there were already several hundred people working in drip tong. like most companies, it needed a slow stopping process.

this process was the most difficult time in li xiaojia's entrepreneurial career. he told tencent news "perspective" that "the most painful time is when personnel adjustments are made."

this is because li xiaojia clearly knows that these people who need to leave have not done anything wrong, but the objective factors of the macro economy, the company's own development stage needs, and the decision to ensure the exchange's long-term capital strategic reserves, investment business needs "one size fits all", and then focus on doing one thing well - the macau exchange, "it's like starting over."

on the afternoon of september 26, li xiaojia announced the official launch of the overall market system of drip tong asx: drip star. this is a financial market based on "real cash flow". the products traded by investors are based on income. cash dividend rights.

compared with traditional stock exchanges, such as the hong kong stock exchange, drip tong asx "drip star" is based on digitization, allowing small and micro market entities to raise funds in the capital market faster and at a lower cost.

for investors, under the framework of the drip exchange, listed institutions regularly pay dividends at high frequencies; for listed institutions, listing on the drip exchange eliminates the need for them to go through the complicated processes of traditional exchanges and pay expensive intermediaries. institutional fees, etc. (note, the current intermediary costs for hong kong ipos are tens of millions or even over 100 million). at the same time, the exchange requires listed institutions to regularly announce high-frequency dividend mechanisms and operating income expectations.

traditional exchanges like the hong kong stock exchange attract listees with high valuations and the ability to raise large sums of money, while asx attracts listees with relatively stable cash flow. the bottom line of the latter's transactions is cash flow. with dividends, the listing owner does not have expensive listing costs and can list first and continue to raise funds. in li xiaojia's view, this will be a market for patient capital, with participants showing performance day by day, building market credit step by step, and slowly establishing financing scale and price.

like traditional exchanges, drip tong asx needs to attract enough listees to raise funds. the difference is that drip tong asx prefers to charge fees for financing in the primary fundraising market, while the bulk of the income of traditional exchanges comes from secondary market transaction fees for high-frequency trading.

li xiaojia believes that the drip exchange is a market where good money drives out bad money, allowing "good guys" to continue to be discovered and rewarded, and allowing "bad guys" to be quickly identified and eliminated; it is also a market that can carry "shared joys and sorrows" , that is, investors bear the "bitterness" of income sharing risks and enjoy the "sweetness" of high-frequency cash dividends.

more importantly, li xiaojia believes that this will be a patient capital market, where investors seek long-term, stable, and predictable returns; financiers must be patient, build credit step by step, accumulate performance, and then raise funds to more and more funds.

as a veteran who has been in charge of the hong kong stock exchange for 10 years, li xiaojia is very confident in focusing on the exchange in the future. he told tencent news "perspective" that trading is something in his genes that he believes he can do and be good at.

the following is a conversation between tencent news "perspective" and li xiaojia, slightly deleted:

start over and build a “micro version” of the hong kong stock exchange: a financial market supported by cash flow

tencent news "perspective": what kind of exchange does diguantong exchange want to become after this adjustment?

li xiaojia:this time, we are going to build a brand new exchange and create a new exchange in the market to make it easier for companies to raise funds: not only the market structure has been innovated, the products have been innovated, but the process has also been innovated.

on september 26, we launched “drip star”, the overall market system of drip connect to asx. this is a new milestone for us, a brand new exchange system, which will also change the process and form of listing companies as well as the exchange’s trading products.

to put it simply, it can be regarded as a micro version of the hong kong stock exchange.

reshape the core functions of the exchange and market participants and digitize them, as shown in the figure below.

drip star: five core elements of a digital operation system

(picture from drip irrigation)

in this picture, rbo (revenue based obligation) is equivalent to the assets of current hong kong stock listed companies. some of the bottom layers of these listed companies are real estate, technology, medicine, etc. rbo is equivalent to a contractual relationship. there is no limit to what the underlying things are. .

