In the faction-ridden investment industry, how did the young Tiger Investment Bank break through the ground?
The day before the meeting with Fang Lei, Tiger Securities had just announced its third quarter results. In the investment banking section, 9 Chinese stocks went public in the US in the quarter, of which Tiger Securities participated in 7 and underwrote 5, continuing to lead the investment banking industry in underwriting the most Chinese stocks to the US.
This good answer sheet, if put 2 years ago for the entire investment industry, simply unimaginable. But change has happened.
Investment, money, financing
After 80 years, Fang Lei, as a partner of Tiger, witnessed the process of breaking the shell of Tiger Investment Bank from 0 to 1, and was therefore asked how far he could go in the extremely competitive investment industry, Fang Lei was firm, “We can go from 1 to 10 if we do it with our heart. we want to be the long-term companion of new economy companies.”
From the participation in Sogou IPO distribution at the end of 2017 to now, Tiger Securities investment banking has developed into a force to be reckoned with. Especially in the domestic science and innovation circle, new economy companies going abroad almost always list Tiger Securities as the standard investment bank. TIGER Investment Banking is behind the listing of Shell, Xiaopeng Auto, Ideal Auto and Qinhuai Data in the US, which received the most market attention in the third quarter.
Focusing on the new economy and increasing the “weight” of the business is the development trajectory of Tiger Securities’ investment banking in this quarter.
In the faction-ridden investment industry, we tried to get a more realistic perspective from this interview on how the young Tiger Investment Bank broke ground.
The only investment bank to underwrite both RISO and Xiaopeng
Skip the pleasantries, Fang Lei took the initiative to cut to the chase, just like the style of Tiger Investment Bank: grounded and strong execution. In Fang Lei’s opinion, this is the core value of Tiger Investment Bank. “We will share the pitfalls in IPO without reservation and solve problems immediately, which has allowed us to conquer many issuers.”
Fang Lei defines the third quarter as a turning point. During the quarter, nine Chinese stocks went public in the U.S., Tiger Securities participated in seven and underwrote five. In terms of contributed orders, Qinhuai Data and Yalla both exceeded $300 million, Shell reached $960 million, and the subscription amount of Ideal Auto and Xiaopeng Auto was straight into two figures, which set a new Tiger Investment Bank order record.
Talking about the biggest highlight of the quarter, Fang Lei blurted out, “Tiger Securities is the only investment bank that underwrites both Ideal Auto and Xiaopeng Auto, the two domestic car-making new forces.
At that time, Tesla’s stock price repeatedly brushed new highs, Musk’s price surpassed Warren Buffett screen dominated the major media headlines, new energy vehicles ushered in the high moment. In this context, as a member of the three major domestic car-making new forces, the ideal car and Xiaopeng car listed in the United States one after another by the outside world is extremely concerned.
In a month’s time, on the prospectus of two star companies, Fang Lei was so busy that he was on 24-hour cell phone standby to help coordinate resources and always be on the front line to respond to the company’s needs.
Without limiting himself to the category of “intermediary”, Tiger Investment Bank treats projects with great care.
For example, in the ideal car project, Fang Lei’s requirement to the team was that the business department should have a good understanding of the technology and products of the ideal car, down to the details of why the ideal chose to focus on the 6-seater model, why a large entertainment screen should be placed in front of the passenger side, why the second row uses power seats, etc.
“Only by truly understanding the positioning and selling points of the issuer can we help educate the market and help the company deliver accurate investment value when dealing with investors. For this reason, even Fang Lei himself often goes to the ideal car experience store for research, and organizes training within Tiger.
This is the daily routine of Tiger’s investment bank. Visiting companies, researching users, dismantling products, and discussing them again and again internally. This kind of detailed, almost research institution-like operation allows the TIGER investment banking team to quickly point out the core value of the issuer when facing the buyer, or to anticipate the market concerns and help the issuer to better refine the project advantages.
The results are obvious. Tiger Securities ultimately contributed $1.887 billion in orders to Ideal Auto, subscribing 172.8% of the company’s global offering. This record was set a month later by Peng Auto, which contributed $2.4 billion to the project as underwriter.
The “coach” from the “player” is more professional
The willingness to “sink” has helped Tiger Securities to accumulate a reputation of “reliability” in the VC circle, but the nutrients that make Tiger Investment Bank “alive and well” are more in its genes.
