Wanda is trying its hand at internet finance in the form of their crowdfunding app “Stable Earner No. 1”, which was launched on June 12 and succeeded in raising their projected RMB5 billion in just three days, smashing a global crowdfunding record in the process.
On June 18 the project was officially greenlit and the funds began flowing into the construction of five Wanda Plazas.
RMB500 million of the first wave of investment came from individual investors and contributed to the sudden online “seckill” – within the first 50 minutes of the launch the RMB 100 million mark had been broken, and online subscribers were many more: institutional investors contributed a total of RMB4.5 billion, and within just three days the product was completely funded.
Some who missed out on the limited quota even called Wanda executives and urged them to continue the product beyond their anticipated run.
To-date, the normal investment limits set by large scale crowdfunded projects around the world reaches into the millions, but a project on this scale is decidedly rare. For a product to launch and sell out so quickly is quite a feat.
How are internet finance projects ‘stable’?
Wanda jointly released “Stable Earner No. 1” with 99Bill, a company that provides online payment platform services, and the app quickly garnered a great deal of attention. After all, a RMB1000 investment in Wanda Commercial Properties is not an opportunity that comes along every day.
Compared to the oversaturated market for financial investment products, the advantage of “Stable Earner No. 1” lies in the fact that capital investment can flow directly into Wanda Commercial’s Wanda Plaza projects, and offers a much higher security than those investing on the stock market.
And this is why the product was named “Stable Earner.” It is not merely a no-lose deal; unpacking it, we can see that only on stable foundations can you stand to gain.
How is it “stable”? Firstly, the project invests in the real economy. There are currently too many products on the market that lean too heavily on virtual assets, and for some products investors don’t even understand the specifics. The “Stable Earner No. 1” Wanda Plaza project is in line with the national direction of industry development, and considers the current national economic transformation and the bigger picture of domestic consumption and urbanization.
Secondly, we want to urge transparency. The funds raised from “Stable Earner No. 1” will all be used exclusively in construction operations for Wanda Plazas. Investors can obtain all the relevant financial information from Wanda Commercial’s published materials.
Thirdly, we offer stable returns. Under Wanda Group’s strong brand appeal, the annual occupancy rates and rental collection rates from its commercial real estate business average over 99%. This is enough to ensure that investors can obtain a stable annualized rate of return of 6%.
How can internet finance projects make money for investors?
One reason why everyone can make money from Wanda Plazas is that the overall cost of Wanda Plazas amounts to much less when compared to its competitors. In terms of land cost, Wanda Commercial obtains land in prime central urban areas that are lower cost. For the project construction, Wanda ensures that budgets are well controlled and enjoys long-term partnerships with construction companies. Wanda is able to open a fully functional Wanda Plaza in just 18 months after purchasing the land, which also greatly increases capital usage efficiency. In addition, Wanda’s exclusive Huiyun information management system will save on human and energy resources, which greatly reduces management costs.
Some investors may express concern that the 4-7 years’ investment cycle may be vulnerable to influence by some uncontrollable factors, such as governmental regulation of the real estate market.
A Wanda spokesperson responded by saying that it is quite the opposite. “‘Stable Earner No.1′ invests directly into Wanda Plaza operations, which completely avoid real estate sales and means that there is no danger of being affected by real estate regulation. In addition, the purpose of launching “Stable Earner No.1″ is to facilitate Wanda’s restructuring to a light-asset business, which will remove any danger of being affected by volatile fluctuations from the real estate industry. ”
Moreover, 99Bill, previously acquired by Wanda, has formulated a number of ways to withdraw from the product. First, investors can trade on the 99Bill platform after holding for three months. Second, “Stable Earner No.1” can get listed through REITs in the future, and investors can exit with profits. Third, it can be purchased by a third party after three years. Fourth, Wanda Group can choose to repurchase at 1.5 times’ price when the product reaches seven years due.
How can you innovate in internet finance?
It has been disputed across the market whether “Stable Earner No.1” belongs to equity financing or bond financing since the news hit the wires.
Due to its positioning as a crowdfunding product, “Stable Earner No.1” is seen as equity financing by the public. Unlike equity financing, however, Wanda Group promises that it can be transferred to a third party. If it really cannot be transferred, Wanda Group will repurchase it when it is due. Furthermore, “Stable Earner No.1” is expected to have a 6% right to yields each year, so it also holds the characteristics of creditor’s rights.
A hybrid product such as “Stable Earner No.1”, which enjoys either priority listing or asset transferring, is a significant innovation in crowd funding. Whether seen from a national scale, or Wanda Financial settled in Shanghai Free Trade Zone, we have to say that it is a financial innovation. This innovation is not a whim, but is instead rooted in Wanda’s development strategy, merging traditional financial methods and internet finance methods in the future.
Firstly, Investors would be able to participate in the direct financing of the real economy with a low threshold, which also enables them obtain a return on investment without the middleman. Secondly, all money is directly linked to the investment project, from online to offline entities. It is the only real development direction of future internet finance that is going back to offline and realizing the dual advantages of industry and finance.
Meanwhile, Wanda also shows that crowdfunding with 99Bill cannot be understood as fundraising by Wanda Commercial. The investor’s return on assets is comprised mainly of rental income. Wanda Commercial is only responsible for site selection, design, construction, investment attraction and management, and will obtain 30% of earnings from the rent, as is typical of Wanda Commercial’s asset-light business model.
There are two ways in which 99bill’s financing model is composed of internet finance crowdfunding and direct investment by institutional investors. As the first RMB5 billion crowdfunding project was being completed, another contract worth RMB5 billion of direct investment from institutional investors had been signed at the same time, which means 99Bill completed a RMB10 billion round of funding within one week. Due to the huge demands, 99Bill’s second RMB5 billion crowdfunding project will be issued within two weeks.