A loss of 1.1 billion in 3 years! "Chinese version of Lego" rushing to HKEX, will "Ultraman" recreate an IPO miracle?

Recently, the Chinese stacking toy giant Bloko officially submitted an IPO application to the Hong Kong Stock Exchange.

This toy company, known as the "Chinese version of Lego," aims to use the light of "Ultraman" to open the door to the capital market.

However, Bloko has incurred losses of over 1.1 billion RMB in the past three years. The profit pillar, including authorized IPs like "Ultraman," is about to expire. At the same time, the founder conducted a "blitz" cash-out before the IPO, inevitably leading to various speculations.

Faced with high uncertainty, will the capital believe in the light?

Three-Year Loss of 1.1 Billion RMB! Bloko Claims to be "Third in the World"

In terms of performance, Bloko has been in a loss-making state in recent years, with losses of 510 million, 420 million, and 210 million RMB in 2021, 2022, and 2023, respectively.

A cumulative loss of 1.14 billion RMB over three years.

It was not until the first quarter of this year that Bloko turned losses into profits.

However, it must be acknowledged that Bloko's expansion speed in recent years has indeed been very fast.

From 2022 to 2023, Bloko achieved revenues of 330 million and 880 million RMB, nearly doubling its growth. In 2024, in just the first quarter, it achieved revenue of 470 million RMB.

In terms of scale, Bloko claims to be the "largest in China and third globally" in the role-playing toy industry.

Bloko also cited third-party Frost & Sullivan data, showing that the company achieved a GMV of 1.8 billion RMB in 2023, with a year-on-year growth of over 170%, making it the fastest-growing scaled toy company globally.

However, according to Frost & Sullivan data, the top two players in the global stacking toy market, Bandai and Lego, both had market shares exceeding 35% in 2023, while Bloko's market share was slightly above 6%. There is also a significant gap in original IPs.

Visibly, Bloko still has a long way to go to become a global stacking toy giant.

Gaming Industry Giant Ventures into Toys

Bloko's founder, Zhu Weisong, is an entrepreneur who transitioned from the gaming industry to the toy industry Ten years ago, when he left Youzu Network, which he co-founded, and incubated Bruco, perhaps he never thought that one day he would enter the capital market with "Ultraman".

Zhu Weisong, who grew up in Xinchang County, Shaoxing, has a successful entrepreneurial experience.

In 2009, 27-year-old Zhu Weisong partnered with Lin Qi to establish Youzu Network. With blockbuster products like "Young Three Kingdoms", they quickly made a name for themselves in the gaming industry.

In just five years, they propelled Youzu Network to go public through a reverse merger, entering the top tier of the gaming industry.

However, in 2014, just as Youzu successfully went public and enjoyed great success, Zhu Weisong made an unexpected decision: to leave the gaming kingdom he had built from scratch and venture into the toy industry.

That year, he founded the predecessor of Bruco - Grape Technology.

Initially, with one hand holding onto Youzu and the other leading Grape Technology, Zhu Weisong explored the track of low-age building block toys.

His starting point was the very niche large-grain building blocks at that time. Using differentiated products to "bite" into the low-age children's market was his initial plan.

However, ideals are lofty, but reality is harsh.

Traditional building block toys are educational products where players can freely construct various structures and models based on their imagination, such as houses, towers, bridges, etc. The main audience is preschool children, so the market is limited and it is difficult to generate repeat purchases. Zhu Weisong found that there was not much room for survival here.

In 2016, Zhu Weisong decisively resigned from all positions at Youzu Network and devoted himself wholeheartedly to Bruco, starting to seek transformation.

After many trials and errors, Zhu Weisong set his sights on the broader building block toy market.

Compared to traditional building block toys, building block toys have specific construction rules. In addition to their educational properties, they usually combine with various IPs, emphasizing entertainment and collectible value. The audience is also more extensive, including not only children but also a large number of teenagers and adult players.

Years of experience in the gaming industry have made Zhu Weisong well aware of the power of IPs.

This time, he bet on "Ultraman".

"Ultraman", who spreads light and hope on earth, is not just a childhood memory for those born in the 80s and 90s in China, but has also captured the hearts of many born in the 2000s and 2010s, as can be seen from the audience base.

This is exactly what Brucok wants.

After lengthy negotiations, it wasn't until 2021 that Brucok finally obtained the IP authorization for "Ultraman," thus opening a new chapter for the company.

In 2022, Brucok launched six series of "Ultraman" stacking products in one go, causing a wave of excitement in the market.

Data shows that the sales volume of Brucok's first "Ultraman" series product in the first quarter of its launch was 140,000 units. By the tenth series, this number had soared to 4.227 million units, an increase of over 29 times.

"Ultraman" Holding Up Brucok's Toy Empire

The launch of the "Ultraman" series also ignited Brucok's performance.

In 2023, Brucok's revenue skyrocketed by 169.3% year-on-year, with the gross profit margin increasing from 37.9% to 47.3%. In the first quarter of 2024, the company even achieved its first profit, with the gross profit margin further rising to 52%.

According to Brucok's prospectus, in 2023 and the first quarter of 2024, products based on the Ultraman IP accounted for the majority of the company's revenue.

Moreover, Ultraman is the largest stacking toy family in Brucok.

As of the first quarter of 2024, out of Brucok's 255 SKU stacking toys, Ultraman accounted for 133, representing over 52%.

After tasting success with Ultraman, Brucok has also successively obtained IP authorizations for popular IPs such as "Transformers," "Naruto," "Marvel Infinite Legends," "Minions," "Pokemon," "Kamen Rider," "Detective Conan," "Hatsune Miku," sparking a wave of excitement in the market.

