Four years of blood loss, executives reducing holdings, Chinese Online's Hong Kong IPO struggles to "refill the blood" and break the deadlock

On February 27, 2026, China Online (300364.SZ), a leading domestic digital publishing company, submitted its prospectus to the Hong Kong Stock Exchange, planning to list on the Main Board, with Citigroup serving as the sole sponsor.

As the first digital publishing company listed on the A-share market, its fundraising in Hong Kong is backed by years of continuous losses and financial pressure. In recent years, China Online capitalized on the popularity of short dramas, increasing investment, but failed to turn a profit—in fact, losses worsened. By 2025, net profit after non-recurring gains and losses had been negative for four consecutive years.

Despite ongoing “bleeding” in operations, the company’s stock price has continued to rise, driven by concepts like AI and short dramas. Notably, while the stock price climbs, core executives have been heavily reducing their holdings. Meanwhile, ongoing losses have led to a decline in cash reserves, making the IPO primarily a fundraising effort to replenish funds.

Currently, many companies are queueing for IPO at HKEX, with stricter regulatory requirements. Whether China Online can successfully pass the review and raise funds remains uncertain.

Continuous Losses: Four Years of Non-Recurring Losses and Difficulties in Turning Profits

China Online has faced profit difficulties for four years, with losses intensifying over time.

From 2022 to 2025, the company’s net profit after non-recurring gains and losses has been negative for four consecutive years, indicating persistent “bleeding.” In 2023, the company achieved revenue of 1.409 billion yuan and a net profit of 89.98 million yuan, but this profit mainly relied on non-recurring gains and losses (about 140 million yuan). After excluding these, net profit was still -38.34 million yuan, meaning no real profit was achieved.

In 2024, revenue declined by 17.73% year-over-year to 1.159 billion yuan, and net profit turned from profit to loss, reaching -243 million yuan, highlighting the worsening situation.

In the first three quarters of 2025, losses deepened further, with revenue at 1.011 billion yuan and net loss at 517 million yuan. The net profit attributable to shareholders was -520 million yuan, and operating cash flow was -173 million yuan, indicating ongoing cash flow pressure and little hope for profit recovery in the near term.

According to the company’s disclosed financial data and prospectus, the net profit attributable to shareholders in 2025 dropped significantly compared to 2024. The main reason is increased investment in overseas short drama business, which is still in the investment phase and thus generating losses. The short drama industry has experienced explosive growth recently, with overseas markets offering vast development potential. China Online launched the FlareFlow overseas short drama platform to seize market share.

The high input and slow return characteristics of the short drama industry may also put pressure on China Online’s overseas expansion profitability. The prospectus shows that from 2023 to the third quarter of 2025, investment in short drama accounted for an increasing proportion of revenue, rising from 34.2% to 40.1%, then to 65.3%. During the same period, related costs increased by over 30%, and the rising investment directly dragged down overall profitability.

The rapid expansion of the short drama business also highlights the company’s focus on marketing over R&D, with marketing expenses significantly exceeding R&D costs. In the first three quarters of 2025, sales and marketing expenses reached 660 million yuan, up 93.65% year-over-year, while R&D expenses were only 53.37 million yuan, showing a clear tilt toward marketing investment.

Market Frenzy and Executive Share Reduction: Can Popular Concepts Sustain Long-term Confidence?

Contrasting with the company’s ongoing operational losses is its strong capital market appeal.

Since hitting a low in April 2025, the stock price has increased by over 60%. As of the close on March 13, 2026, the stock price was 26.97 yuan, with a market capitalization of 19.65 billion yuan. On the day the prospectus was filed (February 27, 2026), the market cap once surged to 23.4 billion yuan. The main drivers of the stock price increase are market concepts like AI and short dramas, rather than solid operational fundamentals.

Source: Eastmoney

More concerning is that, at high stock prices, core executives have begun to reduce their holdings intensively. According to the announcement, in February 2026, directors Zhang Fan, Executive Vice President Xie Guangcai, and two other key executives disclosed plans to reduce holdings within three months after the announcement, through centralized bidding or block trades, totaling no more than 659,700 shares, representing about 0.0903% of the total share capital.

Most of these shares are from low-cost equity incentives. Executives can realize substantial gains by selling at high prices, but this also raises market concerns about the company’s future prospects, potentially shaking investor confidence.

IPO “Refueling”: Multiple Challenges Under HKEX’s “Blockage”

Under losses, tight cash flow, and executive share reduction pressures, China Online’s main goal for listing in Hong Kong is to raise funds to replenish liquidity. The prospectus states that proceeds will be used for content creation, technology R&D, market expansion, and working capital, with replenishment being the most urgent.

Persistent losses have led to shrinking cash reserves. From Q1 to Q3 2025, shareholders’ equity decreased from 920 million yuan to 546 million yuan—a nearly 40% drop over nine months. Operating cash flow remained negative, and without new financing, the company’s liquidity could be at risk.

However, the path to Hong Kong IPO is not smooth. The “flood” of companies waiting to list on HKEX has worsened, with more than 400 companies queued as of March 12, 2026. The surge has significantly extended review times, increasing the cost and duration of fundraising.

More critically, HKEX regulators strictly scrutinize IPO applications. China Online’s ongoing losses, high-level executive share reductions, and reliance on concept valuation could become focal points during review. Additionally, its short drama business lacks clear competitive advantages, facing content homogenization and user retention issues. Without improving its competitiveness, fundraising may not reverse losses.

Furthermore, despite strong desire to list, companies with ongoing losses must demonstrate to regulators the feasibility of profit improvement. China Online has yet to specify a clear profit turnaround point. Whether its “losses for growth” strategy will be accepted remains uncertain.

In essence, this IPO is a survival battle. Four years of losses, executive share reductions, and HKEX’s queue pressure make fundraising uncertain. While concepts like AI and short dramas attract market attention, they cannot replace actual performance. Short-term hype cannot hide long-term risks. If successful, the company may gain a breathing space; if not, its liquidity pressure will intensify. Investors should beware of concept-driven speculation, as sustainable growth depends on solid performance and profitability. Whether China Online can break through remains to be seen. (Produced by Wealth Weekly - Financial Digest)

Disclaimer: The opinions expressed in this article do not constitute investment advice. Investors operate at their own risk.