After the Turmoil — Dehao Runda and NVC Shareholding Change Incident

　　Event Review

　　Because the shareholder Wuhu Economic Development Zone Optoelectronic Industry Investment Development Co., Ltd. is seeking to transfer shares by way of a publicly solicited agreement, Dehao Runda (002005) announced a trading halt on December 20, stating at the same time that the company had other major decisions to make. On the evening of December 26, Dehao Runda announced the acquisition of 20.5% of the shares of NVC Lighting, becoming the largest shareholder of NVC Lighting.

　　The incident was like a winter thunder, quickly becoming the focus of the lighting industry, drawing intense attention from the media and industry professionals. Over the past two days, as the stock market opened high and closed low, analyses and disclosures have kept pouring in. It seems that after the turmoil, doubts still loom thick.

Post-Event Turbulence

The aftermath of the incident mainly involves the following three views:

View One: The cash-out theory of NVC Lighting founder Wu Changjiang.

Based on transaction data, Wu sold NVC Lighting shares at HKD 2.55 per share while simultaneously subscribing to new shares in Elec-Tech at RMB 5.86 per share. This "high sell" and "low buy" generated a difference exceeding RMB 300 million; accordingly, analysts believe Wu Changjiang engaged in a cash-out.

View Two: The power seizure theory of Wu Changjiang.

　　After this equity change, Wu Changjiang not only still holds shares in NVC, but also becomes the second largest shareholder of Elec-Tech. Assuming Elec-Tech becomes the single largest shareholder of NVC Lighting, it can request the restructuring of the board of directors in order to regain control of NVC Lighting.

　　Viewpoint Three: Industry Integration Theory.

　　Elec-Tech is positioned in the mid-to-upstream of the semiconductor lighting industry, which forms a perfect complementary advantage with NVC's position at the downstream application end of the industry. Elec-Tech can leverage this to expand its downstream applications, while also utilizing NVC Lighting's strong channels to sell its own LED lighting products. NVC Lighting can also take advantage of this to access mid-to-upstream technology and product resources in the industry, compensating for its own shortcomings. It is a strong alliance between two powerful players.

　　Deep Concerns

　　From an industry perspective:

The partnership between Elec-Tech International and NVC Lighting fired the first shot at industry vertical integration, like a clap of winter thunder that invigorated the industry. However, looking at the stock market over the past two days, both stocks opened high and trended downward. Although Elec-Tech International's stock had been steadily rising before its trading halt—suggesting a possible leak of inside information—and then "died upon exposure" after resumption, returning to rational levels, NVC Lighting has genuinely entered a bear market. Clearly, investors are not optimistic about this cooperation. In my view, integration of the LED industry chain should be an industry consensus. As the first to "eat the crab" (i.e., the pioneers), they have taken the first step, and as trailblazers they will inevitably play a demonstration role, sounding the horn of industry integration.

From a business perspective:

As the No. 1 domestic lighting brand, NVC Lighting enjoys strong product and channel appeal within the industry. Its choice of Elec-Tech International as an upstream and midstream partner is not favored by many industry professionals. Given Elec-Tech International's technical capabilities and product status in the semiconductor lighting field, the company has not built up a good reputation within the industry, and its developed application products have shown no clear market advantages in recent years. Even if all of NVC's products were switched to LED, the downstream consumption would not play a significant role compared to Elec-Tech International's upstream and midstream production capacity. Whether NVC is laying out the upstream and midstream, or Elec-Tech is integrating downstream applications, the two parties have not formed effective complementary advantages. Moreover, NVC Lighting's board of directors has not made any official statement on this matter to date, and no details of the cooperation between the two parties have yet been published. The road ahead is likely to be anything but smooth.

From a capital perspective:

After the event, although Wu Changjiang holds equity in both companies, it is not hard to see that he has placed himself in a dilemma of competing against himself. Since his shares in NVC Lighting are pledged, even a share swap would be difficult to complete smoothly. Wu Changjiang should not have enough cash in hand to complete this transaction, and it seems that Wu Changjiang now owes Elec-Tech International a favor. If Elec-Tech International continues to appoint Wu Changjiang to lead NVC Lighting, he will owe another favor. It remains to be seen how he will handle the capital relationship between NVC Lighting and Elec-Tech. From Elec-Tech's capital perspective, there are only two paths: first, use Elec-Tech's products, although no advantage of Elec-Tech's products in enhancing NVC's products is currently visible; second, use NVC's channels to sell Elec-Tech's LED lighting products, which will inevitably affect NVC's product lineup. Both of these paths are undoubtedly very difficult to walk; any misstep could easily affect the interests of NVC's other shareholders. Conversely, from NVC's capital perspective, whether to use Elec-Tech's products and whether to lend its channels are both matters that touch on NVC's interests. History is not far behind—when Schneider acquired NVC's small home appliance business, it entered NVC's channels with basically complementary products, which still serves as a cautionary tale.

From a Personal Perspective:

As the uncrowned king of NVC, Wu Changjiang single-handedly founded NVC. Not only in the eyes of many industry professionals is Wu Changjiang synonymous with NVC, and NVC with Wu Changjiang — this fact likely permeates his very blood. After the share swap, Wu Changjiang no longer holds the top position at either NVC or Dehao. This transformation of role and mindset is neither an operational issue nor a capital issue — the question is whether he himself can adjust and adapt. The indisputable fact at present is that, after the turmoil of this past summer, Wu Changjiang himself — both founder and largest shareholder — has nonetheless lost control of NVC Lighting. What are the odds of winning after relying on Dehao? Whether Dehao, the king on both sides, can set aside his pride and let Wu Changjiang take the helm of NVC — all of this requires time to prove.

In short, Wu Changjiang is a legendary figure of the lighting industry, incomparable to ordinary men. Perhaps behind these changes lies some brilliant stratagem, and regaining control is not beyond the realm of possibility. At present, the NVC Lighting shares he holds can still serve either as a fallback or a stronghold, and the businesses associated with him can also be liquidated. In this chaotic lighting world where heroes vie for supremacy, we sincerely hope that Wu Changjiang can once again reign supreme in the lighting realm.

(Note: Please cite the source as China Light Network when quoting or reprinting.)