Founder cashes out 1.7 billion, "bringing down" BOSIDENG, market value evaporates by 8 billion Hong Kong dollars in one day

BOSIDENG, which recently disclosed record-high revenue and net profit for the 2023 fiscal year, saw its stock price soaring. However, just as it was riding high in the secondary market, a share sale announcement by the founder of Gao Dekang caused a collapse in the stock price, with a market value evaporating over 8 billion in a single day. Gao Dekang, the founder and controlling shareholder, was previously renowned for his legendary entrepreneurial journey, and the wealth accumulated from founding BOSIDENG earned him the title of the richest man in Changshu.

The news of the founder planning to sell 1.7 billion Hong Kong dollars worth of shares dealt a blow to BOSIDENG, which had been on the rise.

On July 3rd, BOSIDENG announced that the founder and controlling shareholder Gao Dekang would sell 400 million shares of the company at a price of 4.31 Hong Kong dollars per share. By calculation, Gao Dekang will cash out over 1.7 billion Hong Kong dollars in one go.

Although BOSIDENG stated that this move is beneficial for optimizing the company's shareholder structure and enhancing liquidity, investors seemed unconvinced. On the day of the announcement, the company's stock price plummeted by 15.93%, with a market value evaporating over 8 billion Hong Kong dollars.

Interestingly, on June 26th, BOSIDENG had just released its 2023 fiscal year annual report (from April 1, 2023, to March 31, 2024), with revenue surpassing 20 billion and profits reaching an all-time high. After the financial report was published, BOSIDENG's stock price rose for two consecutive days to 4.87 Hong Kong dollars, with a year-to-date increase of 38.75%. In this context, some investors naturally questioned whether Gao Dekang was cashing out on the good performance.

It is worth mentioning that like many local brands, BOSIDENG also has a rags-to-riches story behind it. Gao Dekang transformed a little-known rural tailor shop into the international brand BOSIDENG, eventually becoming the richest man in Changshu, a story that has always been a topic of fascination. His decisions in several of BOSIDENG's transformations have been crucial to the brand's development.

Founder Plans to Cash Out 1.7 Billion

A share sale announcement caused BOSIDENG's market value to evaporate over 8 billion Hong Kong dollars.

According to BOSIDENG's disclosure on July 3rd, the Yingshin International Investment Limited, indirectly wholly-owned by the trust established by Gao Dekang, informed BOSIDENG that it had signed a block trade agreement with a selling agent. The selling agent agreed to sell 400 million shares of the company to a buyer independent of BOSIDENG at a price of 4.31 Hong Kong dollars per share, accounting for 3.64% of the total share capital. This sale will be completed on July 5th.

Upon completion of this sale, Gao Dekang will cash out approximately 1.724 billion Hong Kong dollars. The transfer price this time is about 10% lower than BOSIDENG's closing price of 4.77 Hong Kong dollars per share on July 2nd.

According to the announcement, before the sale, Yingshin International, Kangbo Investment Limited, Haowei Enterprise Limited, and Shengtian Venture Limited held 15.60%, 25.80%, and 5.56% of BOSIDENG's equity, respectively. These shareholders are all fully owned by the trust established by Gao Dekang, with the beneficiaries being Gao Dekang's family members At the same time, Kangbo Development Limited holds 2.39% of Bosideng's shares, which are ultimately owned by Gao Dekang. Gao Dekang's spouse, Mei Dong, also directly holds 0.03% of Bosideng's equity.

Based on this calculation, before the placement, the Gao Dekang family collectively held approximately 67.57% of Bosideng's shares. After the placement is completed, the Gao Dekang family's total shareholding proportion decreased to 64%.

Regarding the reason for this placement, Bosideng stated that it is mainly to optimize the company's shareholder structure, enhance the market liquidity of the company's shares, and introduce more high-quality overseas investors. The proceeds from the placement will mainly be used for the seller's funding needs and charitable causes.

However, investors are obviously not buying it. On July 3, Bosideng plummeted by 15.93%, with a market value evaporating by approximately HKD 8.35 billion in a single day. Nevertheless, on July 4, the company's stock price rebounded, closing up by 3.74%. As of the close on July 5, Bosideng fell again by 1.92%, to HKD 4.08 per share, with a latest market value of HKD 44.85 billion.

It is worth mentioning that this is not the first time Gao Dekang has reduced his holdings.

On September 1, 2022, Yingxin International, a subsidiary of Gao Dekang, also sold 230 million shares of Bosideng through a placement at a price of HKD 3.94 per share, cashing out approximately HKD 910 million. This reduction also had a significant impact on the secondary market, with Bosideng plummeting by 8.83% on that day.

Noteworthy Bosideng

It is worth mentioning that the timing of the Bosideng placement announcement was quite "clever".

On June 26, Bosideng disclosed its fiscal year 2024 annual report, with the company's revenue and net profit reaching historic highs. During the reporting period, Bosideng achieved revenue of RMB 23.214 billion, a year-on-year increase of 38.39%, and a net profit of RMB 3.12 billion, a year-on-year increase of 44.7%, with the company's operating profit margin rising to 18.9%.