As a startup, Tiger Securities has experienced a US IPO in 2019, which means that before being a “coach”, Tiger is also a “player”, and knows exactly where the “blind spots” and “pain points” of new economy companies are. He knows where the “blind spots” and “pain points” of new economy companies are, and he also knows how to see the problems from the perspective of an entrepreneur. Fang Lei laughed and said, “It is like asking Yao Ming to manage basketball to be more professional.”
This two-way thinking allows Tiger Investment Bank to quickly figure out a way to differentiate and break the game. We have a deep understanding of what companies need, not limited to the listing process, but create value together with entrepreneurs with an open perspective of the whole cycle.
A typical example is the test drive campaign launched jointly with RISO Motors. Fang Lei recalled, “At that time, we thought, “Ideal is a car company, the core is sales. So we took the initiative to propose, why not do a test drive for the Tiger community don’t activities, one user can touch the product, further understanding of the company, increase the interest of doing secondary market shareholders; secondly, it can also help the company marketing conversion.”
In addition, Tiger also put together a video company to subscribe to the ideal car IPO, which is also the idea of Fang Lei field test drive, after doing research. “Now the ideal car video can only watch Aiki, there is no other video platform. The introduction of awareness is also convenient for everyone to ‘kiss on’ in the future.” He said.
Emphasis on thinking differently and going to create services that fit the company’s long-term development strategy is a rule of thumb for Tiger Investment Bank. When underwriting Xiaopeng, in addition to helping to introduce a number of strategic investors, Tiger Investment Bank also considered the possibility of cooperation between car companies and real estate circles, and “threaded the needle” between Xiaopeng and the country’s top real estate companies.
Tiger has an inherent advantage to think outside the traditional investment banking orientation and break the “assembly line” service.
In the past six years, TIGER has gained a large number of users from technology, finance and other cutting-edge industries, including executives and founders of US and Hong Kong listed companies and leading venture capital firms. Not only is the user base highly overlapping with the customer profiles of many new economy companies, Tiger Securities is also able to promote a mutually beneficial and symbiotic “circle of friends” ecology among companies through resource sharing.
“Quality projects are not bad for funding, but investment banks that can provide differentiated incremental value beyond funding are equally important for issuers.” In Fang Lei’s view, the total underwriting fee for a project is fixed, and the entry of emerging technology investment banks can complement traditional investment banks and help issuers go further and smoother without adding additional costs.
Telling the story of China’s new economy
As a Chinese-led investment bank, Tiger Securities shows great confidence in China’s new economy, startups and entrepreneurs, which allows Tiger Investment Bank to stand more firmly on the side of the company compared to many foreign banks.
“Some foreign banks have put pressure on the company to set a lower issue price at pricing meetings or with the risk of withdrawing orders because their clients have placed limit orders. Several times Tiger Securities has strongly backed the company because we have a large number of price-insensitive orders here as well as funds with Chinese backgrounds or focused on Chinese stocks.” According to Fang Lei, the Chinese market is large and deep, and many companies and industries are ahead of their time and do not have analogous growth and profit models, so what Tiger does is to “build bridges and pave roads” and help make up for the cognitive gap.
As early as last year, when underwriting NetEase, TIGER Investment Bank was very bullish on the company and contributed a good size order in a very challenging environment with its in-depth insight into China’s new economy industry. This also laid the groundwork for TIGER to serve as the underwriter for the international placement of NetEase’s IPO in Hong Kong this year.
Why trust? Fang Lei replied: “I think of the source when I drink water. As a company born in the wave of China’s Internet, TIGER Securities has witnessed how the digital economy and information technology continue to drive China’s innovation breakthroughs, and therefore believes that this will be the era of China’s new economic enterprises.
As of October 28, NetEase has risen nearly 50% from its offering price, and the doubts it once had have dissipated. In the general environment, in the third quarter, the number of Chinese stocks listed grew by 30%, and the amount of initial public offering grew by 180%; Ideal, Xiaopeng, Shell, etc. have raised the issue price, and in the “shorting”, “delisting”, ” Policy tightening” in the cacophony of new share prices, the highest share price of Peng listed so far has soared more than 200%.