in traditional exchanges, there are three market participants, namely listed companies, listed index products, and investors; in our micro-version exchange, these are spv (single portfolio vehicle) (note, the subject matter of the listing) or the combination of spvs invested by the fund, namely spac (segregated portfolio accounts collective), corresponds to listed investment funds on traditional exchanges, such as pe or vc, or even securities firms, etc.; while etf (exchange traded facility) operates in accordance with the rules of the exchange passive funds, namely index funds.

in addition to spvs that can be listed on the asx as a lister, multiple spvs held in the investment portfolios of pe or vc institutions can also be listed on the exchange in the form of spacs, and then sell these spv portfolios to etfs or sell them for any other counterparty, this is also a way for institutional investors such as pe or vc to exit and earn a source of income by earning the price difference.

companies can use part of their company revenue to list on exchanges in the form of spv, which is similar to ipos on traditional exchanges today.

this time we will also launch etf products. the underlying assets of the first etf are the portfolios we have invested with our own funds in the past three years - equivalent to a prototype etf. in the future, specialized investors will participate, and their own etfs can also be launched on exchanges, with the underlying assets being the spv underlying portfolio listed on the asx.

the last part, rbu (revenue based unit) is the top product target of drip tong asx. it is the share of spv, spac and etf. it corresponds to the stocks of traditional listed entities. investors buy and sell rbu when trading.

tencent news "perspective": in this business model, what is the process for spv or spac to be listed?

li xiaojia:in this process, generally speaking, if a single project wants to use its future income to go public and raise funds, it can register an spv for listing and raising funds. this process is very fast, and it only takes a few weeks to complete basic kyc checks, prepare the issuance of product instructions, and then it can be listed on the exchange.

the sponsors of spac are mainly institutions and relatively professional investors. these institutional investors can raise funds, invest, and exit projects through spac. if they want to raise capital through leverage, they can also use spac to achieve structured financing on the exchange.

simply put, the asx is a partialprimary marketon the exchange, that is, where funds are raised, in the early days, transactions in the secondary market may lag behind. the secondary market of the hong kong stock exchange is dominated by high-frequency trading, and its trading volume is about 300 times the amount of funds raised in the primary market. it mainly relies on earning transaction fees.

under the asx business model, funds in the primary market can also exit by listing on the exchange. for example, if a consumer fund has good targets in its investment portfolio, it can list a single project as an spv. in this case, the fund will have one more exit method - in the current situation where it is increasingly difficult to list on traditional exchanges, the emergence of the asx can give pe investors one more exit method.

the difference between spv and spac is whether the financing is for investment purposes. if so, it is a spac. their underlying assets are assets with fixed dividends.the exchange's admission standards for listed spvs or spacs are mainly that the underlying project continues to operate for a period of time and has stable cash flow within a certain period. specific requirements will be announced later.

for those who want to raise funds, listing on the diguantong exchange is somewhat similar to traditional exchanges. the amount of funds raised and the length of the fund-raising cycle are all flexible, and there are no restrictions on the amount of funds raised or the period of funds raised. , these are decided by the registrant themselves. even for an spv project, it can only raise 50,000 yuan, 100,000 yuan, or 1 million yuan for one month or three months. the exchange does not impose any restrictions, and the registrant needs to write it clearly.

this process is equivalent to the listed spv or spac financing with its own future revenue.

for example, if the income that listee a can distribute in the spv is expected to be 6 million a year and 500,000 each month, then the number of shares in the spv is set to 500,000. each share comes with its own dividends, and each share can be sold permanently or separately at different time periods according to the investor's preferences. this is the flexible pricing featured by the drip exchange.

for investors, you can buy permanent shares, you can buy them for 1 year or 2 years, or you can even buy them for 3 months, depending on the investor's judgment on risk. listed persons clearly write down their financing plans and terms, and the exchange matches them in the investor demand pool according to their needs.

