Produced by: Pai Finance
Wen Luoli
During the Spring Festival, a "Hot and Hot" stimulated the enthusiasm of national fitness, and also heated up the related fitness industry again. Keep, the "first stock of sports technology" nicknamed "Jia Ling's concept stock", did not eat this dividend.
Keep, which has been listed for less than a year, reached 42 percent in August last year4 Hong Kong dollars, after the market value exceeded the high point of 20 billion Hong Kong dollars, it continued to fall by more than ninety percent. As of March 7, Keep's share price was HK$4 shares, and HK$676%, the company's total market capitalization is about 210.3 billion Hong Kong dollars, nearly 18 billion Hong Kong dollars evaporated from the highest point.
The reason for Keep's continuous **, on the surface, is related to changes in the market macro environment and the superposition of core shareholders, but in fact, Keep's own hematopoietic ability is insufficient, its own revenue has declined, and it has not been able to find a profit model for a long time5%。
With the slogan "Self-discipline makes me free", can Keep still hope that shareholders will achieve "financial freedom"?
1. Behind the stock price**
Keep's most recent ** is related to its financial situation.
On February 9, Keep announced that PricewaterhouseCoopers, which had been working together for less than a year, suddenly resigned as auditor. PwC also pointed out in the announcement that during June 30, 2023 and July 6, 2023, that is, on the eve of Keep's listing in Hong Kong, there were two total 1The whereabouts of the $5.2 billion are unknown.
In response to PwC's questioning, Keep explained in the announcement that on September 26, 2023, Keep Singapore signed a marketing promotion termination agreement with Company A, and from October to November 2023, Company A returned the 87 million yuan to Keep Singapore in installments, and the KEEP Audit Committee has engaged a Hong Kong-based law firm (Investigation Team) to assist the Audit Committee in investigating the marketing promotion transaction.
However, Keep did not provide any explanation for the relevant transactions of Keep Hong Kong pointed out by PwC.
This announcement has caused concerns about suspected financial fraud among investors and institutions, and on the day of the announcement, Keep's stock price responded to **275%。
It is generally believed in the industry that the main reason for Keep's share price** is to enter the lockdown period.
From December 27, 2023 to January 15, 2024, Keep's share price has gone from 16HK$22 shares slipped to 5HK$86 shares, with the highest one-day stock price** reaching 3411%。The core reason for this short period of stock price** is the lifting of the ban from core shareholders.
On January 1, 2024, 26 shareholders among the initial shareholders of Keep ushered in the lifting of the ban, involving 42,745430,000 shares, accounting for 81 of the total share capital32%。On January 12, two more shareholders lifted the ban, with about 8,873 shares040,000 shares, accounting for 16 of the total share capital88%。
In recent years, there are not a few Hong Kong listed companies that have been greatly listed because of the lifting of the ban, and Baiguoyuan, which was listed before, fell by more than 30% on the day of the lifting of the ban, and fell by more than 53% in one month.
It is worth mentioning that on December 4 last year, Keep was included in the "Hong Kong Stock Connect" candidate by the Shanghai Stock Exchange, but it fell 27 on the same day56% and again **11 the next day58%。According to common sense, this is good news for Hong Kong-listed companies, which means that the company will gain more liquidity. However, Keep's performance is abnormal, and the reason for Keep's stock price to continue to be ** is essentially a question about its business model.
2. The number of monthly active members is declining, and the business model is questionable
Keep's road to listing was a bit bumpy. As early as 2022, Keep launched an IPO attack to the Hong Kong Stock Exchange, and updated the prospectus again in the second half of the year, but failed to pass the hearing.
In July 2023, Keep finally achieved its wish in the name of "the first share of sports technology" and raised about HK$300 million to successfully go public. But on the day of listing, Keep's stock price opened 477%, once broken in the intraday.
