Chapter 74: 072 Birth

Yu Xing went to sleep at 1:30 a.m., expecting to wake up to a bright morning after finalizing the intent and drinking beer, but he opened his eyes at just five o’clock.

He drowsed for a few minutes, pulled back the curtain to see only faint dawn light outside, but couldn’t fall back asleep.

Three and a half hours of sleep.

Yu Xing rubbed his face, got up to urinate, washed up simply, brewed a cup of instant coffee, and looked out the window again—early risers, old men and women, were already jogging on the streets.

He sipped the awful coffee while contemplating the morning street scene.

Over the past three months, except for that one trip home, his mind had been constantly preoccupied with company matters; since everyone was a college student, even with Zhong Zhiling and Lu Haiying around, strange, odd questions kept popping up.

At this moment, Yu Xing felt the mental exhaustion from that high-intensity operation was even more profound than the brief sleep he’d just had.

The high commission incentive and the openness of part-time roles meant that, despite being newly founded, Jia’ai.com already had nearly 500 full-time and part-time staff—even after a wave of departures in August.

Five cities, this and that, right and wrong…

Yu Xing lit a cigarette, thinking a sound management mechanism and a lean team would make his work feel more fulfilling.

His thoughts drifted, and he couldn’t help but return to the idea of short selling.

Yu Xing’s rudimentary understanding of short selling came mostly from post-financial-crisis reflections like “The Big Short,” and from companies like Muddy Waters, famous in China for targeting Chinese ADRs.

Muddy Waters probably hadn’t been founded yet; its name came from the Chinese idiom “muddying the water to catch fish.” Its founder was a young American who had worked in investment banking and law, then at a foreign law firm in Shen Cheng, and also ran a warehouse business and a website.

Later, the warehouse business nearly collapsed, and the rent was embezzled by the park manager.

Muddy Waters was founded because, while researching a Chinese company, he uncovered fraud—and decided, without hesitation, to team up with his father, who had experience in this area, and short the company.

This short sale caused the company’s stock price to drop by more than half, and the founder earned a substantial profit of $6,000!

$6,000—over 40,000 Chinese yuan—not a small profit.

Yu Xing remembered this detail vividly, but couldn’t recall the name of the first company Muddy Waters shorted; fortunately, Jiang Nanchun’s name was equally unforgettable.

Muddy Waters was small; similarly structured was Citron, said to be run by just one person who hired two to ten temporary workers for each investigation.

Yu Xing learned about Citron through its challenge against his former boss’s company: Citron shorted Evergrande on the Hong Kong stock exchange in 2012, was sued, investigated by the SFC in 2014, and finally lost in 2016, barred from trading securities in Hong Kong for five years.

Of course, that challenge was later proven correct in a major scandal, and one line from the investigation report became widely quoted.

—“Evergrande’s fate is already sealed; only the timing remains uncertain.”

As an employee, Yu Xing never imagined his evaluation of the same event could shift so drastically across different stages—he remembered it vividly, and even now, recalling it stirred complex emotions.

Thus, if you establish a core figure for the institution, it truly doesn’t need many people.

And it needs sufficient security.

Under security, with the right approach and suitable tools, this work could be done well.

The short-selling institution must operate separately from mainland companies, requiring multiple aliases; Baixiaosheng could assist during certain public opinion moments, but couldn’t be constantly used for short selling since short selling wouldn’t occur frequently.

Targets could be selected from Hong Kong and U.S. stocks that could be researched, operating entirely legally and compliantly.

Yu Xing drank half his coffee, recalling Liu Wan’s own words: projects are tools, people are tools, and the combined effect of these… not exactly lucrative, but could it bring some modest profit?

The city’s silhouette outside the window grew clearer in the dawn light; pedestrians and vehicles gradually increased.

Watching this, perhaps due to lingering fatigue from sleep, or perhaps the post-deal lull after finalizing the company sale, a buried thought quietly surfaced: why me? Why did I have that dream?

Is there fate?

He gazed at the morning clouds on the horizon, and after a long while, shook his head—he simply couldn’t perceive any fate.

Yu Xing finished the rest of his coffee in one gulp; since he couldn’t grasp his own fate, let those chosen companies face theirs.

He went downstairs for a simple breakfast, then peacefully slept another two hours; when he woke, his energy had recovered considerably, and the timing was perfect.

“Xing Ge, let’s go eat.” Zhong Zhiling called.

“You guys go ahead, I’ve eaten.” Yu Xing turned on speakerphone, casually saying, “I need to write something. Take your time eating—no rush this morning. Jia’ai.com won’t be pressing us.”

The phone hung up; his laptop opened last year’s financial report and the Q2 report released in August for Focus Media.