for those who list their shares, they certainly hope that they can list their shares at one time, underwrite their shares, and sell them all, just like they do on traditional exchanges.

on the diguantong exchange, if there are no investors for one-time underwriting, you can start with a small amount step by step, such as financing for 3 months, starting with a small amount.

for example, if there is a financing demand for 500,000 shares, only 200,000 shares may be subscribed by investors for a short period of three months in the early stage. if there are subsequent investors who want to buy all the shares, or there is a longer financing demand, etc., the listing owner has the right to negotiate with the investor. early investors agreed on the conditions for repurchasing shares in the future. once the conditions are met, the shares will return to the listing owner.

later, with market recognition and trust, the listing owner can sell it again to other investors at a better price. the listing owner's financing needs can cycle multiple times.

this is because our exchange chooses relatively practical thresholds. for a wider group of enterprises, these thresholds are more pragmatic, rather than like traditional exchanges, which have high scale requirements or profitability levels, as well as minimum fundraising amounts, etc. , this is because the financing process of traditional exchanges requires tens of millions or even more costs to pay multiple intermediaries including auditing law firms, investment banks and securities firms - these institutions endorse their listing information disclosure. if the amount of funds raised is small if so, after deducting costs, it would be meaningless to fundraisers.

in comparison, our listing process is simple and low-cost.the fundraiser, that is, the spv or spac listed company, does not have any intermediate costs. after connecting the data with the asx's saas system, it only needs to regularly (note, such as daily or monthly) forecast cash income and dividends. requires too many other mandatory disclosures, which we call “accurate disclosures” that focus on the actual amount of dividends provided to investors.

the core of this disclosure is that the listed company must pay dividends according to the listing agreement (each financing party has a rough template for listing, but the specific agreement is different), and dividends are mandatory every month.

dividends are actually the most important means to solve investors' investment risks and returns - high-proportion, high-frequency dividends. in this case, investors will know at least in a short period of time that they are gradually exiting, with one entry per month, and the investor's risk exposure is decreasing. high frequency dividends are very important.

traditional exchanges disclose what happened in the past, allowing investors to trust the listee based on history, and they do not allow predictions about the future, fearing stock manipulation. we are different. we require the listed company to make a dividend forecast every month, which requires the listed company to undergo a test every month, which is challenging for the listed company.

how to keep out the bad guys? what should you do if you encounter a bad person?

tencent news "perspective": businessmen are generally relatively optimistic. they will be more optimistic in their forecasts. will there be a situation where some financing parties' spv or spac ultimately fail to meet the expected cash flow and dividends, that is, default? how to deal with a breach of contract?

li xiaojia: generally speaking, when a company or project comes to be listed on our exchange, it is necessary to connect the data of these project parties to our saas system, so that investors at least know what business the financing party is doing and what it is doing specifically, including daily income, etc.

to be honest, the financing party may commit fraud or even remove the data system. even in traditional exchanges, there are opportunities for fraud. it is actually not easy for the platform to monitor.

on our exchange, two things are certain: how much future dividends will be announced regularly on the exchange, and secondly, how much the actual dividends will be on a regular basis every month.

as long as the listed company fails to meet the expected dividends, it will be a breach of trust for investors.

as a platform, it is difficult for exchanges to completely avoid the malicious behavior of listed persons. even traditional exchanges cannot completely avoid it. the platform has some relevant measures. first of all, the listing owner will be put on the list of dishonest people. at the same time, our listing agreement will indicate the relationship between the listing entity and its holders and investors. if a contract is breached, a breach of contract dispute will arise between them, which is consistent with conventional disputes.

tencent news "perspective": from an investor's perspective, the attraction of the asx lies in regular dividends.

li xiaojia: yes, the exchange requires the listed company to pay money every month, and secondly, it needs to forecast revenue every month, which is a big test for the listed company. if the listing owner is inaccurate once or twice, investors will be able to identify it immediately, and their trust may be compromised or even reduced to zero.

