Image credit: Visual China

Blue Whale News, August 23rd (Reporter Zhu Junxi) After the launch of the domestic 3A game 'Black Myth: Wukong', it sparked the capital markets and once strongly boosted the A-share gaming and media sectors. Digital marketing company Qitian Technology Group is also one of the concept stocks that soared. After the deviation value of the closing prices for two consecutive trading days on August 20th and August 21st cumulatively exceeded 30%, the stock price of Qitian Technology Group began to fall. On August 23rd, Qitian Technology Group closed at 6.68 yuan/share, a decrease of 6.7% from the previous day.

In response to the abnormal stock trading volatility, Qitian Technology Group announced on the evening of August 21st that some media listed Qitian Technology Group as a concept stock for 'Black Myth: Wukong' and reported that Qitian Technology Group's controlling shareholder Rainbow Holdings united with Nvidia to jointly launch a customized version of the game's graphics card. It has been confirmed that Qitian Technology Group does indeed plan to change its controlling shareholders and actual controllers, but this matter still needs approval or registration from the antitrust regulatory authorities, posing uncertainties. In addition, as of now, Qitian Technology Group has no business cooperation with the 'Black Myth: Wukong' game.

On the same day, the Shanghai Market Supervision Administration publicly disclosed the acquisition of Qitian Technology Group Co., Ltd. by Shenzhen Rainbow Haoyue Technology Co., Ltd., the public notice period is from August 21st to August 30th, 2024. The documents indicate that the operators involved are not in the same relevant market and do not have upstream and downstream relationships. Their market shares in each market related to the transaction are all less than 25%, thus categorized as a simple case of operator concentration.

Operator concentration review is a pre-antitrust regulatory system aimed at preventing operators from excluding or restricting competition in relevant markets through operator concentration. After receiving a declaration of operator concentration, the State Administration for Market Regulation will assess its potential competitive impact according to the law. Operator concentrations that have or may have the effect of excluding or restricting competition will be approved with restrictive conditions or prohibited according to the law.

Qitian Technology Group was established in Shanghai in 1996, mainly engaged in digital commodity marketing, bank card value-added marketing, and travel information services. According to its 2024 half-year report published in August, Qitian Technology Group's total revenue in the first half of the year was 3.7 billion yuan, a year-on-year decrease of 18.56%, with a net loss of approximately 147.6 million yuan, a year-on-year reduction in losses of 9.53%. Since the beginning of this year, Qitian Technology Group's stock price has risen by more than 14%, appeared on the 'Dragon and Tiger List' 6 times, with the most recent time being on August 21st.

On July 26th, Qitian Technology Group issued multiple announcements regarding the intended changes in the company's controlling shareholders and actual controllers. The documents indicate that through a package arrangement including the termination of voting rights delegation between certain shareholders, the relinquishment of voting rights, and the issuance of shares to specific parties, Qitian Technology Group will introduce Rainbow Haoyue as its new controlling shareholder. Rainbow Haoyue intends to subscribe for approximately 120 million shares in Qitian Technology Group's issuance of shares to specific parties.

Before the completion of the transaction, the controlling shareholder of Qitian Technology was Xinglu Fund, and the actual controller was the People's Government of Yancheng City. After the completion of the transaction, Colorful Haoyue holds 15.42% of the total share capital of Qitian Technology after the issuance, with a voting rights ratio of 16.93%, independently controlling Qitian Company. The actual controller of Colorful Haoyue, Wanshan, will also become the actual controller of the company. The voting rights ratio of Xinglu Fund and its concerted action parties has decreased from 20.07% before the transaction to 5.51%.

This is the third change of ownership for Qitian Technology in four years, and the frequent changes in the controlling rights can hardly conceal its poor performance and unstable governance structure.

In terms of performance, Qitian Technology has recorded three consecutive years of losses since 2020, with a total loss of 1.567 billion yuan. The company has also been punished and criticized by regulatory authorities multiple times for non-compliant behaviors such as related party transactions and information disclosure. For example, in 2019, Qitian Technology disclosed an expected profit of more than 0.3 billion yuan for the previous year, but the audited annual report for 2018 showed a loss of nearly 0.8 billion yuan.

The acquiring party in this transaction, Colorful Haoyue, was established in 2023 and is mainly engaged in the R&D, production, and sales of graphics cards. It is also the main subsidiary of the well-known computer hardware manufacturer, Colorful. According to rankings, in the first half of 2022, Colorful accounted for over 33% of the domestic graphics card brand market, ranking first. According to the information disclosed by Qitian Technology, as of the end of June this year, the net assets of Colorful Haoyue were nearly 3.2 million yuan, and the total market value of Qitian Technology reached 4.4 billion yuan. Once the aforementioned transaction is successful, it will be a significant event.

Interestingly, although there is no business relationship between Qitian Technology and the game 'Black Myth: Wukong,' and there is no affiliation, the acquiring party, Colorful, is indeed one of the official partners recognized by NVIDIA in mainland China. Through their cooperation, Colorful is able to launch graphics card products based on NVIDIA technology, featuring NVIDIA GPUs such as the GeForce RTX 30 series.

NVIDIA provided panoramic ray tracing and NVIDIA DLSS 3 technology support for 'Black Myth: Wukong,' and released exclusive drivers. After the game went live, NVIDIA also released a game bundle, offering players the chance to get a digital standard edition of the game through the purchase of GeForce RTX 40 series graphics cards or computers.

The designated stores by NVIDIA include Colorful's flagship stores on JD.com and Tmall, among other e-commerce platforms. Colorful has also released the 'iGame GeForce RTX 4080 SUPER Advanced Black Myth: Wukong' custom graphics card, incorporating elements from the game, priced at 9199 yuan. In other words, Qitian Technology indirectly has some connection with the popular game 'Black Myth: Wukong,' but the relationship is not significant. After the hype around the 'Black Myth: Wukong' market discussion subsided, it was destined for its share price to fall.

In addition to Qitian Technology, several other concept stocks related to 'Black Myth: Wukong' experienced a cooling down period after a surge. Take Zhebao Media, the publisher of 'Black Myth: Wukong,' for example. After hitting the daily limit for two consecutive trading days, Zhebao Media fell 9.28% on Friday. The company previously stated in an announcement about abnormal stock price fluctuations that it does not participate in game revenue sharing and that its publishing income accounts for a small proportion of total revenue, not exceeding 1 million yuan.