In terms of revenue structure, Bosideng's down jacket business remains the company's main revenue driver. The financial report shows that as of March 31, 2024, Bosideng's branded down jacket business revenue was RMB 19.521 billion, accounting for 84.1% of the group's total revenue. Among them, the main brand Bosideng's revenue increased by 42.7% to RMB 16.785 billion, while the Xuezhongfei brand's revenue grew by 65.3% to RMB 2.019 billion.

In addition, the sun protection category launched by the company in 2022 also contributed RMB 500 million in sales.

Tianfeng Securities, Dongfang Securities, and Zheshang Securities have all raised their profit forecasts for Bosideng, expecting continuous growth in revenue and net profit attributable to shareholders for the fiscal years 2025 to 2027, with earnings per share and price-earnings ratio also expected to improve. Dongfang Securities specifically gave a valuation of 17 times the price-earnings ratio for the fiscal year 2025 and a target price of HKD 6.03.

The outstanding performance of the company's results drove Bosideng's stock price up by over 12% in two days. As of June 28, the company's stock price had accumulated a year-to-date increase of 38.75% In this case, investors naturally question whether Bosideng is cashing out on good performance.

Today, Bosideng's performance and stock price are both thriving and very impressive. However, the company has also encountered bottlenecks.

Reviewing Bosideng's financial reports over the years, it can be found that from 2013 to 2016, Bosideng's total revenue dropped from 9.32 billion yuan to 4.72 billion yuan. During this period, Bosideng was implementing a "diversification" and "seasonal" strategy. During this period, the company gradually drifted away from mainstream aesthetics and was once considered as "down jackets for parents".

However, starting in 2017, Bosideng refocused on its core down jacket business and began transitioning to a high-end direction.

Dongxing Securities pointed out that before Bosideng's brand transformation in 2017, the average price tag for products was between 1000 yuan and 1100 yuan. Since 2018, prices have continued to rise, and by 2021, the average price tag has risen to around 1800 yuan. Calculated, the average price tag for Bosideng down jackets has increased by 63%-80% over four years.

After the transformation, Bosideng has also been jokingly referred to by consumers as "once ignored me, now you can't afford to climb up to me".

At the same time, Bosideng has been generous in marketing, inviting celebrities such as Yang Mi, Xiao Zhan, Jackson Yee, and Gu Ailing to be brand ambassadors.

With a series of strategies, in 2018, Bosideng's performance returned to an upward trend. As the high-end direction flourished, the company also resumed diversification, launching other product categories such as T-shirts, sun-protective clothing, and cycling clothing. The company's stock price has also risen from less than one yuan during the low period to the latest 4.08 yuan per share.

Self-made richest man in Changshu, Gao Dekang

Similar to many national brands, behind Bosideng is the story of Gao Dekang's self-made success.

In 1976, Gao Dekang founded his own tailoring group in Shanjing Village, processing clothing for clothing factories in Shanghai. At that time, his entire assets were 11 employees, 8 sewing machines, and a Forever brand bicycle. It is said that at that time, Gao Dekang used his bicycle to deliver goods to Shanghai.

In 1980, Gao Dekang officially established a company named Shanjing Village Clothing Factory. Subsequently, the Shanjing Village Clothing Factory continued to grow and expand.

By 1984, Gao Dekang began to enter the down jacket market and shortly after, paid a brand usage fee of 150,000 yuan per year to process Xiusideng brand down jackets for Shanghai Tiangong Clothing Factory. In the following years, the factory's scale continued to expand.

After 16 years of OEM experience, the Bosideng brand was officially established in 1992. In 1995, Bosideng took the lead in "off-season sales", producing 680,000 pieces and selling 620,000 pieces of down jackets, nearly 8 times growth, ranking first in national sales.

With Gao Dekang's efforts, the Bosideng brand's reputation in China has been growing, and it has even been a perennial champion in the apparel sales rankings, especially when Gao Dekang seized the opportunity of the Olympics in 2001 to directly promote Bosideng's brand reputation overseas In 2007, Bosideng successfully listed on the Hong Kong Stock Exchange, becoming the "number one down jacket stock in China".

However, with the advent of the e-commerce era, Bosideng suffered heavy losses and once disappeared from the market. But through the high-end transformation mentioned above, the company made a comeback and even thrived.

In recent years, along with the rise in Bosideng's stock price, the Gao Dekang family's wealth has also soared. With a net worth of 34 billion RMB, Gao Dekang made it onto the "2024 Hurun Global Rich List" and is known as the richest man in Changshu, Jiangsu.

Public information shows that the Gao Dekang Capital empire is vast, with positions in 84 companies, serving as the legal representative in 44 companies, and as a shareholder in 12 companies.

Financial reports show that as of the end of the first quarter this year, Bosideng Group's down jacket business had a total of 3,217 regular retail outlets. From OEM processing to establishing its own brand, from a rural tailor shop to a billion-dollar listed company, under Gao Dekang's leadership, Bosideng has truly developed into a down jacket empire