for example, if the monthly dividend per share is 1 yuan, if it suddenly rises to 1.2 yuan in a certain month, it means that the revenue of the project is growing; if it decreases to 0.8 yuan in a certain month, it means that the revenue income has decreased - this is easy for investors to refer to and make judgments.

tencent news "pianwang": if you list projects that you have invested in before, investors may be more likely to choose to trust you.

li xiaojia: this is another story. when we invested in these projects in the past three years, we mixed in too many motives. some projects were invested because we wanted to make money, and some were for proofing, that is, to run data.

in the exchange market, investors may or may not trust the issuer's data.

for example, if the listed company accurately forecasts its revenue and dividends during the cycle, it may increase the trust of investors, but once the listed company wants to raise longer-term funds, investors will still if you have your own thinking, you may not buy the fund-raising amount of the listed company at one time for a period that is too long. instead, you will choose a slightly longer period and slowly advance. even if the listing owner wants to commit fraud, it may take a longer period and cost.

tencent news "perspective": with this business model, the cost for spv or spac is almost zero.

li xiaojia: it can be almost ignored, because there are not many costs in the preparation process. the specific amount of funds that can be raised depends on the listing owner's own conditions and efforts and the mutual trust between it and the investors. of course, it can also be raised through investment banks and securities firms. this cost and expense is only possible based on the ability to raise funds.

taking the first step and listing on the exchange to raise funds, for those who list their shares, they have nothing to lose. then they can try the listing first, and slowly accumulate trust after getting up. in the end, whether the listing owner can hit a deer or an elephant in the exchange is up to them. the exchange is equivalent to a place where each other needs to find a matching and trusted counterparty.

three years since i started my business: i remember all the pitfalls i have gone through, and i have gained a lot.

tencent news "perspective": from the time you started your business in 2021 to now, what was the point that prompted you to shift your focus from investment to exchanges?

li xiaojia: first of all, being an exchange itself is the original intention and goal of drip tong’s entrepreneurship. initially, we had some beliefs and conjectures about the market, and wanted to understand how the market actually does it?

some conjectures have already been implemented in the structure of our current transactions, such as those discussed today, some are new, and some other conjectures do not appear in the current business model structure. whether these original conjectures can become reality depends on market practice, that is, the market needs to set an example.

just like when everyone first lived in houses, we thought we should live in buildings, so we had to build a bunch of buildings. after the sample room is covered, you need to try living in the sample room.

we are not saying that we were planning to do a before, but now we are doing b. in fact, this is what we originally wanted to do, but we have to climb a mountain in the middle, that is, enter the market, before we can know what exactly needs to be done to reach the destination.

our own investment in the past three years has been equivalent to making prototypes of the model room and building the model. after building the model, we determined several core conclusions. first, the exchange needs to be digitalized, secondly, the threshold must be practical, and then, the trading method needs to be drip-fed first, and one must be patient. these are the conclusions we obtained from our prototype.

when we made self-operated investments, we started with stores. now we no longer have stores in our exchange structure, but use enterprises as nodes - this is what we get after investing in stores ourselves.

now we find that the lowest factor of the store, which we called the "melon" before, is actually not the best solution in the structure of the exchange. it must be on top of the vine. the melon can be touched along the vine, and then the melon can be touched. gua figured it out.

but the real carrier for listing on the exchange in the future must be a vine, not a melon, unless the melon is big enough, almost as big as a vine.

this is one of the lessons we have learned through self-operated investment in the past three years.

after these three years, we have identified a new market, the exchange market. in this market, it is not limited to stores, and the cycle is not limited to 2-3 years. it can be permanent or shorter-term. it all depends on the needs of buyers and sellers in the market.

in the past three years, we have learned through investing what we should do, what we should not do, and what we should not do.

if we had to do it again, we would still do it, because without doing this, we would not be able to learn the conclusions mentioned above. however, we also found that we actually don’t need to do so much, because the conclusions we get may not need to be done so much to get them.

