Chinese TV producer Linmon Media seeks Hong Kong IPO

Chinese TV producer Linmon Media has filed for an IPO in Hong Kong. This is the third time the eight-year-old company has sought an IPO.

The heavily redacted draft prospectus, sponsored by Morgan Stanley and CICC, does not disclose the amount of fresh capital the company aims to raise, nor the company’s projected valuation. The timing of the IPO is also not disclosed.

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Linmon had previously sought a listing on the A-share market in mainland China and had already attempted to list in Hong Kong late last year. Both requests were abandoned.

The company was founded in 2014 by former SMG film executive Zhou Yuan and co-founders Su Xiao, Chen Fei and Xu Xiao’ou. Today, it claims to be the fourth largest television producer in China in a highly fragmented market, and a market share of only 2.9%.

His recent shows include “A Love for Separation”, “A Little Reunion”, “A Little Dilemma”, “Nothing but Thirty” and “Twenty Your Life On” focus on popular contemporary topics such as family life, life education and women. accountability. Licensing to third-party broadcasters, streamers and distributors forms the majority of its business, although it is also involved in content marketing and film distribution.

Fox Network Group has picked up the ex-China rights to Linmon’s drama series “To Be a Better Man,” about a US-trained chef who returns to China with the remains of his best friend.

The prospectus shows that Tencent Video has been a major customer and corporate investor. Tencent led a $15 million financing round in the company’s third year, while Hony Capital and Hunan TV’s Mango V Foundation led a $76 million B financing round.

The prospectus says Linmon managed to deliver all of his scheduled productions during the COVID-related disruptions of 2020. But he opted to drop theatrical release of his feature film “Monster Run” when Chinese theaters closed, and l allowed to major streamers instead. for 135 million RMB ($21 million) in revenue.

Exceptionally, the company is unable to demonstrate a full range of financial improvements. During the record three-year period, the company’s revenue declined: from 1.79 billion RMB ($277 million) in 2019 to 1.43 billion RMB ($222 million) in 2020 and 1.25 billion RMB ($194 million) in 2021.

Profit after tax in 2019 was 80.4 million RMB ($12.5 million), but fell to 62.5 million RMB ($9.70 million) in 2020 and remained at 60, 9 million RMB in 2021. He was able to indicate an improvement in profit margins at the gross level.

As is often the case with IPOs of Chinese companies, the published risk factors make for the most insightful reading. Along with the expected warnings about piracy, competition, customer failures, Linmon is obligated to explain some of the Chinese TV regulatory environment to potential investors.

Examples include: “PRC drama series are banned from certain content, such as
as promoting superstition, obscenity, gambling or violence, defamation as well as
social morality or cultural traditions”.

“We may need to incur additional costs and expenses to revise our drama series content based on
requests from competent authorities. “Furthermore, if any of our drama series fails to obtain a license [from the National Radio and Television Administration]we may have to throw it away, even if it is already finished, which will lead to a total loss of investment.

Linmon explains China’s rules governing star salaries: “The NRTA requires, among other things, that the total payment of all actors in a drama series should not exceed 40% of the total production costs, and the payment of lead actors should not not exceed 70% of the total payment of all players.

And it highlights the risks posed by China’s legal system: “The PRC’s legal system is partly based on government policies and administrative rules that can take effect retroactively. As a result, we may not be aware of our violations of certain policies or rules in a timely manner.

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