The Polar Opposites of the Primary Market: Money is Vanishing, Stories are Collapsing – How Should Ordinary People Understand This Turmoil?
Hello everyone, I’m your financial observer. Over the past month, I’ve had conversations with dozens of investors, financial advisors (FAs), and entrepreneurs, just as I usually do. The term that’s been on everyone’s lips is no longer “opportunity” or “explosion,” but a word that sends chills down one’s spine – “divergence.”
In simple terms, the current capital market is like a forest after a heavy rain: the big trees are still desperately trying to absorb water, while the grass has already withered and turned yellow. In the past, there was plenty of water and big fish; everyone was sharing in the benefits. Now, it’s a game of survival of the fittest, where only the strongest companies can survive.
To make this complex news easier to understand, I’ve broken it down into five key points and explained them in plain language.
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1. Where Has All the Money Gone? The AI Sector Has Become a “Water Pump,” While Other Industries Are “Dehydrating”
Key Phenomenon:
The amount of money hasn’t decreased; it’s just become much more selective.
- Embodied Intelligence (e.g., humanoid robots): 93.5 billion yuan was invested in this sector alone in the first half of the year. That’s more than 20% of the total investment in the industry.
- General AI Industries: The concentration of funding has exceeded 55%. This means that if your business isn’t related to AI, getting funding is almost impossible.
Plain Language Explanation:
It’s similar to the situation with new energy vehicles in 2021. Everyone thought new energy was the future, and a lot of money flowed into that sector. What happened later? Overproduction, price wars, and many companies went bankrupt. The same thing is happening with AI and robotics now.
Another interesting trend is the sudden surge in “AI + science” projects (AI4S) in the first half of the year, such as using AI in new materials and pharmaceuticals. Why? Because many old funds that invested in new energy and pharmaceuticals were contractually prohibited from investing in AI, but their managers were pressured to find related projects to meet their investment targets.
Warning:
When competition reaches its peak, the usual sequence is:
1. Valuation Correction: A company that was once valued at 1 billion yuan might now be worth only 300 million.
2. Funding Drought: What used to be easy funding has become extremely difficult.
3. Company Shutdowns: Companies that can’t survive will simply close down.
Conclusion: If you’re not in the AI or robotics sector, or if your AI project lacks real value, getting funding is very challenging.
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2. Policy “Brakes Applied Suddenly”: New Funds Are Hard to Create, and Old Funds Are Running Out of Money
Key Phenomenon:
On June 5th, the government issued Document No. 54, which changed the regulation of private funds from self-management to strict government oversight.
- High Barriers for New Funds: To set up a new fund management company, you need to go through a comprehensive review by provincial financial departments and securities regulatory agencies.
- Local Funds Stopped: County-level governments are generally not allowed to create new guidance funds. Many small investment firms (GP) relied on these funds for survival, but now that’s no longer possible.
- Chilling Data: Only 2 new fund managers were registered in June, and equity venture capital funds saw a 40% decrease compared to last year.
Plain Language Explanation:
Previously, starting a fund was like getting a taxi license; you just needed the right documents. Now it’s like getting a heavy truck license, with strict background checks and even new restrictions in some areas.
The impact on the industry is devastating:
- Small and Medium-Sized Firms Struggling: Many small firms that relied on local funds are now struggling.
- Policy Uncertainty: Different regions have different rules, creating confusion and fear among investors.
Conclusion: New capital can no longer enter the market, cutting off the industry’s supply of “blood.”
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3. Existing Funds “Countdown”: Money Will Be Completely Gone by Mid-Next Year
Key Phenomenon:
Although new fund fundraising has stopped, existing funds still have money.
- Time Frame: Funds established between 2023 and 2025 will likely spend all their money by mid-2026.
- Subsequent Impact: Due to the sharp decline in new fund fundraising this year, by mid-next year, the available funds will be concentrated in a few large institutions and state-owned enterprises.
- Special Funds Decline: The traditional model of raising money from friends to invest in a star project is becoming increasingly difficult due to high compliance costs and strict regulations.
Plain Language Explanation:
It’s like your savings account: you still have money from previous years, but at the current rate of spending, it’ll only last until next summer. In the future, raising funds will be extremely difficult.
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4. The Myth of Hong Kong IPOs Has Crumbled: From “Getting One Means Making a Profit” to “Waiting in Line for a Decade”
Key Phenomenon:
In the past two years, listing on the Hong Kong stock market was a lifeline for companies in the primary market.
- Before July: Hong Kong was the global leader in fundraising, with 102 new companies raising 33.9 billion yuan.
- Turning Point in July: The Fed’s hawkish stance and Japan’s interest rate hikes tightened overseas funding. The ZD Group’s IPO scandal also damaged market confidence.
- Dramatic Drop in August: Only 2 new companies were listed in August, raising 3.7 billion yuan, a stark contrast to July’s 12 billion.
- Long Waiting Lists: There are now 379 companies waiting to list, and it could take more than 10 years to process them all.
Plain Language Explanation:
Listing on Hong Kong used to be like buying a ticket to Disneyland; it was expensive but worth it. Now, there’s a long queue, and the facilities are reportedly poor. The result is that most companies can’t get listed, and those that do often see their stock prices fall on the first day.
Conclusion: The era of easy Hong Kong IPOs is over. In the future, mergers and acquisitions, secondary sales of shares, and industry collaborations will be more realistic options.
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5. The “Invasion” of Embodied Intelligence (Robotics) and Infighting: No Technological Breakthroughs, Only Power Struggles
Key Phenomenon:
- High Interest: 93.5 billion yuan was invested in robotics in the first half of the year, five times more than last year. There are 680 humanoid robot companies nationwide, with over 40 waiting to list.
- Policy Tightening: On September 9th, investment banks were instructed to require proof of sustainable revenue, reduced losses, or genuine technological innovation for robot company IPOs.
- Industry Infighting: Newly listed robot company CEOs have accused each other of manipulating revenue through fake transactions. Anonymous reports have also surfaced.
Plain Language Explanation:
Robotics, once a promising field, has become tainted by the same problems as mature industries like solar and new energy.
- Focusing on Tricks: Companies are manipulating financial reports to look better for listing purposes.
- Mutual Accusations: There’s a lot of dishonesty and infighting among them.
Conclusion: With stricter IPO requirements, companies that rely on tricks will face funding difficulties and may go bankrupt.
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Winter Survival Guidelines for Different Groups
Based on this analysis, here are some practical suggestions for three types of people:
1. For Entrepreneurs (Business Owners):
- Get as Much Money as You Can: Focus on raising funds; don’t delay the process for a higher valuation.
- Stockpile Resources for the Winter: Can your company survive without any funding for 18 months? If not, cut costs and maintain cash flow.
- Real Customer Orders: Only companies with real customers and cash flow will have a competitive advantage. Those that rely on fancy presentations will face closure.
2. For Investment Firms (GP):
- Cash Is King: Control your investment pace and don’t waste money.
- Fundraising First: Collect funds whenever possible, regardless of policy details.
- Shift Strategies: Avoid focusing on Hong Kong listings; consider mergers and acquisitions or secondary sales of shares.
3. For Industry Professionals (Employees):
- Don’t Rely on IPOs: In the next three years, IPOs will be accessible to only a few.
- Enhance Industry Knowledge: Those who understand the industry, technology, and business will be more valuable.
- Explore New Opportunities: There’s a growing demand for mergers, secondary sales, and industry business development.
In Summary:
The winter has arrived, and the winds are fierce. The days of surviving by luck, following trends, or telling good stories are over. Now, real skills, cash, and real customer orders are the only keys to survival.