Ask AI · Chinese Online Chasing the Hottest Bandwagon Repeatedly Fails—Can Hong Kong IPOs Break the Profit Jinx?

By Zhang Jiaru

At the end of 2025, three A-share companies formed an “Yi Zhongtian” lineup with a combined market value exceeding 1 trillion yuan, making headlines for a time. At the start of 2026, “New Yi Zhongtian,” made up of Yidian Tianxia, Chinese Online, and Tianlong Group, has also been in the spotlight again.

Among them, Chinese Online’s core strengths are “IP + overseas short dramas.” Riding the AI application boom, it once boosted the company’s capital-market market value to as much as 31.9 billion yuan. Now that the “New Yi Zhongtian” hype has cooled, Chinese Online’s market value has shrunk, and its closing market value on March 23 was 17.67 billion yuan.

However, discussions about Chinese Online in the market have not cooled down.

Recently, Chinese Online officially disclosed its Hong Kong IPO prospectus, aiming to ease long-term funding pressure through a secondary listing. The use of proceeds includes AI technology upgrades, building an overseas short-drama ecosystem, repaying loans, and supplementing working capital, among others.

It is worth noting that as a leading domestic digital publishing and online literature IP company, Chinese Online’s core business has continued to face pressure. Over the seven-year period from 2018 to 2024, its net profit after deducting non-recurring gains and losses (hereinafter referred to as “non-recurring adjusted net profit”) recorded losses for 6 years. In the first three quarters of 2025, its non-recurring adjusted net profit still has not turned profitable.

Behind this, after listing, Chinese Online has kept chasing bandwagons—from mobile games to the metaverse to short dramas—but has never managed to establish a sustainable profitability model. In this Hong Kong IPO, the company is betting on overseas short dramas. Whether it can achieve a turnaround in performance and become a focus of outside attention.

Two Bandwagon Chases End in Failure: From Mobile Games’ Collapse to the Metaverse’s Retreat

Many people know Chinese Online because of a copyright rights enforcement case involving the TV series “Empresses in the Palace.” In 2013, a company spread the e-book version of “Story of Yanxi Palace” without authorization. The digital copyright exclusive licensee for that book, Chinese Online, sued the company in court. The court found that the company constituted instigation of infringement and ordered it to pay compensation of more than 40,000 yuan.

This case is Beijing’s first example in which a website was ruled to have committed instigation of infringement. It has been widely cited by copyright-specialized institutions and law firms, and is used as a teaching case for determining digital copyright infringement. It is this victory that quickly brought the name “Chinese Online” into the public eye.

Chinese Online was established in 2000. It listed on the Growth Enterprise Market in January 2015, becoming China’s “No. 1 Digital Publishing Stock.” At that time, Chinese Online’s business was divided into digital reading products, digital publishing operation services, and digital content value-added services.

After listing, Chinese Online began its journey of chasing bandwagons. In 2015, with the widespread adoption of smartphones, the mobile game industry boomed. That August, Chinese Online announced a private placement to raise 2 billion yuan, to be used for IP integrated development projects and others, with the aim of building an end-to-end industry chain layout across film and television, games, animation, and more.

Entering 2016, Chinese Online once again clearly laid out a development strategy of “literature +” and “education +” twin wings. It positioned the otaku/digital culture space as a key segment of “literature +.” In the same August, the company completed its private placement and, in November, strategically invested 250 million yuan in AcFun (AcFun/A站), a portal website that is a source of otaku culture, and 250 million yuan in Shanghai Chenzhike, the first large-scale profitable otaku game company in China.

Among them, Chinese Online placed high hopes on Shanghai Chenzhike. In 2018, Chinese Online acquired the remaining equity in Shanghai Chenzhike by combining cash payments with directed share placements, with a total consideration of 1.4726 billion yuan, thereby achieving 100% control.

Also in 2018, because Chenzhike failed to meet its performance-guarantee commitments, Chinese Online fully accrued a goodwill impairment provision of 1.254 billion yuan for the goodwill formed from the acquisition. As a result, Chinese Online suffered a massive loss of 1.508 billion yuan in 2018, while the total attributable net profit from 2015 to 2017 was only 144 million yuan.

In 2020, Chinese Online sold 100% of its stake in Chenzhike. The transaction consideration was only 45.67 million yuan, sharply contrasting with the acquisition price totaling over 1.7 billion yuan across the two rounds.

By 2021, technology giants at home and abroad were announcing that they were moving into the metaverse; that year was also dubbed the “metaverse year.”

In its 2021 annual report, Chinese Online clearly expressed optimism about the development of the metaverse, saying it would treat it as a long-term development strategy. It announced support for building a metaverse culture laboratory of the School of Journalism and Communication at Tsinghua University, establishing an internal innovation department, and setting up a dedicated metaverse fund to support business exploration.

But the investment did not bring profitable returns. In 2022, Chinese Online posted a loss of 362 million yuan. Regarding the reasons for its performance, the company said, “The company has increased investment in innovative businesses such as the metaverse and Web3, as well as international business.” At the same time, due to special reasons, some business activities were affected.

In its 2024 annual report, Chinese Online mentions the term “metaverse” in no way at all.

