July 26 (NBD) -- Wanda Sports Group Company Limited ("Wanda Sports"), sports arm of Chinese conglomerate Dalian Wanda Group ("Wanda Group"), rang the opening bell of the Nasdaq Stock Market on Friday and started trading under the symbol "WSG", becoming the first China-based sports company going public in the U.S.

Founded only four years ago, Wanda Sports has become one of the world's largest sports events, media and marketing platforms in terms of income. It issued a total of 23.8 million American depositary shares (ADS) at the price of 8 U.S. dollars per share in the initial public offering (IPO), to raise 190.4 million U.S. dollars.

The listing was seen as part of Dalian Wanda's shift to asset-light business model and a move to realize chairman Wang Jianlin's sports ambition. 

"While we don't anticipate any changes to how we operate, we are excited about being part of a public company on a highly liquid market," Eric Yuan, Head of Public and Investor Relations with Wanda Sports said to National Business Daily (NBD).

Photo/Tuchong

Cutting offering prices shortly before scheduled IPO

It's noted the company on Wednesday lowered the offering price from 12-15 U.S. dollars per share and eliminated the sales of ADSs from its shareholders, including Wanda Sports & Media (Hong Kong) Holding Co. Ltd. and IDG Capital associated entities, which led to around 38 percent of decrease in the IPO size from a previous size.

The change for the offering plan suggested that investors consider proposed valuation was too high and were uncomfortable having an IPO providing liquidity for insiders/VCs, Kathleen S. Smith, Principal at Renaissance Capital, told NBD.

According to an industry insider, the shareholders' selling on offering could result from the heavy pressure of debt. The asset-liability ratio for the sports company has reached more than 100 percent in the past two years but the figure dropped to 83.9 percent in the first quarter of this year.

"The listing of Wanda Sports is aimed to reduce the asset-liability ratio and ease financial burden of the group," Zhang Qing, founder of sports consulting firm Key-Solution said to NBD.

Wanda Sports noted in its prospectus that the proceeds of the IPO will be used to repay a loan, fund strategic initiatives and for general corporate purposes.

Wang Jianlin's sports ambition

Wanda Sports was officially launched in December 2015 while its owner Wang Jianlin weaved his sports dream more than 20 years ago.

Back in 1994, Wanda Group took over its hometown soccer club and then renamed it as Dalian Wanda FC. In the city of Dalian in north China's Liaoning province where Wang started his business, the tycoon presented the world with the booming of Chinese business and the magnificence of Chinese football.

During the 5-year-ownership by the property development giant, the Dalian-based super league soccer club won four championships in Chinese Jia-A League and represented the top of all Asian clubs and once ranked 29 among all clubs in the world.

However, Wang announced Wanda Group's withdrawal from the super league soccer club in 1999 due to the dissatisfaction with the industry circumstances at the time. In the same year, Wanda Group transferred its 30 percent of the soccer club share to Dalian Shide Group.

Although Wang kissed the soccer club goodbye, his enthusiasm for football and his ambition to expand his empire in sports industry didn't stop.

Wang Jianlin (Photo/VCG)

In January 2015, Wanda Group unveiled its purchase of 20 percent stake in Spain's Atletico Madrid, with the transaction worth 52 million U.S. dollars. Wanda Group became the first Chinese company to invest in a top-flight European football club and this move marked the commercial property billionaire's return to football after nearly 15 years.

Furthermore, the deal signifies the beginning that Wanda Group marched towards sports industry.

One month after the stake purchase in Atletico Madrid, Wanda Group signed a big deal worth 1.2 billion U.S. dollars, landing a 68.2 percent stake in Swiss' Infront Sports & Media. Infront is one of the leading international sports marketing companies in the world and handles the media and marketing rights for world-class international sports events, including all seven Olympic winter sport federations and two soccer World Cups.

