Chapter 29: Saint Games Acquisition (Part 4)

Chapter 29: The Saint Games Acquisition (IV)

Within days of recruiting Zhang Li, Qinghui and Zhou Chang caught Jing Hong's side off guard again with another product.

For that product, Fanhai and Qinghui had traditionally divided their territories north and south—Qinghui focusing on the north, Fanhai on the south—and had coexisted peacefully for years. However, Qinghui Group recently achieved a technological breakthrough on that product, and on the very evening they launched the new version, Zhou Chang suddenly dropped a hundred million to besiege Shanghai.

Crossing the river overnight and launching a surprise attack on the south, Qinghui broke the unspoken agreement. This time, the assault caught Fanhai Group completely unprepared.

Qinghui Group's video advertisement for the product's Shanghai launch instantly went viral across the internet.

Jing Hong found it equally baffling: with the new version, Zhou Chang hadn't even tested its promotional effectiveness in the north before directly crossing the Yangtze and sparking the war?

How much confidence did Zhou Chang have in his own judgment?

...

Before they knew it, it was October. Before the commitment that "Fanhai Group would not increase its stake in Saint Games for three months" expired, Saint Games' Q3 earnings report came out first.

Key figures like revenue and net profit all came in below expectations—way below.

As soon as the earnings report was released, Saint Games' stock price plummeted, dropping 10% in a single day. All the analysts found the performance baffling. No one had expected the new game *Expedition*'s honeymoon period to be so short-lived.

Perhaps due to the poor earnings, Saint Games' CEO once again urged Fanhai to take action, resolve the relevant policy issues, and help *Expedition* enter China—and he was in a big hurry about it.

It seemed that over the past few months, Saint Games had repeatedly asked Fanhai to help it enter China and expand its market precisely because of business troubles. After all, the CEO certainly knew that *Expedition* was underperforming.

To discuss "entering China," the CEO of Saint Games even flew to Beijing in person one day, scheduled a meeting with Jing Hong, and came to Fanhai—which showed a lot of sincerity.

Floor 50 of the Fanhai Tower, General Manager's office.

Jing Hong's assistant led Mark Greenberg, Saint Games' CEO, straight into Jing Hong's office.

Mark Greenberg's parents were Jewish, and he himself had some distinctly Jewish features. Jing Hong had always assumed that the founder of a gaming company would have a stereotypical basement-dweller look, but Mark Greenberg was clearly not that—he looked like a sharp, savvy businessman.

In fact, although he was the founder of Saint Games, the real heavy lifters were the other two co-founders. The creative concepts and world-building all came from them, but because Mark Greenberg was better at management and operations, he got the CEO seat.

However, in the past year or two, Mark Greenberg had been feeling the heat. Early last year, news broke that he had sexually harassed several female engineers at Saint Games, severely damaging his reputation, and some shareholders even called for the company to replace its CEO. But because Mark Greenberg's control over the board was fairly stable—all the independent directors were on his side—he rode out that crisis without a scratch.

Jing Hong didn't even get up to go to the sitting area. He remained seated behind his large desk and pointed to a chair across from him. "Have a seat."

Mark Greenberg hesitated for a moment, but eventually dragged the chair out and sat down.

Knowing that Jing Hong's English was excellent, Mark Greenberg didn't bother slowing down his speech. He smiled and got straight to the point: "I'm here because the whole *Expedition* entering China thing has been delayed for months—"

"Not in a hurry," Jing Hong cut him off. "Before we discuss entering China, let's talk about the Q3 earnings report first."

Mark Greenberg clasped his hands in his lap. Hearing this, he paused for a moment, but then said, "Alright."

Jing Hong rummaged through a stack of documents on his right side, found nothing, then dialed an extension and said to his assistant, "Print another copy of Saint Games' financial report and bring it in. I need both Q2 and Q3."

Tan Qian immediately replied, "Got it, Mr. Jing."

Then, while waiting, Jing Hong completely ignored Mark Greenberg across from him and casually reviewed and approved a few documents.

Two or three minutes later, Tan Qian brought in the reports. Jing Hong took them, said "Thanks," and handed the documents he'd just approved to his assistant to run through the company's online system. The company was so big that almost everything needed his sign-off. Jing Hong rarely operated the online system himself; he basically signed off on paper, and his assistant would scan the documents, upload them to the system, and keep the originals.

After the assistant left, Jing Hong slowly opened the earnings report and said, "In Q3, *Expedition*'s revenue dropped 20% compared to last quarter, and net profit fell 29%. User growth also slowed significantly, down by a quarter."

Mark Greenberg was silent for a moment, then said, "Yes. *Expedition* didn't live up to expectations, so we urgently need to expand the market."

"That doesn't add up." Jing Hong reached over, pulled open a drawer, and took out another document. "These past two months, *Expedition* seems to have run a few large-scale events? On August 15th, log in and get 10,000 gold coins. Then again on September 15th. And on August 30th..." Jing Hong read them off one by one. "Also, since *Expedition* officially launched, it has released new skill effects for character classes every month, across all classes. Yet in all of August and September, Saint Games only released one effect for the ranged class 'Mothership' and one for 'Wyvern.' Additionally, between August 15th and October 15th, all effects were 50% off." "Finally, these past two months, *Expedition* suspended promotions in Japan, South Korea, India, and other places, and even cut promotions in the US—its largest market—by half, and pulled the plug on Facebook Ads entirely." With that, Jing Hong tossed the report onto the desk in front of Mark Greenberg.