It is worth noting that Chinese Online’s main business profit level has remained persistently weak. During the seven-year period from 2018 to 2024, the company’s non-recurring adjusted net profit was profitable only in 2021; in the other six years it recorded losses. In the first three quarters of 2025, the company’s non-recurring adjusted net profit loss was 520 million yuan.

High-Burning Money for Overseas Short Dramas; While IPO Funds Are Needed to Replenish Cash, Executives Plan a Group Sale

After its first two bandwagon chases ended in failure, Chinese Online now treats “overseas short dramas” as its core growth engine. According to disclosures in its Hong Kong IPO prospectus, the company became one of China’s first enterprises producing and distributing short dramas as early as 2021. In 2022, it became one of the few domestic companies whose annual short-drama revenue surpassed 100 million yuan.

Also starting in 2022, Chinese Online accelerated its expansion into overseas markets. Its core overseas platform, FlareFlow, has achieved phased results.

The prospectus shows that FlareFlow has over 33 million registered users, offering about 52 million short-drama episodes, and has once topped the #1 spot on the daily ranking of free entertainment applications in the U.S. App Store. In addition, through equity investments, the company has deeply participated in the operations of ReelShort, a leading overseas short-drama platform, further expanding its global influence.

In terms of content formats, Chinese Online has also achieved results by adapting literary works and high-quality IP into comics, AI comic dramas, animation, short dramas, films, and related merchandise.

In its AI comic-drama layout, a research report by Guohai Securities shows that as of November 2025, the play count for “From the Womb to the Top: Reverse Destiny” produced by Chinese Online exceeded 100 million. Additionally, the album play count for “Immortal Lord Returns: Only One Hand Can Stabilize the Human World” exceeded 64 million times. Furthermore, last year, the film “Luoxiaohong: Battle of the Dragon 2,” co-produced based on the company’s flagship IP, achieved domestic summer-season box office revenue of 533 million yuan, and in September 2025 it entered North American theaters, with the IP’s influence continuing to expand outward.

Behind these impressive data points is massive spending on marketing. In the first three quarters of 2025, Chinese Online’s sales expenses totaled 660 million yuan, up 94% year over year, accounting for 65.3% of revenue, while R&D investment during the same period was only 53 million yuan.

In its Hong Kong IPO prospectus, Chinese Online openly said that overseas short dramas follow a high-investment model of “burning money to exchange for scale,” stating that in the first three quarters of 2025, the substantial increase in sales expense mainly stemmed from the expansion of FlareFlow’s business scale; the company is actively carrying out marketing and user acquisition activities.

Chinese Online’s model of “heavy buying of volume, light R&D” is highly similar to the growth logic of typical “buy-volume” game companies, featuring upfront marketing costs, delayed revenue recovery, and rigid infrastructure investment.

Financial pressure has become more prominent. As of the end of Q3 2025, the company had cash and cash equivalents of 294 million yuan, while short-term borrowings reached 302 million yuan, and operating cash flow was negative.

Previously, Chinese Online planned to raise 1.784 billion yuan via an A-share private placement to replenish liquidity. The intended projects included replenishing working capital and repaying bank loans, but the matter was terminated in August 2025.

Against this backdrop, Chinese Online first disclosed its plan to list in Hong Kong in December 2025, and recently formally submitted its prospectus. It clarified that the use of proceeds includes repaying loans and supplementing working capital.

Of course, the core purpose of Chinese Online’s Hong Kong proceeds is to, through AI technology upgrades and building an overseas short-drama ecosystem, form a strategic re-emphasis on overseas short dramas.

Market participants analyze that a Hong Kong listing may enhance Chinese Online’s brand awareness and commercial credit level in overseas markets, strengthening the momentum for overseas growth on both the funding side and the market side.

At present, the Hong Kong IPO market is hot. Whether Chinese Online can quickly and smoothly list in Hong Kong in the short term still faces significant uncertainty.

On February 20, at a speech during the HKEX’s Lunar New Year opening ceremony for the Year of the Horse, an HKEX executive revealed that currently there are 488 companies waiting in line to list.

It is worth noting that while Chinese Online is pushing forward its IPO and plans to make a big move overseas, four core executives are simultaneously disclosing plans to reduce their holdings.

In early February 2026, Chinese Online announced that its director Zhang Fan, director and executive vice general manager Xie Guangcai, chief operating officer Yang Ruizhi, and vice general manager, board secretary, and CFO Wang Jingjing plan to reduce their company shareholdings. The reason for the reduction is personal capital needs.

This has sparked outside discussion: are the executives’ planned share reductions truly because of capital needs, or do they implicitly reflect views on the company’s long-term prospects?

From the collapse of mobile games to the retreat of the metaverse, and then to betting on overseas short dramas, Chinese Online has consistently laid out plans for frontier industries and explored a path to sustainable profitability. This Hong Kong IPO is both a pragmatic choice to ease funding pressure and a key campaign for Chinese Online to prove to global investors that its business model is viable.

At a new starting point for globalized content competition, whether Chinese Online can truly convert its massive IP reserve into long-term competitive strength—rather than falling into a dilemma of “burning money for growth, always not making money”—will be the core benchmark for testing whether its transformation succeeds or fails.

We will continue to pay attention to the progress of Chinese Online’s Hong Kong IPO.