Following the acquisition of Swiss marketer Infront, Wang was eyeing the Florida-based endurance sports company World Triathlon Corporation ("WTC") which is the organizer of global triathlon brand Ironman. In August 2015, Wanda Group has reached an agreement to acquire 100 percent of the World Triathlon Corporation for 650 million U.S. dollars.

The acquisition heralded another landmark investment by Wanda Group in sports industry. "It is a leader in mass participation sports events which owns long-term contracts and rights," Smith commented to NBD. At the end of 2015, the conglomerate officially launched its sports unit, Wanda Sports, headquartered in Guangzhou.

"At the end of 2015, the establishment of Wanda Sports' head office marked a new stage that mergers and acquisitions in the past year stepped into. It is not the end, but it will be a fresh beginning," Wang once remarked.

Wang expressed his anticipation for the sports arm of his business empire through his public speaking, aspiring to achieve a double-digit profit margin by 2020 and furthermore, build the first 10 billion-U.S. dollar company in the sports industry.

Apart from Wanda Sports, Wang is approaching his sports ambition by further increasing the influence of the Wanda brand in global sports arena.

In March 2016, FIFA announced that Wanda Group would have "the highest level of sponsorship rights" for the next four World Cups until 2030. The conglomerate then became the first Chinese top level sponsor for FIFA. Three months later, FIBA inked four Basketball World Cups deal with Wanda Group until 2033.

Behind acquisitions and partnership deals embody Wang's strong wish and ambition in the sports industry, and he has come a long way with the listing of Wanda Sports.

2019 to be cyclically weak for Wanda Sports: industry insiders

The above-mentioned series of acquisitions now constitute the major IPO strengths of Wanda Sports, which are Infront, WTC's parent World Endurance Holdings, and Wanda Sports China.

Eric Yuan told NBD that Infront will continue to play an integral role in Wanda Sports' future growth plans but he didn't detail the contribution Infront made to Wanda Sports in recent years. 

With regard to the listing, Yuan added that the sophistication of the investment community and the global exposure will help Infront and Wanda Sports to continue grow the business.  

According to Wanda Sports' prospectus, its businesses mainly consist of mass participation, spectator sports and digital, production, sports solutions.

It has maintained outstanding financial performance over the past three years. Last year, the company reaped the revenue of 1.1 billion euros (1.25 billion U.S. dollars), rising from 877.2 million euros of 2016, with a profit of 54 million euros in 2018.

Photo/Tuchong

Wanda Sports emphasized the income increase in 2018 is impacted by cyclicality effects relating to its media production business, particularly the FIFA World Cup Russia in the year.

But industry insiders held Wanda Sports could encounter challenge this year. The firm posted a loss of 8.6 million euros in the first three months of this year, though generating 245.6 million euros in revenue.

"The number of Wanda Sports' contracts and rights in partners has declined and 2019 is expected to be cyclically weak following the 2018 FIFA World Cup," Smith said to NBD.

Wang Jianlin revealed at the annual meeting of Wanda Group held in early 2019 that over 95 percent of Wanda Sports' revenue last year was contributed by the overseas market.

Although dependent on the FIFA and other international events, Wanda Sports now is exploring the domestic market for further growth.

Chinese sports media and events market is expected to grow at a faster pace in the next five years, reaching revenue of estimated 9.3 billion euros by 2022, the prospectus predicted.

Wanda Sports' Chinese rivals such as Tencent Sports and Alisports focus more on creating sport events with their own intellectual properties (IPs) and sports content distribution, a report released by market research firm iResearch shows.

By comparison, spectator sports segment, which includes media distribution, sponsorship and marketing, commissions and agency fees, maintains Wanda Sports' core business, the company also develops To-C business, such as selling tickets in the triathlon activities, analyzed Zhang Qing.

As for other ways to boost income, the company can host more mass participation events and create and distribute sports-related short videos as its media products, added Zhang.

Email: gaohan@nbd.com.cn