Bonafide credentials

Top film studio finally lists in China after an 1,870-day wait


Zhang Ziyi: one of Bona Film Group’s high-profile shareholders

In addition to tallying up their box office receipts, China’s film bosses have another habit of counting the days until their films make it onto the silver screen. Take Wang Zhonglei of Huayi Brothers’. At the premiere of the epic The Eight Hundred in 2020, he told the media: “I have waited for today for 463 days. For 463 days, not a day has gone by without The Eight Hundred being on my mind and in conversations.”

Yu Dong, chief executive of Bona Film Group, China’s top-grossing film producer and distributor, did similar maths for how long it took to get his company’s stock onto the A-share market in China.

“In April 2016, Bona Films bid farewell to Nasdaq and was officially delisted. It took 1,870 days from submitting IPO materials to the meeting [during which Chinese regulators formally review the application for an IPO], and another 630 days from the meeting to receiving the approval. It had been a long and arduous road,” he recounted at the Beijing International Film Festival in mid-August.

Bona first went public on Nasdaq back in 2010 but was taken private in a deal that valued the studio and distributor at $1 billion. At the time, investors were supportive of the move as rival studios that were launching on the A-share market were getting more favourable valuations. In 2015, Bona Films was valued at around Rmb6 billion in the US, while competitors like Enlight Media and Huayi Brothers saw their market capitalisations reach Rmb79 billion and Rmb61 billion respectively in the A-share market.

But what Bona hadn’t anticipated was how long it would take to relist in China. “After delisting from Nasdaq, Bona did not try to go public through a backdoor listing; it did not take shortcuts; it just patiently waited in line. But a lot has happened in the last few years. China’s film market went from Rmb60 billion to just Rmb20 billion during the pandemic and there was also the yin-yang [tax evasion] contract scandal that rattled the whole industry. Most of the studios saw their valuations drop over 70% between 2016 and 2019,” noted Sina Entertainment.

Bona’s debut in China was finally achieved in August, when the company’s shares begin trading on the Shenzhen Stock Exchange. The first day of trading saw the stock surge 44% and by the end of the week the share price had risen from Rmb5.03 to Rmb14.36, bringing a market value of Rmb19.7 billion.

The Beijing-based company raised Rmb1.38 billion from the share sale, with the proceeds going towards film production and construction of new cinemas.

Investors are hoping that shares in the studio will do even better over the longer term. Part of the reason, they claim, is that the movie-maker has carved a productive niche in making patriotic films. “Bona has a solid grasp of subject matter that would do well in the general environment,” says Xiang Kai, a screenwriter.

In recent years the studio has churned out what some would describe as ‘propaganda-style’ blockbusters like The Battle at Lake Changjin (released in 2021) and its sequel, which came out a year later. It has also backed Operation Mekong (released 2009) and its sequel Operation Red Sea (2018). Out of the top 10 grossing films in the Chinese market, Bona was the studio behind three (Lake Changjin 1 and 2 and Operation Red Sea).

The strategy has paid off. According to the IPO prospectus, between 2019 and 2021 Bona reported revenues of Rmb3.1 billion, Rmb1.6 billion and Rmb3.1 billion respectively. Net profits were Rmb311 million, Rmb189 million and Rmb356 million.

“Even though Bona faces a problem common to others in the film and TV industry – unstable income – it has rarely lost money over the years. In fact, among the 12 largest film studios in China, Bona’s net profit level in 2021 is third in the industry, behind only Mango Excellent Media and Huace Film and Television,” ThePaper.cn calculated.

Sina Entertainment was complimentary too: “In recent years, the works of many film studios have failed to make it to the big screen due to various reasons, or the subject matter didn’t appeal to audiences and flopped in the box office. Bona is one of the few companies that has consistently developed one blockbuster hit after another. It has also released films for every major holiday. Its performance is relatively stable and it is generally perceived as a safe investment,” the portal added.

Still, given how fickle Chinese audiences can be, as well as the uncertainty around potential intervention from regulators and censors in the lead-up to releases, others warn that film studios are still high-risk investments.

“Even with many years of experience, no one can fully grasp audience tastes or the policy orientation. Even if you are firmly on the pulse and at the forefront of the leading trends every time, one bad release or one poor performance can see even the most successful film studio fall off the pedestal,” says Sina.

There were signs of some of that unpredictability in the trading of Bona’s shares, which was bad news for stars like Zhang Ziyi and Huang Xiaoming, who have held stakes in Bona for some time. While Bona was waiting to relist, Yu sought investment from celebrities like Zhang and Huang, who bought interests in the studio about five years ago at Rmb14.55 a share. Though the IPO has given them an opportunity to offload their shares, they might choose to wait. As of Tuesday this week, the stock price was hovering around Rmb11.2…

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