Focus Media’s capital market performance before this year had been outstanding—it was the first Chinese new media company listed on the NASDAQ 100 Index—and its founder Jiang Nanchun repeatedly promoted his company as the second-largest media group after CCTV.

Focus Media’s stock peaked in November last year at $65.10, with a market cap nearing $8 billion; this year, affected by multiple factors and recent financial turmoil, its price had dropped over 70%, now hovering around $20.

Last night, Yu Xing had used this sharp price drop as his reason in his call with Liu Wan, arguing that, from a human psychology perspective, it would be hard to resist the urge to tinker.

Less than a year ago, nearly $8 billion—still in U.S. dollars—now only $2.5 billion; if it were him, he’d definitely try to revive the stock price.

Of course, this psychological reasoning was merely surface-level; corporate governance couldn’t be bound by such logic alone.

So Yu Xing planned to use a crude method to verify whether Focus Media’s core business was grounded in reality.

Focus Media, in essence, was an advertising company—it installed LCD screens in countless commercial buildings and apartment elevators, then played ads from various brands on them.

Its Q2 financial report showed total revenue of $211 million, a 106.8% year-over-year increase, and net profit of $36.13 million, with nearly 60% of revenue coming from LCD advertising.

Meanwhile, Focus Media’s financial report listed 121,000 LCD screens.

These were the foundational data points Yu Xing considered critical.

His crude method: first verify whether this number was real, whether it was inflated.

How to verify it…

Yu Xing planned to count with his fingers.

121,000 advertising screens, right? I’ll hire thirty college students across all cities—each assigned 4,033 screens—and require them to complete the count within a month, meaning 134 screens per day.

Each college student’s part-time wage is 5,000 yuan; total labor cost: 150,000 yuan.

As for whether each student’s reported number is accurate, whether their work was thorough…

Some error is unavoidable.

On one hand, I can inform the part-time students that others are doing the same task, and the final numbers will be cross-checked; on the other hand, Yu Xing plans to send people posing as potential advertisers to inquire about the number of screens in different cities, pretending to evaluate ad placement effectiveness.

As long as the data is aggregated and errors are filtered out, whether there’s inflation should be easy to discern, and data from multiple angles can be compared multidimensionally.

If even this foundational data is flawed, the revenue figures in the financial report are likely inaccurate or fabricated.

One lie always requires more lies to cover it; once a key data point is confirmed false, the rest of the financial analysis can be left to professionals like Liu Wan. If the foundational data from this investigation proves solid…

Then we’ll come back in a year or so.

Flies don’t buzz at eggs without cracks.

The problem is, it’s almost certain this is a cracked egg—we just don’t know what stage it’s in.

Already cracked? Cracking now? Preparing to crack?

Anyway, this one is first.

With intent against carelessness, it’s unlikely the loopholes can be hidden perfectly; moreover, by common sense, no one would think someone would idle enough to meticulously count numbers in the hundreds of thousands.

Yu Xing named this basic yet critical data investigation “Ding Feng Spirit.”

When the phone rang again, the document on his laptop was nearly complete.

Yu Xing hadn’t written it too clearly—just enough for him to understand—and the next three months at Jia’ai.com could be used to assign people to carry this out.

Still, as he closed the laptop, he couldn’t help but sigh—even after dropping over 70%, Focus Media’s market cap still equaled nearly 20 billion Chinese yuan…

Compared to the nascent institution, it was like a mountain peak.

Could it really be shaken?

Probably.

And beyond this peak, there are more.

On his way to meet Zhong Zhiling and the others, a sudden inspiration flashed through Yu Xing’s mind—he quickly sent Liu Wan a text: What do you think of naming the institution “Guo Shan Feng”?

Liu Wan found the message amusing, thought for a moment, and replied: Good—very symbolic, fierce, ruthless.

She sent a second text: Are you so certain Focus Media has problems?

Yu Xing replied: We’ll find out by checking. By year-end we’ll have data—we’ll analyze it together, settle the score. Also, ruthless?

Liu Wan was puzzled: Isn’t “Guo Shan Feng” ruthless? Didn’t you say it’s the king cobra?

Only then did Yu Xing quickly check on his phone: the king cobra’s common names include “Guo Shan Feng,” “Guo Shan Feng,” “Shan Wan She,” “Guo Shan Wu”…

Oh, indeed ruthless!

But that fits short selling quite well…

Could this also be fate?

Even the English name came to him—kingcobraresearch.

King Cobra Research or Guo Shan Feng Research.

After a long pause, Yu Xing replied to Liu Wan: Then let’s go with this name, okay?

Liu Wan: Your company, do as you please.

Yu Xing thought it fine—the symbolism was… decent enough.

The company name was set, the first target chosen, the investigation strategy defined—now it was just a matter of launching in the remaining months of the year.