According to the prospectus, in 2022, Keep will have an average of 36.4 million monthly active users, making it the largest fitness platform in China. Keep, which used to be the darling of capital, was favored by many capitals, and from September 2014 to December 2021, the company received a total of 9 rounds of financing, with a total of 6With a capital of 500 million US dollars, there are many star companies including Goldman Sachs Group, Coatue Management, Tencent Investment, Hillhouse Capital, and SoftBank Vision. According to the calculation of Sina Hong Kong stocks, as of January 31, the top three loss-making companies SoftBank Vision**, Tianjin** and Times Capital had a cumulative floating loss of 2$8.5 billion.
There are common problems in commercialization and monetization in content communities, and Keep's business model has not been successfully verified since its establishment.
In the years before going public, Keep's performance had been in the red. According to the prospectus, from 2019 to 2022, Keep's revenue increased significantly, from 66.3 billion yuan, an increase to 22. in 2022$1.2 billion, but at the same time, Keep's adjusted net loss was 3700 million, 1100 million, 8300 million, 6700 million, with a cumulative loss of 19800 million.
In the first half of 2023, Keep has finally achieved a turnaround on its books. According to the 2023 interim report, Keep's revenue in the first half of 2023 was 98.5 billion, net profit reached 119.5 billion, but under non-IFR measures, the adjusted net loss still reached 22.3 billion.
At the beginning of its establishment in 2015, Keep's positioning was "sports social + free fitness courses", by outputting high-quality and free fitness courses to attract "white users" interested in fitness, and by creating an interactive community ecology, it attracted a large number of young users to settle in, and it took only one year for Keep's MAU (monthly active users) to reach 10 million.
In 2018, Keep started an all-round exploration of the business model, upgraded the business model, expanded from a single content product output, expanded to the sales of smart fitness equipment and supporting sports products, and launched a membership subscription system.
In 2021, Keep had 300 million registered users, 34.4 million MAUs, and an average of 3.3 million monthly paid members. Then, with the help of the home fitness boom, Keep launched a live interactive course to drive MAU to further improve.
In fact, since 2021, Keep's monthly active users and users' willingness to pay have shown a downward trend. Keep's average reading paid membership reached 415 in the third quarter of 2021After a high of 40,000 people, it fell all the way to 301 in the first half of 202370,000 people. At the same time, Keep's average monthly active users also increased from 3,435 in 202180,000 people, down to 2,95490,000 people.
In the first half of 2023, among Keep's three major businesses, only "membership subscriptions and online paid content" achieved a 10% growth, compared to a 9% year-on-year decrease in private label sports product revenue5%, advertising and other revenue fell 214%。
Keep's main revenue** consists of three parts, namely private label sports products, membership subscriptions and online paid content, advertising and others.
Among them, membership subscriptions and online paid content are Keep's main revenue**. In 2022, the revenue from membership subscriptions and online paid content, including virtual events, reached 89.4 billion yuan, accounting for 40 percent of total revenue4%, which has become the business segment with the highest revenue growth rate and the largest revenue contribution increase since 2019.
In the first half of 2023, Keep** membership subscription and online paid content revenue increased by 10% year-on-year to 44.9 billion yuan. For this portion of the growth, Keep attributes it to increased revenue from virtual events. This part of the proportion is gradually increasing, and it has also become the active driving force of Keep's revenue.
Another major revenue** is the revenue from private label sports products, which reached 46.6 billion yuan, a year-on-year decrease of 95%。Keep said in the prospectus that the decrease was mainly due to lower sales of health food. This change also directly led to a decline in Keep's revenue in the first half of the year. However, this business still accounts for the highest proportion of Keep's revenue, at 47%.
Specifically, on Keep's fitness hardware, sales are still growing. In the first half of the year, the total merchandise transactions of Keep smart bikes increased by more than 20% year-on-year, and the total merchandise transactions of Keep bracelets increased by more than 10% year-on-year.
Keep's third business, advertising and other revenue, was 06.9 billion yuan, a year-on-year decrease of 214%, Keep explained that the main reason is the negative impact of the epidemic on advertisers.
