On November 3rd last year, more than 5 months after submitting its prospectus, RIRI ZHU went public in the United States NASDAQ after receiving the China Securities Regulatory Commission's overseas issuance and listing filing notice, and finally caught up with the pre-cooked food trend and listed on the New York Stock Exchange on November 17th.

In fact, the news that RIRI ZHU was planning to land on Hong Kong Stock Exchange had already spread as early as 2020. In August 2021, RIRI ZHU signed an agreement with Ace Global Business Acquisition Limited, a special purpose acquisition company, to merge and go public on NASDAQ, but the plan was eventually abandoned by RIRI ZHU in October 2022, which led to the subsequent listing on the New York Stock Exchange.

However, half a year of trading on the U.S. stock market has made RIRI ZHU deeply understand what is meant by 'not acclimatized to the local conditions'.

According to the Smart Finance APP, on April 30th and May 21st, RIRI ZHU successively released two announcements stating that the 2023 performance report could not be disclosed before the specified deadline or within an additional 15 days, due to the lack of accounting personnel with knowledge of Generally Accepted Accounting Principles (GAAP), who are required to prepare financial statements in accordance with regulatory requirements.

In short, because the financial department of RIRI ZHU lacks accounting personnel who understand the GAAP accounting principles, they are unable to prepare financial reports. As a result, RIRI ZHU directly triggered the regulatory procedures of the SEC and the delisting process of the New York Stock Exchange. Companies that exceed the annual report deadline need to submit it as soon as possible within six months, and if they violate the rules again, the exchange can either decide to grant up to six months' grace period or directly initiate the delisting process.

In addition, according to the listing rules of the New York Stock Exchange, if a company's securities' average closing price is below $1.00 for 30 consecutive trading days, it will be regarded as 'below the compliance red line' and receive a delisting warning from the U.S. Securities and Exchange Commission. From April 30th to June 11th this year, the company's closing price has been below $1.00 for 29 consecutive trading days, which means that if the company's stock price is lower than $1.00 on June 12th, the SEC's warning letter will be sent to the company.

However, perhaps driven by an inexplicable 'will to survive', the stock price of RIRI ZHU soared as high as 389.74% on June 12th and triggered multiple fuses, ultimately rising by 198.10% and finally settling at $1.54 per share. But even so, it has fallen 80% from its initial offering price of $8.50.

Is the capital market unfriendly to pre-cooked food?

In fact, before the IPO, RIRI ZHU was regarded as a darling of the pre-cooked food industry by many market investors. As a 'Hong Kong-version of Li Ziqi' in the food circle, RIRI ZHU had gone through 8 rounds of financing before going public. Among them, there are many star capitals, such as C Capital, Alibaba Entrepreneurs Fund, Unity Ventures, and Hong Kong Group. However, RIRI ZHU's performance in the U.S. stock market just half a year after its listing, which led to the risk of delisting, makes many investors believe that the U.S. stock market is 'not interested in' the concept of pre-cooked food. However, the reality is not like this.

According to the Smart Finance APP, the pre-cooked food industry in the Chinese market is still in its early stage of development, and there is a considerable gap compared with the mature markets of developed countries. In terms of history, the concept of pre-cooked food first originated in the United States. With the support of industrial assembly lines, American catering enterprises have a high degree of chain operation and therefore have a huge demand for stable suppliers. In addition, Western people’s dining tastes and techniques are relatively single, and consumers generally accept pre-cooked food as a dining method.

In the 1970s, pre-cooked food in the United States experienced unprecedented prosperity and formed pre-cooked food giants represented by Sysco, Tyson, and Conagra, with sales of $51.3 billion, $43 billion, and $11 billion in 2021, respectively. Taking the pre-cooked food giant Sysco as an example, the company is the largest food distribution and sales enterprise in North America and the leader of the global pre-cooked food industry. It has entered the ranks of the Fortune 500 and provides food and related services to approximately 725,000 customers worldwide, providing meals for 360,000 restaurants and hotels. As of June 12th, Sysco's market capitalization reached $35.421 billion.

By comparison, RIRI ZHU, which rose to fame as a food self-media, and then transformed into a pre-cooked food brand, dropped on its first day of listing, with a first-day drop of 26.9%. Starting from March this year, the average daily turnover rate of the company's stock has been as low as 0.2%, which shows that its liquidity is worrying. Its poor performance is obviously not due to the fact that the market 'does not understand pre-cooked food'; rather, it is due to the company itself.

Weak fundamentals have been ignored by the market

Since RIRI ZHU has not disclosed its 2023 financial report, investors' understanding of it can only be based on the prospectus-disclosed 2021 and 2022 annual reports and the latest Q3 2023 financial report.

Data show that the company achieved revenue of RMB 205 million and RMB 180 million from 2021 to 2022, a YoY decline of 12.20%. During the same period, the company also recorded net losses of RMB 459 million and RMB 122 million, respectively. Going further back in time, the company also incurred losses of RMB 158 million and RMB 114 million in 2019 and 2020, respectively, which means that its cumulative losses over four years have reached as high as RMB 853 million.

In fact, according to the vision of RIRI COOK, the purpose of burning money is to establish a closed ecosystem from content to realization.

From the business model disclosed in the prospectus, RIRI COOK hopes to attract traffic with high-quality food content, and then realize the content through offline sales of prefabricated food, and finally achieve a closed loop of realization. However, under the background of shrinking revenue and continuous losses, the cash flow of RIRI COOK is increasingly tight, with high debt, and this business model seems to be on the verge of bankruptcy.

From the business structure, the revenue of RIRI COOK is mainly divided into five sectors: online sales, offline sales, cooperation arrangement income, advertising, and experience stores. From the type of products, the company's product categories include instant, ready-to-eat, and plant-based meat, with more than 100 SKU developed. However, even with a diversified business structure, RIRI COOK's realization capability is still not ideal. In terms of sales channels, the company's online product sales revenue in 2022 only achieved 67.0166 million yuan, directly halving the sales revenue of 149 million yuan in 2021.

Combining with the Q3 2023 financial report, the core income source of its sub-business revenue comes from offline product sales, while brand cooperation and offline experience store income have been completely zeroed out; the company's online product sales revenue has dropped by 39.3% year-on-year; the advertising revenue in the first three quarters of 2023 is only 298,700 yuan, a year-on-year decrease of 51.9%.

In the first three quarters of 2023, although RIRI COOK has initiated a cost control strategy, corresponding sales expenses, management expenses, and performance expenses have decreased by 6.5%, 35.2%, and 46.5% year-on-year, respectively, pushing the net loss to narrow to 15.7726 million yuan. However, from the annual data of cash flow, as of the end of 2022, the net cash flow generated by the company's operating activities is negative, with a net outflow of 37.083 million yuan, and the cash and cash equivalents at the end of the period are 96.9046 million yuan. At the same time, as of the end of 2022, RIRI COOK's total current assets were 156 million yuan, and its total current liabilities were 261 million yuan; its total assets were 255 million yuan, and its total liabilities were 374 million yuan, with liabilities exceeding total assets. It can be seen that RIRI COOK still has considerable debt pressure.

In summary, the fundamental reason why RIRI COOK is ignored by secondary market investors is its weak fundamentals, which makes it difficult to support the company's business model and daily operations, and naturally cannot play a role in supporting stock prices and valuations. Without a "source of water", the short-term boost of the stock price can only briefly keep RIRI COOK alive in the US stock market, and it is difficult to truly win the favor of the market.