“Today we have two things: first, finalize the investment and equity ratios; second, confirm the next steps with Jia’ai.com.” Yu Xing, having suppressed his inner ruthlessness, turned to the matter at hand.

He asked his second and third in command: “Did you two discuss it last night?”

Lu Haiying and Zhong Zhiling exchanged glances and answered firmly: “Senior Brother, we’ll pool together 400,000.”

Yu Xing laughed: “You’re going all in.”

The company sale’s 2.635 million, minus the remainder, gave them a combined 15% stake worth 390,000; now they were offering 400,000—adding part of their three-month savings to round it up.

Lu Haiying nodded: “Yes, as long as Senior Brother has no other plans, we’ll invest this way.”

Yu Xing mentally calculated, then said: “I’ll also contribute a round number—1 million. Liu Wan’s money will be counted as investment once our equity structure is clear—no rush.”

Song Yufeng’s 120,000 was confirmed; thus, Baixiaosheng could raise 1.52 million in total.

Yu Xing added: “Jia’ai.com’s acquisition of shares requires taxes, but since this transfer is handled through the Hong Kong company, it’s subject to a 10% withholding tax. We’ll confirm details with Jia’ai.com—this tax will be covered by the previously set option shares.”

The shareholder of the mainland Jia’ai.com entity was the Hong Kong Jia’ai.com; the employee option pool had been set at 10%—perfect for covering the tax. Yu Xing had no intention of taking advantage here.

Zhong Zhiling and Lu Haiying hadn’t considered this at all, and both nodded—Senior Brother was straightforward.

The current equity stakes were now preliminarily clear: based solely on capital contribution, with Baixiaosheng setting aside 10% for options, the company’s total valuation was 1.68889 million, Yu Xing held 59.21%, Lu Haiying and Zhong Zhiling together held 23.68%, Song Yufeng held 7.11%.

“Senior brother, as a director, I propose that in addition to the 10% employee stock options, we allocate another 10% as your incentive shares,” Lu Haiying said at this moment. “Zhong Zhiling and I have already discussed it—we truly mean it.”

Yu Xing nodded slightly, not refusing, and turned to Song Yufeng.

Song Yufeng said without hesitation: “Brother Xing, I have no objections at all!”

With this calculation, the company’s total valuation became 1.9 million yuan; Yu Xing’s 1 million yuan investment gave him 52.63% equity, plus the additional 10% incentive, bringing his total stake to 62.63%, while Lu Haiying and Zhong Zhiling together held 21.05%, and Song Yufeng’s share dropped to 6.32%.

“Alright, I accept it. But honestly, if I took all of that 10% for myself, I’d feel uneasy,” Yu Xing smiled. “We’re starting fresh together—we should have a good omen. I’ll take the 10%, but I’ll give 2% to Xiao Ying, 1.5% to Zhong Zhiling, and 0.5% to Brother Feng.”

Seeing all three were about to speak, he immediately said: “This counts as a small board meeting—I’ll exercise my right as the major shareholder. This is settled.”

Yu Xing believed his junior siblings genuinely offered the 10%, and he didn’t think himself unworthy to accept it—but things could still be done more beautifully.

Unlike Guai Ai Network, which was launched in haste, driven by urgency, and aimed at selling itself, this Baishaosheng project could last longer, and thus could lay a stronger foundation from the very beginning.

Zhong Zhiling and Lu Haiying exchanged a glance, understood their senior brother’s intention, and accepted it just as Yu Xing had done earlier.

Song Yufeng still wanted to decline politely.

“Alright, Brother Feng, your noble character—then I won’t give you that 0.5%,” Yu Xing was willing to honor his integrity.

“Hey, hey, Brother Xing, I’m wrong, I’m wrong—I do want it, I really want it!” Song Yufeng quickly dropped his pretense and swiftly admitted his mistake.

Yu Xing grunted, half-smiling: “Then it’s settled.”

In the end, he held 58.63%, Zhong Zhiling and Lu Haiying held 24.55%, and Song Yufeng held 6.82%.

With the ratios set, everyone felt unusually pleased.

Especially Song Yufeng. Though in actual monetary value, that 0.5% amounted to only 7,600 yuan—less than what the other two received—it proved something… following Brother Xing was the right choice!

Brother Xing feasts on meat; even if I only get a sip of broth, it’s still fine!

Song Yufeng now had one single, determined thought: he must grow the company strong and great, and build a glorious future!

Only by working his hardest could his shares gain ever-increasing value!

For that alone—even if he had to go in himself!

Song Yufeng had not rested all night. He defined two value positions for himself: first, to stay tightly by Brother Xing’s side and provide him emotional value; second, to stand tall and shoulder responsibilities for the company.

Privately, he would be the boss’s confidant; publicly, he would be the company’s backbone.

(End of Chapter)