On June 24th, Blue Whale News - Reporting by Wang Jianwen. Rastar Group, the "first stock" of soccer, saw its stock price skyrocket with the return of RCD Espanyol to La Liga in Spain.

On the morning of June 24th, Rastar Group announced that its subsidiary, RCD Espanyol, is returning to La Liga and that the expected revenue from television broadcasts will significantly improve in the next season, which will have a positive impact on the company's future performance.

On the same day, the stock price of Rastar Group opened high and closed at 2.66 yuan per share, an increase of 19.82%, and the total market value increased to about 3.3 billion yuan.

As the first Chinese listed company that controls a club in one of the five major European soccer leagues, Rastar Group took over the centennial soccer giant RCD Espanyol in 2016. The thriving of RCD Espanyol is directly linked to the performance of Rastar Group.

After a year's absence, can RCD Espanyol stop bleeding?

After a year's absence, the centennial soccer giant RCD Espanyol returns to La Liga.

On June 23rd, RCD Espanyol defeated Real Oviedo 2:1 in the final of the play-offs and successfully obtained the qualification to participate in the La Liga tournament in the 2024-2025 season. This is the second time in recent years that RCD Espanyol has returned to La Liga. Echoing the cheers of the fans, the stock price of Rastar Group, who is behind the RCD Espanyol club, also skyrocketed.

Rastar Group's acquisition of RCD Espanyol dates back to 2015, when the economy of soccer was booming. Many companies, including Wanda Group, entered the sports industry. Rastar Group invested a total of 102 million euros (about 750 million yuan) from 2015 to 2016, acquiring 99.35% of RCD Espanyol's equity.

Afterwards, RCD Espanyol's influence and revenue continued to grow, becoming the main source of revenue and profits for Rastar Group. By 2019, the sports business revenue of the company reached 1.212 billion yuan and the net profit was 224 million yuan. In the same year, Rastar Group's revenue and net income attributable to shareholders were 2.594 billion yuan and 295 million yuan respectively.

After the highlight of the game, RCD Espanyol's performance began to decline. After the 2019-2020 season, RCD Espanyol performed poorly and fell into La Liga SmartBank again after a 27-year absence. Although they returned to La Liga successfully the following year, the club fell back to La Liga SmartBank in the 2022-2023 season.

Frequent promotions and relegations and other factors such as the pandemic have also affected the performance of RCD Espanyol. From 2021 to 2023, RCD Espanyol's revenue was 363 million yuan, 709 million yuan, and 789 million yuan, and the net losses were 320 million yuan, 181 million yuan, and 34 million yuan, respectively.

As a result, Rastar Group's performance in recent years has also been poor. From 2021 to 2023, Rastar Group's operating income was 1.407 billion yuan, 1.606 billion yuan, and 1.733 billion yuan, all below pre-pandemic levels. Deducting non-recurring gains and losses, the net profits attributable to shareholders were -670 million yuan, -318 million yuan, and -88 million yuan, respectively, and the company has been operating at a loss.

Rastar Group is looking forward to RCD Espanyol's future performance after its return to La Liga. Due to the different levels of attention, the income of La Liga games is far higher than that of La Liga SmartBank games. Therefore, Rastar Group announced in its statement that after RCD Espanyol's promotion to La Liga, the club is expected to earn no less than 43.7 million euros in broadcasting rights income in the next season, and the achievement will have a positive impact on the company's future performance.

But whether Rastar Group's sports-related business can return to profitability after the return of RCD Espanyol to La Liga is still uncertain.

Rastar Group told Blue Whale News that the performance of soccer club business is affected by many factors, such as game results, ticket sales and membership, sponsorship and advertising, and player transfers, among others. Club game results and player transfer transactions both carry uncertain factors.