3. It is difficult to sell medals to really stimulate the commercialization process
The virtual event project that drives Keep's performance growth is mainly by attracting users to pay to sign up for online sports events initiated by Keep, mainly running events to complete the check-in, and complete the competition to get corresponding medals, badges, bracelets and other peripheral products. In order to register for the competition, users pay a graded registration fee ranging from 29 yuan to 139 yuan.
Since last year, KEEP medals co-branded by various well-known IPs have become a new social currency for young people. On the social ** platform, there are a lot of topics about keep medals. Previously, there was a rumor on the Internet that "Keep sold medals and earned 500 million", although Keep later denied this rumor, but it is undeniable that selling medals has become the most important profit point for Keep today.
Keep's business model of selling medals is derived from the offline marathon commemorative medal model.
In 2016, Keep cooperated with North Malaysia, Guangzhou Malaysia and other events to host official online cooperation; Since 2018, Keep has launched a "seasonal race" based on the theme of solar terms and traditional festivals. With the increase in events, Keep has also put a lot of effort into medal design.
In December 2021, Keep partnered with Hello Kitty's parent company, Sanrio of Japan, to launch the Cinnamon Dog Online Running Event, which attracted more than 400,000 paid users to participate, more than 20 times more than the previous races.
The medal business has revitalized Keep's paid business. In the first half of 2023, Keep's ARPPU (average revenue per event user) grew by 30% year-on-year, and the average monthly revenue per monthly active user increased by 24% year-on-year, thanks to the continued growth of the virtual sports event business1%。
However, from the ** point of view, Keep's MAU and average reading subscribers both declined year-on-year. In the first half of 2023, these figures were 29.5 million and 3.0 million respectively, compared with 37.7 million and 3.7 million in the same period in 2022.
But the medal business has also brought some negative complaints to Keep. Some users complained that Keep was playing hunger marketing and needed to contribute both money and effort to get a medal, and some users complained that they failed to participate in the competition, and Keep did not refund the registration fee.
It is worth noting that with the explosion of Keep medals, there are also medal reselling, running, auction and other gray intentions, if not increased management, these gray products will incur the risk of its reputation.
Previously, many people in the industry compared Keep with Peloton, the "first share of smart fitness" in the U.S. stocks, the company also integrates fitness, technology and social ** functions, but the difference is that Peloton started by selling hardware, with a different focus.
The similarity between the two is that they have both enjoyed the dividends of "home fitness", and with the help of the epidemic, Pelton's revenue soared by 172% in the fourth quarter of 2020, achieving profitability for the first time. However, the difficulty of making profits has also become a common problem for both.
*After the recovery of the fitness business, Peloton, which is highly dependent on home fitness, has been greatly impacted, not only the stock price** and market value have evaporated. In 2023, Peloton also ushered in the departure of its co-founders and major internal reshuffles. According to Peloton's latest financial report for the first quarter of 2024, revenue during the reporting period was 595.5 billion US dollars, down 341%；Net profit attributable to ordinary shareholders was -1$5.9 billion. The latest news is that DeepWater Asset Management (Deepwater), a world-renowned asset management company, released its 2024** report, saying that tech giant Apple may acquire Peloton.
In order to cope with the stock price**, Keep has opened a repurchase plan many times, the latest one is in mid-February, the share repurchase plan will be invested 16 million Hong Kong dollars, but the stock price fell again after a short recovery.
According to the research report of Founder**, although Keep is currently in a loss-making state, the company is actively controlling expenses and continuing to polish its own profit model, and it is comprehensively expected to have an adjusted net profit of -3 from 2023 to 202514/-1.94/1.7.8 billion yuan, which will achieve full profitability in 2025.
However, in the first half of 2023 alone, Keep's adjusted net profit has reached 22.3 billion, if Keep can't find a real profit closed loop, the goal of achieving full profitability in 2025 will be a big question mark.