Summary of the Core Content
KaYou, the leading domestic collectible card company with annual revenues exceeding 10 billion yuan and a gross profit margin of over 67%, obtained the approval to list on the Hong Kong Stock Exchange in June 2025. However, it has迟迟 failed to initiate the listing process, allowing the prospectus to expire without a successful listing. With less than a year left before the deadline to complete the listing by the end of 2026, otherwise it will have to pay 1.35 billion yuan to Sequoia China and Tencent to buy back its shares under the agreed-upon terms, it is stuck in a dilemma: it cannot afford to list at a high valuation due to a lack of buyers, has not achieved significant transformation, faces regulatory risks, and cannot afford to lose the bet.
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Detailed Analysis
1. It's Not the Hong Kong Stock Exchange That's Stopping KaYou from Listing
Many people think the Hong Kong Stock Exchange is preventing KaYou from going public, but the opposite is true: KaYou itself believes that listing now would result in significant losses and has chosen to wait.
In the first half of 2025, the Hong Kong stock market was particularly hot, with new shares averaging a first-day increase of 38% for the year, the highest in the past five years. KaYou, with its annual profit of 4.4 billion yuan and a 71% market share in the collectible card industry, was the first pure collectible card company to apply for listing on the Hong Kong Stock Exchange and could have received a high valuation premium. It would have been like a popular milk tea shop that could sell its shares at 20 times its annual profit.
However, KaYou dawdled and did not start the issuance process. By the second half of 2025, the market sentiment changed dramatically: many consumer-oriented new stocks were listed, and investors' valuations for companies that relied on quick profits from a single business model plummeted. For example, the stock price of Bruco, a leading toy company in the same industry, fell from a high of HK$198 to HK$39 after listing, a 50% drop. If KaYou had listed at that time, the issue price could have been halved, resulting in a huge loss for its founders. Therefore, they chose to wait until the prospectus automatically expired.
2. Spending Money on the Spring Festival Gala and Stationery to “Reinvent” the Company’s Image, but This Doesn’t Fool Sophisticated Investors
KaYou is well aware of its negative reputation for “exploiting children through card games.” To achieve a higher valuation, it invested heavily in partnerships, such as becoming the exclusive card partner for the Spring Festival Gala for the first time in over 40 years. It also launched a high-end stationery brand and won awards from Japanese and German design competitions, trying to transform its image from a “card-selling company” to a “national cultural and creative brand.”
However, this strategy doesn’t fool investors. The stationery business generates only about 500 million yuan in revenue annually, accounting for less than 10% of total revenue, with over 80% still coming from card sales. Moreover, 68 of its 69 IP rights are leased from others, and only one is its own. Most of its past revenue came from the Ultraman IP. With nearly 80 IP rights expiring in 2025 and 2026, KaYou faces the risk of losing these licenses if the rights holders raise the fees or decide not to renew them. Even the so-called collectible cards launched for the Spring Festival Gala are worthless on second-hand platforms, and their supposed collectible and cultural value is not convincing to investors.
3. Increasing Regulatory Restrictions on “Gambling-like” Business Models
KaYou’s core business model relies on the “blind box” system, which exploits the curiosity and gambling tendencies of minors. There have been numerous reports of children spending tens of thousands of yuan on card games. Regulatory restrictions are tightening: the government has explicitly banned the sale of blind boxes to children under 8 years old, and sales to children over 8 years old must be approved by guardians. In 2025, the Consumer Association received complaints about blind boxes with an average claim amount of over HK$4,400, with the highest claim reaching HK$300,000. When KaYou first applied for listing, regulators required additional compliance materials on child protection. If it forces a listing now, all its financial data will be made public, and any new regulations banning the sale of such products to minors could severely impact its performance. Institutional investors would be very cautious about investing in a company with such obvious regulatory risks.
4. The 1.35 Billion Yuan Repurchase May Seem Affordable, but It Could Seriously Limit Future Options
Many believe that KaYou, with 5.3 billion yuan in cash, can easily afford to buy back shares from Tencent and Sequoia. However, the cost is far greater than just the cash. A repurchase would signal that KaYou failed to fulfill its five-year listing promise, significantly reducing its valuation from the previously claimed HK$69.5 billion. Future financing would be difficult, as no investors would be willing to pay a high price for a company with such a poor track record. There are also painful examples from other companies, such as Qiaojiangnan and Wanda Commercial Management, which lost control of their companies after multiple failed listings and bet failures. Although the founders hold 83% of KaYou’s shares, a 1.35 billion yuan repurchase would not result in the loss of control. However, after spending that amount, KaYou would need to continue investing in IP renewals and new businesses. It would also be labeled as a “listing failure” by the capital market, making it even harder to obtain listing approval in the future.
In short, KaYou’s current dilemma stems from its past success exploiting regulatory loopholes for quick profits. It has failed to develop a viable alternative business model and is stuck in a situation where it cannot afford to list at a low valuation and cannot afford to lose the bet. Time is running out for it to find a solution.