we later reviewed the market and found that it was actually enough to invest in 8,000 stores at that time, but later we invested in 5,000 more prototypes.

why brake? this is a math question. the bottom line is that you can survive without making money in the next 5-8 years.

tencent news "periscope": around june 2023, when i met you, you had exactly 8,000 households.

li xiaojia: yes, there should be no need to continue at that time, but we invested in another 5,000 companies.

tencent news "perspective": why did you want to rush forward, 10,000 or 15,000 companies?

li xiaojia: at that time, investment was going smoothly and the returns were also very good. we were thinking at that time, if we have this money to make, why not make it.this is actually a lack of understanding of our own abilities and the market. we are not investors. we are not sensitive enough to the market knowledge, and we are more likely to be arrogant when using our own money.

just to add a little more, the fund of diguantong is not a consumer investment fund. we also did it for proofing at the time. therefore, in the investment process, there is a principle of broad distribution. some are good, some are bad, some are long-term and some are short-term. some allocations are required. , in order to invest in proofing, it means that we have to spread some in the terraced fields and some in the paddy fields. at that time, our motives were mixed.

if we only invest, we only need to look at the good and the bad, which means that we may not need to invest in so many cultural and sports categories, but the cultural and sports industry is so big, in order to proof, we need to find the rules, and we still need to invest in (literary and sports categories).

tencent news "perspective": when did you decide you needed to put the brakes on?

li xiaojia: we should have put the brakes on the situation in the fourth quarter of last year (2023), and we decided to do so. however, we only stepped on the brakes when the exchange market rules were released in early january this year. in fact, it would be better to apply the brakes earlier. but it doesn't matter much.

at that time, we felt that we had to climb this mountain to know the direction ahead. if we didn't climb this mountain, we wouldn't be able to see clearly what was ahead, so there was no problem for us to climb this mountain.

looking back, when climbing this mountain, there is actually a road that can be bypassed when halfway up the mountain. you can just walk on it flatly. there is no need to climb the last part - this time i invested a lot. people and money also take more risks. but those who did not have this understanding at that time would not have this understanding.

i am a person who thinks about long-term things. we are also a licensed and regulated institution, a licensed exchange, and we need to have sufficient capital reserves. my logic of braking at that time was very simple. two considerations, the worst stress test, even if all the money is lost, we will not make a penny in the next five years. under these two conditions, are our current food and ammunition reserves sufficient? live more than five years? it's a math problem, it's that simple.

there was a time when i just carried away (overconfident and complacent). at that time, everyone said yes, so i said i would continue to invest. looking back now, if i hit the brakes earlier, half a year or three months earlier, it would have made a difference.

the current expectation is that the money we invest will be returned, and there will be a moderate return that can cover the capital cost (capital cost refers to interest).

to sum up, it would have been better if the brakes had been applied earlier. however, i still think that the time when we hit the brakes is not too late, a little bit late.

tencent news "perspective": if you only do exchanges in the future, you won't need too much money.

li xiaojia:yes. the main cost is some technology and labor costs, which are very low.in the future, diguantong will be a typical fintech company.

one of the best businesses in the world is companies such as traditional exchanges such as the hong kong stock exchange. we call them small companies and high-profit companies with large markets. take the hong kong stock exchange as an example. there are only more than 1,000 people, and the money they make and the market they cover are large enough.

in the future, we will be a small fintech company covering a large market.

tencent news "perspective": three years after starting a business, which stage is the most stressful?

li xiaojia: the process of personnel adjustment is painful, and we need to explain our current decisions and the realities we face clearly to those who are leaving. i personally feel that tough decisions have to be made, and always face everything honestly.

tencent news "perspective": the business of the exchange is to be a platform, which is completely different from the previous investment entity. is this a new start for you?

li xiaojia: i have ended my self-operated investment. after finishing the prototype, i am now only doing exchanges. it can be considered a fresh start.