As far as the income structure of Rastar Group in recent years is concerned, in addition to broadcasting revenue, player transfer fees are also an important source of income for the company's sports-related business. As there were no player transfer revenues in the winter transfer window and other factors, the financial results of RCD Espanyol in the first quarter of 2024 declined, dragging down the overall performance of Rastar Group. From January to March 2024, the company's revenue was 302 million yuan, down 6.00% year on year; the net loss attributable to shareholders was 97 million yuan, down 133.54% year on year.

In addition, according to the 2021 annual report of Rastar Group, the company incurred an additional cost of RMB 68.4469 million for team upgrading bonuses when the Spaniards returned to La Liga that year, and if the company still needs to pay large bonuses this year, it may have an impact on the company's profit.

The 'football dream' of Chaoshan billionaire Chen Yansheng

Before taking over RCD Espanyol, Rastar Group had a connection with football.

The founder of Rastar Group, Chen Yansheng, is from Chaoshan, Guangdong. After graduating from high school, he worked in a fishing gear factory and met his wife Chen Dongqiong there. In 1995, the couple founded Rastar Plastic Factory, and earned their first bucket of gold by selling toy soccer balls. Later, the company turned to producing toy car models. In 2010, Rastar Group (formerly known as 'Rastar Model') was listed on the Growth Enterprise Board of the Shenzhen Stock Exchange.

Currently, Chen Yansheng and Chen Dongqiong hold 34.62% of the equity of Rastar Group, and the Chen family also holds 63.55% of the equity of another listed company, Rastar Environmental Technology. In 2022, with a total asset value of RMB 8.5 billion, Chen Yansheng ranked 2677th on the Hurun Global Rich List.

After its listing, Rastar Group has continuously expanded its business scope. In 2013, the company turned its attention to the gaming business. That year, the company spent RMB 18.36 million to acquire 51% of the equity of mobile game developer Changyu Tianxia, and fully acquired online game developer Xinghui Tiantuo by issuing shares and RMB 411 million in cash, making gaming business an important source of income for the company.

In 2015, Rastar Group took over RCD Espanyol. Since then, the company's three major business lines, toys, games, and sports, have been established.

Continuous mergers and acquisitions have also brought heavy liquidity pressure to Rastar Group. As of the end of 2016, the company's monetary capital balance was only RMB 441 million, while the total balance of short-term loans and non-current liabilities due within one year was as high as RMB 524 million, resulting in huge short-term debt repayment pressure. The company's liquidity pressure has not been eased since then, and has even affected another company, Rastar Environmental Technology, under the family.

In November 2020, Rastar Environmental Technology, controlled by Chen Yansheng, Chen Dongqiong and their son Chen Chuanghuang, and Chen Dongqiong's brother Chen Yueping, submitted an application to list on the Growth Enterprise Board. According to the prospectus, Rastar Group had lent a total of RMB 126 million to Rastar Environmental Technology for capital turnover from 2018 to 2019. This situation has also been subject to multiple inquiries from the Exchange. Since 2020, the fund lending between Rastar Group and Rastar Environmental Technology has been terminated.

With Rastar Group's continuous losses in recent years, the company's liquidity pressure has further increased. By the end of 2023, the company's monetary capital balance was only RMB 107 million, while short-term bank borrowings reached RMB 883 million, and non-current liabilities due within one year were RMB 140 million.

Against this background, in May 2023, Rastar Group launched a RMB 885 million private placement plan to promote the development of its toy and gaming businesses, alleviate its liquidity pressure, and repay bank loans. Among them, RMB 200 million of the raised funds will be used to repay bank loans.

However, in the following year, Rastar Group did not further promote the private placement plan. In June this year, the company announced that, as of June 14th, the private placement plan had expired and automatically lapsed.

Regarding the reasons why the private placement plan has not made substantive progress and whether the company has further financing plans in the future, Rastar Group replied to Blue Whale News that the implementation of the refinancing plan needs to comprehensively consider changes in regulatory policies and the capital market environment, the company's actual situation, development planning, and financing environment. In the future, the company will develop corresponding capital market financing plans according to its operational development needs and capital requirements.