Based on these well-known IPs, Brucok has created a product matrix spanning all age groups from young children to adults, completing the transformation from a traditional building block toy company to a stacking toy company, redefining its toy empire.

The prospectus shows that in 2023, Brucok's revenue from stacking character toys was 770 million yuan, accounting for 87.7% of total revenue; in the first quarter of 2024, this proportion increased to 97.4% Moreover, compared to general building block toys, the profit margin of assembling toys is higher.

The prospect of the market is also an important focus of the capital market.

According to the prospectus, assembling role-playing toys are the fastest-growing and most promising sub-category in the global toy industry.

Based on data from institutions such as Frost & Sullivan, the compound annual growth rate of the GMV of the assembling role-playing market is expected to be 29% from 2023 to 2028. The market size is projected to reach 99.6 billion yuan in 2028, with a penetration rate of 18.4% in the global role-playing toy market.

Multiple Authorized IPs Are About to Expire, When Will Original IPs Take the Lead?

While Zhu Weisong's strategy seems effective, excessive reliance on external IPs could also become the "Achilles' heel" of Bluecore.

The prospectus shows that Bluecore's existing "Ultraman" IP authorization in China will expire in 2027, and authorizations for multiple IPs such as "Naruto," "Marvel Infinite Legends," and "Pokemon" will also expire next year.

This means that in the next 2-3 years, Bluecore will face pressure from the expiration and renewal of multiple core IP authorizations.

If unable to renew in time, or if renewal conditions change significantly, it could impact Bluecore's business continuity and profitability.

Bluecore also acknowledges in the prospectus that authorized IP agreements are usually for 1-3 years and generally do not automatically renew. If unable to maintain or renew authorization agreements with similar terms, the company's business, operating performance, and financial condition will be significantly adversely affected.

Facing this "time bomb" of authorized IPs, can Bluecore's original IPs bear the future of the entire toy empire?

Currently, Bluecore only has 2 original IPs: the versatile Bluecore for children's puzzle games and Hero Unlimited with a theme of Chinese traditional culture ![] (https://wpimg-wscn.awtmt.com/946cc6be-4169-47f7-9ea7-8a81a74ef5be.jpeg)

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In the past three years, the proportion of Blue City's original IP business revenue has increased from less than 2% in 2022 to 15.8% in 2024.

![] (https://wpimg-wscn.awtmt.com/4cea6c00-278e-48af-8f69-cbb2ea562c9d.png)

Despite the rapid growth, there is still a huge gap between the revenue scale of original IP and the overall revenue.

Moreover, compared to popular IPs like "Ultraman," Blue City's original IP still lags behind in terms of popularity, influence, monetization capabilities, and more.

![] (https://wpimg-wscn.awtmt.com/fd71883d-d216-4d59-a4c4-a0d8fe4d98b6.png)

Of course, creating a hit original IP is not something that can be achieved overnight. It requires a deep cultural foundation, keen market insights, superb design capabilities, efficient operational systems, and a certain element of luck.

For Blue City, this is both a long-term process and a continuous trial-and-error, iterative process.

On the eve of the IPO, the controlling shareholder's rush to cash out before submitting the application form sparked speculation

Just a month before Blue City submitted its application to the Hong Kong Stock Exchange, Zhu Weisong suddenly sold a large amount of equity.

In April of this year, Zhu Weisong transferred over 2.3 million shares of common stock in the restructured Blue City through a wholly-owned holding company, accounting for about 1.1% of the total share capital, cashing out over 75 million yuan.

At the same time, external shareholder Gaorong BLK Holding Limited under Gaorong Capital transferred 895,300 preferred shares to Gaintex, cashing out nearly 29 million yuan.

Based on Blue City's share trading price of 32.27 yuan per share in 2024 and a total share capital of 223 million, Blue City's latest valuation has reached 7.2 billion yuan.

After the equity transfer, Zhu Weisong remains the largest shareholder of Blue City.

According to the prospectus, Zhu Weisong currently indirectly holds 54.95% of Blue City through his companies Wit Bright Limited and Playcreation Holding Limited, making him the actual controller of Blue City.

Junlian Capital, Source Code Capital, Yunfeng Fund, and others are also shareholders of Blue City, holding 7.03%, 5.64%, and 3.15% respectively. The stock incentive platform First Prosperity holds 9.81% of the shares in Blue City

It is worth noting that before the IPO, Blue Moon received investments from well-known capital firms such as Yunfeng Fund, Junlian Capital, Source Code Capital, with a financing amount of nearly 1.8 billion yuan.

According to regulations, if the company fails to successfully go public within 12 months after submitting the prospectus, the repurchase right will be reinstated.

Based on Blue Moon's current cash flow, it is highly likely that it cannot afford the high cost of redeeming preferred shares.

Just as Blue Moon has turned losses into profits and cashed out on the eve of the IPO, the timing and pricing logic at this point inevitably lead to various speculations.

This is not the first time Zhu Weisong has sold Blue Moon shares for cash.

In 2021, Zhu Weisong transferred equity in two angel rounds for a total price of 120 million yuan.

Regarding these two transactions, Blue Moon stated that it was its domestic affiliate company engaging in commercial negotiations to acquire the Blue Moon Technology shares sold by Zhu Weisong, rather than capitalizing Blue Moon Technology.

Calculating this, Zhu Weisong has cashed out nearly 200 million yuan since 2021.

In addition, unlike other IPO companies that impose restrictions on investors holding shares, there are no lock-up restrictions on Blue Moon investors' shares.

In other words, once Blue Moon successfully goes public, these investors can reduce their holdings and cash out at any time.