Chapter 19: Feichi Auto Investment (Part 1)

Chapter 19: Feichi Auto Investment Case (I)

Not long after that, something major went down at Fanhai.

Feichi Auto—the EV startup Fanhai had backed—officially rolled out its first mass-production model.

Feichi is currently the top-performing EV company in China. Fanhai Group led its Series A in January 2015, Tiantong Securities led the Series B in June 2015, and it raised again in June 2016 with Fanhai, IDG, and others on board. Now, after all that groundwork, Feichi has finally launched its first production model.

In fact, the car had already been unveiled at an auto show mid-year and gotten rave reviews.

As always, in the EV space, Fanhai and Qinghui had each picked a horse years earlier.

But this time, Qinghui Group had whiffed badly. The company it backed ran into a mess of problems—its CTO even got diagnosed with a serious illness and announced retirement... And every startup that came after fell short of Feichi. The ones without major tech gaps were all traditional automakers like BAIC, SAIC, and GAC—and they weren't taking outside money. So on the EV track, Qinghui had genuinely fallen behind.

Over the past two years—especially since Zhou Chang took over—Qinghui had talked to Feichi countless times, signaled interest, and even tried to get into the Series C. But now that Fanhai had finally backed a winner on this track, why let their old rival squeeze in? Every time, Fanhai used its shareholder position to have Feichi shut Qinghui down hard.

In other words, Qinghui kept knocking, but the door never opened.

Now that Feichi had rolled out its first production model to a rapturous market, all Qinghui could do was watch with envy.

Feichi also made it clear it wasn't looking at another round anytime soon—the P1 launch had already solved its cash problems.

Feichi wasn't wrong. A week after launch, P1 pre-orders had blown past every projection. Cash was the last thing they needed to worry about.

The media was all over the P1's pre-sales numbers:

"Feichi cracks the big leagues—Fanhai, the backer, might be the biggest winner!"

"Fanhai put in $100 million—can it mint the next Tesla?"

And of course, there were also pieces about Qinghui:

"Qinghui blew it with Feichi! Already trailing Fanhai on the EV track?"

"Betting blunder! Whatever happened to 'Panorama Auto,' Qinghui's big bet?"—the piece went on and on about Panorama's train wreck.

Honestly, seeing all that, Jing Hong let out a long sigh of relief.

Back in 2015, it was Jing Hong who'd gone with his gut and picked Feichi over Panorama.

He was glad he had.

At the same time, watching Qinghui beg to get in and get shut out, Jing Hong felt a little schadenfreude.

...

In the weeks that followed, things were relatively quiet between Fanhai and Qinghui.

Jing Hong would occasionally hear about Qinghui's moves—like gutting the entire executive team of a company they'd bought the year before and parachuting in a whole new management crew, all wrapped in slick PR spin. Stuff like that...

The next run-in with Qinghui caught Jing Hong completely off guard.

At the time, Fanhai was in the middle of acquiring a legacy film-and-TV company.

Xindong Pictures, a legacy studio, had produced a string of blockbusters and had a roster of household-name stars.

Fanhai first picked up 15% through negotiated transfers and open-market buys. But right after, Orient Insurance—Xindong's second-largest shareholder—bumped its stake from 17.5% to 20%.

Clearly, Fanhai wanted to take control of Xindong. And so did Orient Insurance.

Within a week, Fanhai was back in the market, grabbing another 5% to go from 15% to 20%.

That move lit up the peanut gallery. Retail investors who'd bought in were like, "Ten limit-up days, here we come!!!"

Meanwhile, Orient quietly scooped up another 2%, hitting 22%.

Everyone was speculating like crazy about who'd hit the 30% mandatory tender-offer threshold first—Fanhai or Orient?

Once that threshold was crossed, the shareholder would have to make a tender offer to every Xindong shareholder to buy them out. That dragged in every single shareholder, and things could spiral out of either side's control. Plus, under Xindong's bylaws, anyone holding over 30% could appoint two directors—so fighting past that point was pointless.

Word was, things inside Xindong were messy. The largest shareholder was all for Fanhai coming in, and Fanhai had kept Xindong's board in the loop. But Orient, the second-largest holder, had other ideas—it wanted the crown for itself. So at this point, both sides were clearly racing to scoop up over 30% on the open market as fast as possible.

But just as everyone was grabbing popcorn, betting on who'd cross 30% first—Fanhai or Orient—the script flipped.

Or rather, a new player walked in.

Qinghui suddenly stormed in and bought 5% of Xindong in one shot on the open market!

Nobody saw that coming.

Because Qinghui had zero footprint in film and TV.

Fanhai had a film-and-TV arm. Qinghui? Nothing.

Everyone was asking: Was Qinghui really planning to get into film and TV? And wasn't it a bit late for that?

Then again, with Qinghui's resources, it was never really too late.

When Zhao Hanqing broke the news, Jing Hong couldn't believe it. "Qinghui?"

"Yes."

Jing Hong confirmed again: "Qinghui?"

"Yes." Zhao Hanqing said, "Things just got complicated. Nobody saw Qinghui coming, because they don't do film and TV at all—they don't want long-form video messing with their short-form video play. The real question is what Qinghui is actually after... Are they really going to dive into film and TV? Orient was already out of cash and scrambling to raise more, so we were sitting pretty. Then this wild card shows up out of nowhere."

Jing Hong mulled it over, equally baffled, and just said, "Let's wait and see."

Zhao Hanqing nodded. "That's all we can do."

After Zhao left, Jing Hong felt a knot of irritation thinking about Zhou Chang wading in.

His gut had never steered him wrong, and right now it was telling him: this was not that simple.

He sat at his desk, digging into Xindong and Orient—even tracing the dozens of companies Orient controlled or invested in, and the companies those companies controlled or invested in—but nothing jumped out.

Jing Hong: "..."

What he did find was that Qinghui had started making film-and-TV moves months earlier. For instance, Qinghui had put money into two TV dramas based on major IPs—the source novels were huge, press releases were flying, and outsiders were guessing Qinghui's video-based SNS platform was about to add a film-and-TV section. And there were other similar moves...

On the surface, it all screamed "getting into film and TV."

But Jing Hong couldn't shake the feeling.

"..." He got up, walked to the coffee machine in the corner, poured himself a cup, and found himself thinking about how unflappable Zhou Chang had looked when he'd bought him coffee last time.

Jing Hong shoved his hands in his pockets, stared at the floor, and racked his brain over what Xindong could possibly stir up—but came up empty.

He was even more annoyed now.

Just then, his eyes landed on the small trash can sitting quietly beside the coffee table.

In a rare move, Jing Hong raised his leg and kicked it flying across the room.

The little bin clattered against the sofa, but the impact wasn't fully absorbed—it bounced off and went rolling across the carpet a dozen or so times, finally stopping only when it hit one leg of the big desk in the office area.

…………

That evening, Jing Hong had two friends over at his place.

Both were middle school classmates and very accomplished—one went into communications, the other computer science. The latter got his undergrad degree from Peking University and his PhD from Berkeley, worked in Silicon Valley for a few years, then came back to China and joined Xingyuan. He came back as a P8 and later became CTO of an IT company Xingyuan had acquired, with plans to go for P9 next year—basically the highest a corporate employee can go.

Interestingly, the reason he didn't pick Fanhai or Qinghui—the better options—but stayed at Xingyuan was that he knew both Jing Hong and Zhou Chang, and that felt awkward.

Jing Hong was his middle school classmate; Zhou Chang was his PhD classmate.

When he first found out the friend knew Zhou Chang, Jing Hong couldn't believe it—the world felt so small. He even thought of the "six degrees of separation" theory—that any two people in the world can be connected through at most six intermediaries.

But thinking about it more, Jing Hong found it totally natural.

He loved computers, studied computer science, and was good at it—so it made sense that many of his close friends also loved computers, studied computer science, and were good at it. And worldwide, there were only a handful of top schools in this field, with most people gravitating toward the two in Silicon Valley—Stanford or Berkeley. Jing Hong, this friend, and Zhou Chang were all in the same year, so it wasn't surprising that the latter two had been classmates.

Jing Hong had always gotten along well with these two friends.

Back in seventh and eighth grade, before Jing Haiping started his business, Jing Hong was just a regular kid—his family was actually a bit worse off than his friends'. In ninth grade, he often stayed at their houses for dinner. Later, when his father got rich, Jing Hong stayed the same—studying, writing papers, interning, working—and their relationship didn't change, until about a year ago. After Jing Hong took over Fanhai Group, things got a bit more distant, but thanks to shared interests like tennis, they still occasionally exchanged news and chatted. Since they were all in IT, sometimes the friends would ask Jing Hong for his take on policy interpretations, so they never lost touch.

Jing Hong had noticed this. Over the past year, to keep the old friendship alive, he'd invite them over every few months to reminisce and catch up. He genuinely felt happy with old friends—whether from elementary, middle, high school, undergrad, PhD, or even from internships. After joining Fanhai—or more precisely, after his identity was revealed—he started having trouble telling whether people were genuine or just faking it.

The chef made five or six home-style dishes. Since it was just at home, Jing Hong wore a free Fanhai Group T-shirt, with the company's mascot jumping around on the chest—pretty eye-catching.

The friends were used to it and chatted while they ate.

"Let me ask you guys something..." said the communications friend. "So here's the thing. My boss is about to jump ship and wants to take me with him, but I think my current job is pretty good... I know the work well, and I should be up for a promotion soon. Should I go? Or is staying here more likely to get me promoted...?"

"Go with your boss, obviously." Jing Hong smiled at him. "The new boss will probably bring his own people, and you'd likely get pushed aside."

"…………" The friend looked pensive.

At the same time, he was thinking, "Jing Hong is only 32, but I'm already 34—how am I still this immature?"