"..." Mark Greenberg paused, then explained, "Between fending off Qinghui and getting ready for Fanhai, integrating resources—these past two months, Saint Games' focus hasn't been on *Expedition*'s regular operations. There were some oversights."

Jing Hong listened half-heartedly. When he was done, Jing Hong smirked and asked, "Really? Didn't you do this on purpose?"

Mark Greenberg: "..."

In fact, Jing Hong had seen this coming a mile away.

He could see that Saint Games welcomed neither Qinghui nor Fanhai. Bringing in Fanhai was a last resort at the time.

When facing a hostile takeover, there were only a few standard plays: the "white knight," the "scorched earth tactic," and the "poison pill"—the go-to for decades.

Saint Games' play was basically scorched earth—selling off or trashing valuable assets, buying junk, piling on debt, making the company look so unappealing that the buyer would walk away. You could also call it a "tanking tactic."

Usually, it was a lose-lose for everyone involved.

But internet companies were different. For internet companies, the most valuable asset was "traffic." So if a gaming company's numbers looked bad—revenue and profit both down from Q2, like old players had lost interest and new user growth had flatlined—Fanhai would naturally back off.

Saint Games' original plan was probably: use Fanhai to fend off Qinghui, then use "due diligence" as an excuse to stall Fanhai's tender offer. Once the Q3 earnings came out, both Fanhai and Qinghui would lose interest simultaneously, and Saint Games' crisis would be resolved.

But Fanhai refused to be stalled indefinitely. Zhao Hanqing even hauled his luggage to the airport late at night, so Saint Games had no choice but to agree to Fanhai's due diligence, accept Fanhai's tender offer, and ultimately give up 31% of its shares.

Clearly, Fanhai Group's refusal to commit to "no further share increases" was because it also wanted control of Saint Games. So the Saint Games board pulled every trick to keep Fanhai from making a move for at least three months, allowing time for the earnings report to come out, hoping Fanhai would voluntarily back off after seeing it.

For a game, as long as the core foundation remained intact, winning players back and launching events after the crisis was resolved was very easy. After all, what players loved most wasn't the flashy effects but the core gameplay itself—they would never abandon *Expedition* just because there were fewer effects.

But Jing Hong had seen this coming all along.

He had his people keeping tabs on *Expedition*'s events the whole time, and even registered an account himself to check them out.

Sure enough, *Expedition* gave away gold coins twice in a big way, put all effects on 50% discount, and in the entire 61 days of August and September, only released two items.

Meanwhile, reports showed that marketing and promotions in Japan, the United Kingdom, India, and other places had all been suspended, deliberately slowing user growth.

In other words, for these past few months, Saint Games had been deliberately making *Expedition* look like a junk game and Saint Games look like a junk company.

Jing Hong asked Mark Greenberg again: "Three months have passed. Has Saint Games already found a few small consortiums to buy back the 31% from Fanhai?"

Jing Hong speculated that over three months, Saint Games had found several small consortiums in the US or Europe, planning to take advantage of the weak earnings, depressed stock price, and Fanhai Group's lost interest—and likely desire to unload—to jointly buy back the 31% stake. That way, Saint Games' shareholders would be dispersed again, control of the company would be firmly re-established, and the crisis resolved.

Those small consortiums should already be aware of Saint Games' plan, only wanting to get a piece of *Expedition*'s pie and make some money.

If Fanhai wanted to wait and see, not selling the shares for now, then Saint Games would have no choice but to painfully tank its revenue for a few more months, reflected in the next few earnings reports.

In short, the goal was to make Fanhai believe that *Expedition*—Saint Games' most important game in recent years—had a bleak future, lose interest in "controlling Saint Games," and transfer the 31% stake to a buyer when one appeared.

Mark Greenberg said, "...Of course not. How could you think that?" But his smile was already visibly strained.

Jing Hong continued: "Saint Games only intended to let Fanhai be the major shareholder for three months. So, you've been urging Fanhai to resolve the policy issues for *Expedition* and pave the way for its entry into China—right?"

"No!" At this point, Mark Greenberg could only repeat: "No!"

Jing Hong added: "Use Fanhai to fend off Qinghui, then urge Fanhai to help *Expedition* resolve China's policy issues and obtain operating rights in China, while simultaneously tanking *Expedition*'s revenue and profits. Then after three months, use the ugly Q3 earnings to make Fanhai think it made a mistake, lost money, lost interest in Saint Games, and sell the shares back to you... And since the stock price is still at a low point, you'd even make a profit." Jing Hong smiled. "Well-played. You used Fanhai thoroughly and completely."

Despicable, Jing Hong thought. He was beginning to understand why Zhou Chang was so unceremonious with Saint Games.

Mark Greenberg kept denying, but his heart had already turned cold. He had assumed that Jing Hong and Zhou Chang, being young and not from the forefront of Western capitalism, would be easy to fool—but clearly, he had been too naive.

"I regret it's come to this. But since you've treated your former 'white knight' this way..." Across from him, Jing Hong sat behind his large desk, one hand propping up his chin, smiling slightly—and it was actually quite handsome—he said, "Your company, I'm afraid, is beyond saving."