Summary in Plain Language
Recently, Shu Ping, the owner of Haidilao, sold 259 million shares of Haidilao through a family trust, earning a cash out of 2.75 billion Hong Kong dollars. This is the first time in nearly 10 years since Haidilao went public that Zhang Yong and Shu Ping have actually sold a significant amount of shares to external investors and received real cash. What’s even more interesting is the contrast: just 4 months ago, Zhang Yong personally invested 150 million Hong Kong dollars to increase his holdings in Haidilao, stating his intention to continue buying more. Over the past three years, Haidilao has become a “dividend machine,” distributing almost all of its profits. The couple has already received tens of billions in dividends, so they are not short of cash flow. The essence of this sale is that the entire business logic of Haidilao has completely changed. It has evolved from a growth-oriented company that opened many stores to quickly expand its scale to a company that generates substantial profits but has nowhere to spend them, forcing it to distribute all the earnings to its shareholders. Even the founders are now partially liquidating their equity to put the money in their own pockets for safety.
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Detailed Analysis
1. This is not Zhang Yong playing a “high-buy-low-sell” trick; it’s a clear contrast
Many people might think, “Zhang Yong bought at over HK$13 four months ago and sold at over HK$10—doesn’t that seem like charity?” But this is a misunderstanding:
- Previously, Zhang Yong and his wife rarely sold shares: in 2020, they only sold 23.5 million shares for HK$780 million, which was less than 2% of their total holdings, amounting to just a small amount of extra cash.
- The 2021 transaction of 115 million shares involved selling old shares and then buying new shares at the same price, which was more like a financing mechanism for the company, with no net gain for them.
- The significant share changes in the first half of 2025 were just internal transfers between family trusts, with no cash flowing outside the company.
- This time, they actually sold shares to external investors for HK$2.75 billion. The two transactions were also different: the 150 million shares purchased by Zhang Yong were funded by him personally, while the shares sold this time came from a family trust owned by Shu Ping. While it’s not exactly the same as buying and selling with the same hand, on a family asset level, it’s like spending HK$150 million to buy a small portion of shares and then selling them for HK$2.75 billion, resulting in a net cash out of HK$2.6 billion—a clear change in their approach.
2. Zhang Yong and his wife don’t rely on selling shares for their livelihood; they’ve already received nearly tens of billions in dividends
Some wonder, “Are the Haidilao owners so poor that they need to sell shares?” On the contrary, they are the biggest beneficiaries of Haidilao’s high dividend policy:
- From 2018 to 2022, Haidilao invested almost all its profits in opening new stores, distributing only HK$0.36 per share over five years, with the couple receiving a few hundred million in dividends.
- In 2023, Haidilao’s dividends soared, with a total of HK$2.82 per share distributed over the next two and a half years, eight times the previous five years’ total. They received 95% of the company’s profits, and with nearly half of the company’s shares, they earned billions in dividends alone. By now, they have received tens of billions in dividends and have long achieved a situation where they can earn hundreds of millions in cash each year without doing anything.
- Interestingly, the sale was timed right after the new dividend registration period, meaning the HK$259 million in shares sold already included more than HK$97 million in dividends, leaving the external investors at a disadvantage.
3. Haidilao’s sudden “generous” dividends are not out of charity; they simply have too much money
Many think Haidilao is being charitable, but the reason is that they have too much cash and nowhere to spend it:
- In 2020-2021, Haidilao opened over 800 new stores too quickly, leading to huge losses. They had to close unprofitable stores and implemented cost-cutting measures. Since then, management has been cautious: only 24 new stores were opened in 2022 and 9 in 2023. Now, opening a new store requires proving its profitability before the headquarters will approve the funding.
- Haidilao used to spend all its profits on new stores, but now, with annual profits in the billions, the expenses for opening and upgrading stores are only a few hundred million. In 2023, the company had HK$8.5 billion in discretionary cash after covering all necessary expenses. It’s better to distribute this cash to shareholders rather than investing it poorly.
- The high dividend policy was a result of the company no longer being able to grow as quickly as it used to; there are no higher-returning investment options.
4. Haidilao’s dividend era is coming to an end
The current model of distributing all profits is unsustainable:
- In 2023, Haidilao had HK$8.5 billion in discretionary cash; by 2024, it will only have HK$6.3 billion, and by 2025, it will drop to less than HK$4 billion, a reduction of more than 50% in two years. This is due to declining turnover rates and profits per store, as well as increased expenses for expanding and upgrading stores.
- The company’s dividend amount has already exceeded its annual profits, and in 2025, the dividends will cost more than the profits. The cash reserves have decreased from HK$6.4 billion at the end of 2023 to HK$3.9 billion. If this continues, the company’s assets will eventually be depleted. Management has stated that the high dividends are a voluntary choice, not because they can’t spend the money; rather, it’s better to distribute it to shareholders.
5. The HK$2.75 billion in sales signal two things
The official reason given is “personal financial arrangements by shareholders,” but there are two likely underlying reasons:
- New domestic tax regulations for offshore trusts have been implemented this year. The family trust owned by Zhang Yong and Shu Ping, being registered overseas, previously didn’t pay much in taxes. Now, they may need to file additional declarations and potentially pay significant taxes, requiring them to prepare a large amount of cash to comply with the new rules.
- More importantly, as the people who understand Haidilao’s operations best, Zhang Yong and his wife believe the company’s stock price is unlikely to rise significantly again. They are selling at a price they consider a good opportunity to cash out. Previously, they invested all their wealth in Haidilao’s growth, but now they are diversifying their assets and choosing to convert some of their equity into cash for safety.
In summary, this sale by Shu Ping’s family trust is a significant shift in Haidilao’s business strategy and reflects a change in the company’s financial situation.