Liu Jia On the morning of May 3rd, a group of loss data in Millet prospectus triggered widespread concern in the industry. Prospectus shows that from 2015 to 2017, the group produced a loss of 7 billion 600 million yuan, a profit of 490 million yuan and a loss of 43 billion 900 million yuan. As of December 31, 2017, the group had a net debt of 127 billion 200 million yuan and a cumulative loss of 129 billion yuan. The prospectus said that this is mainly due to the large amount of fair value losses that millet can convert into redeemable preferred stock. The convertible redeemable preferred stock is designated as a liability on the consolidated balance sheet, while the fair value is added to the consolidated income statement as a fair value loss. For example, in 2017, the fair value of the convertible convertible preferred stock was up to 54 billion yuan. After deducting the change in the fair value of convertible redeemable preferred stock, the share based compensation, the gain of the fair value of investment, and the amortization of intangible assets caused by the acquisition, millet lost 300 million RMB of the adjusted non international financial reporting standard in 2015 and adjusted non international finance in 2016 and 2017. The standard profit is RMB 1 billion 896 million 900 thousand yuan and RMB 5 billion 360 million yuan respectively. In fact, there were similar experiences in the 2016 when the US map was listed, and over 6 billion of its huge losses attracted widespread attention and doubt. In fact, a large part of the loss figure is the improvement of the fair value of preferred stock. A preferred stock is a mixed stock between common shares and bonds. Unlike ordinary shares, preferred stock is fixed in dividends and has priority in the distribution of dividends and surplus property. At the same time, the rights of preferred stock are also limited. The most important thing is that there is no right to vote. Convertible preferred stock allows the holder to convert the preferred stock into a certain amount of shares under certain conditions, which is equivalent to the design of option on the basis of the preferred stock. When the company is in good condition, the preferred stock can be converted into common stock and enjoy the rights and interests of the common stock, and the companys operating condition is not good. At the same time, you can not convert and enjoy a fixed dividend. