The lock-up period has expired, with the two major cornerstone investors beijing centergate technologies International and Nanjing Economic Development Zone Ju Zhi Venture Capital having a book loss of up to 72%, while Outman (02438) surged against the trend by 14.13% the previous day.

According to the Securities Times app, China Securities Co.,Ltd. went public in Hong Kong on April 14th this year, bringing in two cornerstone investors, Beijing Centergate Technologies International and Nanjing Economic Development Zone Juzhi Ventures, subscribing for 16.484 million shares and 8.441 million shares, totaling 24.925 million shares, with a lock-up period of six months. After the company went public, its market cap declined all the way. Based on the IPO price of HKD 3.8, the unrealized losses of the two cornerstone investors have reached 72.4%.

It is worth noting that in addition to the two cornerstone investors, the company had undergone seven rounds of financing through rounds A to D before its IPO, attracting various institutional investors and controlling shareholders (with limited conditions for sale) who will also see unlocking of shares. With the two cornerstone investors, a total of 1.432 billion shares will be unlocked, which is 20 times the pre-unlocking float. Ignoring the restricted sale issue, such a large number of unlocked shares presents a major challenge to the stability of its secondary market.

On October 23rd, indirect shareholder Perfect Opt (08311) announced that its subsidiary, Skyteam Resources Limited, is restrained from selling its 25.21322 million shares of China Securities Co.,Ltd. common stock held in DoorQuest until the last day of the sale restriction commitment, which is October 23, 2024. After this date, Skyteam will be released from this sale restriction commitment, implying that the shares held by Perfect Opt will also flow into the float.

However, faced with the unlocking, the company's stock price surged by over 14% against the trend. In reality, shareholders with excessively high unrealized losses and those who are very bullish on the company's development are not expected to sell. But the actions of financial investors capitalizing on the surge in prices should draw significant attention from relevant investors.

During the A-D rounds of financing, DoorQuest had different prices and post-investment valuations for each round. The A round of three financings took place from 2013-2015, with a post-investment valuation increasing by 19 times in two years. The A-2 round in 2015 and the C round, just 9 months apart, pushed the valuation up by another 1.7 times. By the time of the D-2 round, the post-investment valuation had soared by 150 times compared to the A round. Based on the current market cap, investors from the three A rounds are still in substantial profit, with A round investors making 40.6 times their investment. Investors who genuinely lost money are from the C round onwards, with D-2 round investors experiencing a loss of 72%, aligning closely with the cornerstone investors.

All these investors invested in the form of preferred shares, but those who made profits will convert to common shares. Investors from rounds A and B profited, with the prospectus showing that A round, A-1 round, A-2 round, and B round investors collectively hold 0.593 billion shares, while C round investors have a lower loss rate, holding 0.183 billion shares, totaling 0.776 billion shares.

In addition, the company redeemed the investment from round D-1 in September 2022. The investors of round D-2 suffered large unrealized losses on the books, but held a small number of shares, only 0.0039 billion shares, which also resulted in substantial losses like the cornerstone investors, totaling 0.029 billion shares. However, compared to investors who gained unrealized profits, the difference is negligible. For Ask the Way Out, the cornerstone investors can be seen as an appetizer, with the upcoming unlocking of rounds A-C investors posing the largest potential selling pressure.

Additionally, it is worth noting that the rounds A-C investors are more strategic investors who have been developing with the company for over 9 years, demonstrating higher stability. If the unlocking occurs, the preference between profitability and bullish company development leans more towards the latter.

So why has Ask the Way Out not been favored by investors since going public? Financial Streamline App has learned that the company's core technology lies in generative AI and voice interaction, offering AI-generated content (AIGC) solutions, AI enterprise solutions, smart devices and accessories, operating through a ToSMB/ToPC business model. Benefiting from the AIGC investment trend, the company's pre-IPO valuation soared, but its performance did not shine as brightly.

From 2021 to 2023, the company's revenue growth has continued to slow down, decreasing from a growth rate of 50.42% to low single digits. In the first half of 2024, revenue plummeted by 37.9%. At the same time, the company has been experiencing consecutive years of losses, with a cumulative net loss for shareholders of 1.75 billion yuan over the past three years. In the first half of this year, the net loss for shareholders was 0.579 billion yuan, a 165.5% increase compared to the loss of 0.218 billion yuan in the same period last year. The growth slowdown and expanding losses present a huge challenge for short-term investors, as the short-term fundamentals are struggling to support the current market cap and investor confidence in holding positions.

More importantly, Financial Streamline App has observed changes in brokers' positions, which may be laying the groundwork for significant volatility for Ask the Way Out.

In the company's broker positions, there has been a sudden increase in holdings recently. For example, China Securities Co., Ltd., which is in first place, increased its holdings by 0.141 billion shares on October 9th. Zhongce Wealth & Richness added 41.254 million shares on the 15th, Huatai Hong Kong added 25.617 million shares on the 16th and another 25.617 million shares on October 16th, while Futu Securities added 58.8815 million shares on the 22nd. The total increase in holdings by the above brokers amounts to 0.267 billion shares.

In conclusion, as Ask the Way Out faces unlocking activities, both the cornerstone investors facing unrealized losses on the books and the shareholders with unrealized gains should take note of the related actions.