Losses for three consecutive years! The leading cross-border enterprise was labeled "ST"

In 2021, Lianluo Smart merged with Newegg and successfully went public in the United States. At the end of the year, Newegg's revenue and profits both increased. It reaped the benefits of e-commerce after the epidemic and was highly expected by industry insiders.

But now its parent company has once again been labeled as "ST", which makes people wonder whether Newegg is in the same bad situation now. According to reports, Newegg has already settled in TikTok.

Newegg faces delisting as its parent company is delisted

Recently, Newegg 's parent company Lianluo Interactive issued an announcement that its company's stock will be subject to special treatment of "other risk warnings" from May 6, 2024. The stock abbreviation will be changed from "Lianluo Interactive" to "ST Lianluo", and the stock code will remain unchanged.

There is no doubt that the incident of Link Interactive being delisted is closely related to the company's current profitability.

Financial report data shows that Lianluo Interactive's net profit has been negative in the past three years. In 2023 alone, the revenue was 11.546 billion yuan, but the net profit was a loss of 629 million yuan. This loss situation continued in the first quarter of this year, with revenue of 2.755 billion yuan and a net loss of 138 million yuan.

Continuous negative net profits have made Lianluo Interactive overwhelmed. According to industry insiders, the company currently owes more than 400 million yuan in bank loans, and its headquarters building has also been sealed off. It seems reasonable for Lianluo Interactive to be labeled as "ST".

The parent company itself is in trouble, and its subsidiaries are also in a mess. Newegg, as a company merged and listed with Lianluo Interactive's subsidiary Lianluo Intelligence, focuses on its core e-commerce business and successfully listed on the Nasdaq in 2021. The closing price on the first day of listing was US$13.24, and the closing market value was as high as US$4.81 billion.

Newegg reaped the benefits of e-commerce after the pandemic, with both revenue and profit reaching new highs, including revenue of $2.376 billion, up 11% year-on-year. At the same time, its website also ushered in a period of rapid development, with more than 30 million registered users, now more than 40 million, and annual visits as high as 30,500 times. Newegg's outstanding performance successfully allowed Lianluo Interactive to get rid of the ST label and become the A-share bull of the year .

But now it is gradually declining. According to data reported by foreign media, Newegg received a notice from Nasdaq because it failed to meet the minimum price requirement of $1 per share for 30 consecutive working days, requiring Newegg to maintain a closing price of $1 per share for at least ten consecutive working days within 180 calendar days, otherwise Newegg will face the risk of delisting.

There were early signs of trouble for Newegg. In 2022, the second year after its listing, Newegg planned to raise no more than $300 million in public financing to solve its debt problems and ease the company's financial pressure. At that time, Lianluo Interactive held 59.98% of Newegg shares, and it is expected that the shareholding ratio will decrease after the financing.

Looking deeper into the market, we can find that Newegg's performance and stock price performance are disappointing, which has a lot to do with the development of e-commerce in the North American market in recent years.

After losing hundreds of millions of yuan in two years, Newegg encountered obstacles in North America

As a 3C vertical e-commerce website established in 2001, Newegg was once very successful in China, with total sales reaching US$2 billion as early as 2008. However, with the rise of domestic e-commerce and fierce competition in the North American market, Newegg chose to retreat.

Even so, Newegg still has a high reputation and market influence in North America. With its 3C, smart home and other products, it has captured more than 30 million users and 17 million unique visitors per month, making it a gathering place for electronics enthusiasts. At its peak, Newegg processed an average of more than 20,000 orders per day.

Before going public, Newegg was still introducing third-party Chinese sellers on a large scale, trying to complete the transformation from a vertical 3C e-commerce to a comprehensive e-commerce platform by relying on the Chinese supply chain + US local operation model. At that time, many Chinese sellers made considerable profits and believed that "although the platform is small, the profits are good."

However, as the competition from Amazon and other platforms became increasingly fierce, Newegg's living space was gradually squeezed, and sellers were struggling. Especially in the few years after its listing, TEMU and other platforms were engaged in fierce price wars, and Newegg also repeatedly reported declining performance.

In 2022, Newegg's net profit attributable to the parent company was -57.4 million US dollars; in 2023, Newegg's revenue and profit both declined. Specifically, revenue fell by 12.9% year-on-year to 1.497 billion US dollars; the platform's net profit fell by 2.72% to -58.99 million US dollars. This is equivalent to Newegg losing hundreds of millions of yuan in two years.

Under multiple pressures, Newegg is also trying to break the deadlock with a new development model and chooses to enter TikTok.

Can Newegg save itself by joining TikTok?

During Cyber ​​Monday last year, Newegg chose to focus on TikTok with computer components and gaming products, and the 24-hour live shopping made it a huge success. Gaming-related products were hot sellers, such as game controllers and other collaborative gaming tools.

Having tasted the sweetness , Newegg has stepped up its efforts, and currently has 150 hours of live streaming per week, attracting more than 26 million consumers. Naturally, live streaming has also brought Newegg a lot of income. In the first half of this year alone, Newegg has earned millions of dollars through this channel.

The reason for this is that Newegg always directs consumers to TikTok to watch its programs during live broadcasts, further increasing its exposure. In the first five months of this year, Newegg's live broadcasts were played 4.5 million times on TikTok, with a monthly audience of 260,000.

From the perspective of this category alone, it is thriving, but whether live streaming alone can help Newegg make a comeback is still unknown. Currently, Newegg is facing not only its own financial and development problems, but also a lot of messes of its parent company.

As early as 2021, Newegg had successfully removed the label of its parent company with its excellent performance, but now Newegg is also in trouble. As the saying goes, when one prospers, all prosper, and when one suffers, all suffer. The parent company's performance changed and was labeled as a delisted company, and Newegg's performance began to decline in the second year of its listing, which was not surprising to industry insiders.

However, Newegg is currently facing a delisting warning, which Allbirds, a benchmark in the US footwear industry, has also received. Prior to this, Allbirds went through multiple rounds of financing and successfully listed on the Nasdaq, but in the second year, the profit attributable to the parent company fell below negative $100 million, and it suffered losses in the following years.

This example is undoubtedly a warning to the majority of sellers. Although there are many benefits to going public, it is not a "magic pill" for eternal youth. If companies want long-term development, they should focus more on themselves.

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Newegg

Wearing an "ST" hat