"Hey, Jing Hong," the IT friend spoke up, "I heard Fanhai and Qinghui are going at it again recently? And this time, the battleground is the film industry, which Qinghui had never even touched?"

"Yeah." Jing Hong took a sip of ice water and paused. "I'm actually not entirely sure what Qinghui's real goal is."

"Let me ask Zhou Chang." The friend suddenly looked excited. "Zhou Chang must know the reason, right? He has no idea I know you!"

Jing Hong: "……"

"But I won't sell Zhou Chang out." The friend said as he sent the message, then added to Jing Hong, "I'm just being nosy, but I can't abuse the trust he's given me. I have standards."

Jing Hong: "...Whatever."

Honestly, if the other guy was willing to talk, he was willing to listen—he wasn't some saint.

This involved Fanhai Group, and he had a responsibility to a lot of people.

In the business world, executives even climbed walls themselves, sent spies, and used illegal tactics all the time—what harm was there in him listening in?

Unfortunately.

After a moment, Jing Hong asked, "So you and Zhou Chang are actually pretty close?"

"Not bad," the friend said. "We were in the same program back then. Later, we were all in Silicon Valley, so we had a few get-togethers, but Zhou Chang was always at McKinsey—too busy, missed most of them. We didn't have much of a personal connection. Later, Zhou Chang was the first from our department to come back to China. At the time, I only knew he'd accepted Qinghui's offer. A few months later, I got a DM from Xingyuan's HR. I didn't know any other returnees, so I thought I'd ask Zhou Chang about the work environment back home... He was really helpful and shared a lot. Good thing I send out New Year's texts every year, heh."

Jing Hong smiled.

That was an inside joke.

Years ago, this friend had complained to Jing Hong about people who mass-send greeting messages to everyone every Spring Festival. But Jing Hong had replied, "If you ever need something from someone someday, those 'New Year's greetings' will pay off." If years go by with no contact and the chat history is empty, it's hard to open that door. But even if it's just exchanging "Happy New Year" every Spring Festival, that makes you acquaintances, and reaching out isn't as awkward.

That was exactly the situation the friend was describing now.

The friend continued, "So I took Xingyuan's offer, and after coming back to Beijing, I treated Zhou Chang to a Peking duck dinner. Then later, I heard Zhou Chang had become CEO of Qinghui Group... I mean... what kind of luck do I have? All my friends end up as China's richest men! Can I sell this fate?"

Jing Hong: "...You're getting off track."

"Anyway, I didn't want to lose touch." The friend said, "Even if I don't expect any real benefit, knowing a big shot is still cool. So I occasionally ask him for his takes on policies. Funny thing—you two have almost identical views on a lot of things."

Jing Hong said, "Mm."

Just then, the friend's phone went "ding."

The friend glanced at it and said, "Zhou Chang replied."

He eagerly picked up the phone and tapped the red notification bubble.

Then, the moment he saw Zhou Chang's reply, his expression turned complicated and utterly amusing—like he was torn between laughing and not daring to.

Jing Hong asked, "...What's wrong?"

"...Nothing." The friend replied to Jing Hong, "I forwarded a news link and asked, 'Qinghui doesn't seem to have any film business, right? So why acquire Xindong? Why insist on fighting Fanhai Group over this?' with an emoji. But Zhou Chang was super cautious—he didn't say anything."

Jing Hong casually asked, "So what did Zhou Chang reply to you?"

"………………" The friend said, "He replied with something inappropriate. You probably don't want to know."

Jing Hong grew curious instead: "What inappropriate thing?"

The friend said, "Just a two-part allegorical saying."

"???" Jing Hong was even more curious now. "...What saying?"

"Really, don't ask..." At this point, the friend caved under Jing Hong's gaze, but still struggled to explain first, "First, I need to make clear—I'm absolutely sure he doesn't know I know you."

"Fine, I get it," Jing Hong said. "Just say it already, no need to make excuses for him."

By this point, the friend had given up and put on an expression of someone enjoying the drama, saying, "It's that saying... Zhou Chang said, 'No particular reason—beating a kid on a rainy day: just killing time.'"

Author's note:

① Disclosure of stake: According to the Securities Law, after holding 5% of a listed company's shares, any increase or decrease of 5% must be reported in writing to the CSRC and the stock exchange within three days, and the listed company must be notified with trading suspended—this process is called "disclosure." However, the new Securities Law of 2020 changed the rule: after holding 5%, any increase or decrease of 1% triggers disclosure, but trading is not suspended; suspension still requires 5%.

② Mandatory takeover offer: To prevent hostile takeovers and protect existing shareholders, China, the UK, and Germany all stipulate that once a shareholder's stake in a company reaches 30%, they must issue a mandatory general takeover offer to acquire all shares from all shareholders. In other words, a shareholder either avoids exceeding 30% or must be prepared to buy out the entire company—which requires enormous capital and is very difficult. Of course, whether to accept the offer, sell, and how much to sell is entirely up to the shareholders. The US, however, has no such "mandatory offer" requirement.