“Quality Chinese stocks continue to be highly sought after by global investors. We have seen several projects on roadshows where instead institutions are articulating their reasons for investment to issuers in anticipation of more placement opportunities. Wall Street still sees Chinese stocks as a platform to share the dividends of China’s development, and there is still plenty of enthusiasm.” Fang Lei noted that in deciding whether to subscribe, U.S. investors are thinking more commercially, such as what problems the company solves, whether the business model is scarce, and whether the team can support growth prospects.
“Tiger is a firm ‘long’ on China’s new economy.” Fang Lei briefly summarized.
Technology to specialize
As we enter the fourth quarter, whether the wave of Chinese IPOs will continue, and if not, where will Tiger Investment Bank go from here is the question we put to Fang Lei. He spoke in a calm tone: “Do a good job and build up.”
The light-hearted attitude comes from Tiger’s clear planning for the future. In the second quarter, Tiger Securities’ U.S. subsidiary took five heavyweight licenses, including investment research. At the same time, the U.S. equity self-liquidation is moving forward as planned.
Investment research and clearing, the former represents the modeling, pricing and other professional capabilities, which determines how deep the investment bank can participate in the project; the latter represents the investment bank’s autonomy over the trading system, which determines the business stretch and service efficiency. However, due to the large investment and long incubation period, they are the business areas that many investment banks from Internet brokerage firms “skip”.
The logic of Tiger’s choice to do heavier and heavier may lie in its judgment of the industry: most of the investment banking coverage channels are similar; to go far, the business cannot be limited to referrals and bookkeeping, but to do “fine” and “deep”. This is the only way to be able to accompany the enterprise for a long time and provide broader and customized services.
“Tiger wants to be the most knowledgeable Internet investment bank in the new economy and technology.” Fang Lei is quite satisfied with the process. In the third quarter, Tiger Securities investment banking more than doubled the number of underwriting while the number of participating Chinese projects remained flat from the previous quarter.
From the Ideal Car project when Tiger US analysts held dozens of PDIEs for US institutional investors to share unique perspectives on the global tram competition landscape, to the Yalla pilot conference when they helped investors gain insights into the company’s business model and competitiveness in the Middle East market, Tiger’s investment bank’s involvement in the project is getting deeper and deeper. In addition, Tiger’s U.S. analyst team has published many research reports including Ideal Auto, Xiaopeng Auto, Weilai and Sound.com, gradually forming a professional image of “Chinese stocks look for Tiger” in U.S. institutions.
The technology of investment banking is also being strengthened. Compared with traditional investment banks that rely more on people and offline referrals, Tiger Securities’ online order process continues to iterate, and the system can accurately push for specific investors, significantly reducing communication and time costs. Due to its insistence on self-research, in projects such as Qinhuai Data and Shell, Tiger Investment Bank’s resilient middle and back office system also responds quickly to issuers’ DSP (friends and family stock) customization needs, with efficiency far exceeding peers. Even in the allocation of this “difficult bone” for brokerage firms, other Internet brokerage firms in the circle are still at the stage of relying on third-party clearing providers, while Tiger, on the contrary, announced in its third quarterly report that it has achieved quarterly self-clearing of more than 10% of its clients’ US stock transactions. This means more flexibility at the bottom of the business and faster allocation of new shares.
The biggest feeling of Fang Lei in these two years is that whenever we talk about Tiger Investment Bank, there are less people who are surprised. The incremental value of Tiger Investment Bank’s differentiation is being slowly accepted and recognized. While sighing, Fang Lei is glad that the team was “ignorant and fearless” and dared to break the traditional rules of the game with the initial intention of creating value.
“What percentage of revenue will Tiger Investment Banking account for in the future?”
“10%-20%, I think.” Fang Lei pondered and answered, “In addition to providing users with more opportunities to hit the new market, I hope investment banking can also serve our entire ecology, grow and accompany more quality companies to the world.”
There is still a long way to go for Tiger Securities to reach this goal. But the undeniable fact is that in just three years, the emerging technology investment bank has gradually gained a firm foothold in an industry dominated for a century by traditional investment banks like Goldman Sachs and Morgan Stanley, and has taken the lead in the vertical of Chinese stocks.
From a longer-term perspective, the investment banking business has rewritten the business landscape of Tiger Securities, allowing it to “break the circle” from a pure U.S. and Hong Kong stock brokerage retail brokerage to a top-tier technology brokerage, giving rise to more business growth possibilities.
The market is cyclical. The proactive expansion of business boundaries has, in the end, given Tiger Securities an additional “ace in the hole” against the cyclicality of a single business.
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