Keep knowledgeable with free updates
Merely signal as much as the Chinese language enterprise & finance myFT Digest — delivered on to your inbox.
We wrote earlier this week about some bizarre worth strikes amongst US-listed, China-based micro-caps, rounded off with a warning from a retail dealer that Baiyu Holdings (BYU) — which for weeks has been flogged in seedy Whatsapp teams by individuals unknown — is likely to be the following Nasdaq inventory to plunge from a current peak.
Aaaaannd it’s gone:
Wednesday’s 73 per cent decline coincided with information that Baiyu has signed a letter of intent with Adler Worldwide “to cooperate within the building and operation of charging and swapping stations in Cairo”.
Pursuant to the LOI, [Baiyu] agrees to supply power storage programs, charging piles and swapping tools, and to supervise the planning and building of the charging and switching stations. Each events have agreed to collectively function and handle the stations via a newly established Egyptian three way partnership. The undertaking, totally funded by the Egyptian authorities, includes the planning, renovation, and reconstruction of 365 charging and swapping stations in Cairo, with an preliminary funding of roughly $1.5 million per station, totaling $547.5 million, topic to the dimensions of subsequent building.
Baiyu hasn’t at all times been in battery swapping. Like UTime, the Shenzhen-domiciled telephone firm turned wannabe mpox vaccine producer whose shares final week fell 90-odd per cent, it has lived many lives.
The corporate at the moment says it has two most important enterprise strains: commodities buying and selling, and provide chain administration. Till 2018, nevertheless, Baiyu (which on the time glided by China Industrial Credit score) operated a micro-lending enterprise out of Suzhou in Jiangsi Province.
Slowing progress within the native textile trade to which CCC presumably prolonged credit score ended up hitting the corporate onerous, based on its contemporaneous accounts. By the next yr the agency had modified its title to Bat Group and pivoted to leasing pre-owned luxurious vehicles.
It didn’t personal many such vehicles. Eleven, to be exact, with the fleet distributed throughout Beijing, Shanghai, Zhejiang and Chengdu. Bat nonetheless stated it earned roughly $1.8mn from working leases throughout 2019. However that enterprise was wound down 12 months later.
Bat grew to become Baiyu quickly after and has been buying and selling non-ferrous metals ever since, albeit with “zero margin,” based on a deep-dive on the corporate by J Capital Analysis, printed with impeccable timing on Wednesday.
Anne Stevenson-Yang, who co-authored the report (entitled “Three Companies, 4 Names, and We Nonetheless Don’t Know What They Do”), instructed us Baiyu was “considerably overvalued however too small and risky for us to cowl on an activist foundation. So we wrote up this piece.”
There’s loads in there to take pleasure in. Baiyu “admits to zero stock of commodities as of Q2 2024,” J Capital alleges. “This means what the corporate discloses elsewhere: ‘buying and selling commodities’ truly means lending money.”
“BYU’s different enterprise line of supply-chain administration providers has fully collapsed,” J Capital provides, with income having fallen from $1.4mn in FY22 to $68,000 in FY23. “Unusually, prices of revenues ballooned from $7,500 to $59,000 in the identical interval.”
Money and money equivalents could also be low ($255,750 as of final quarter) however Baiyu is sitting on present belongings of $307.4mn. Simply over $290mn of that is made up of loans receivable from third events:
As J Cap factors out, Baiyu says it costs 10.95 per cent every year on stated loans, “which is greater than thrice the one yr Mortgage Prime Charge of three.45 per cent set by the Folks’s Financial institution of China”. Baiyu has written no less than 11 mortgage agreements over the previous six quarters.
It additionally boasts a fairly lengthy record of related-party corporations:
J Capital additionally notes that Baiyu has cycled via a minimum of six totally different auditors over the previous seven years. It may not come as a shock that BF Borgers, of Trump SPAC fame, was one in every of them.
At press time Baiyu had not responded to a request for remark.
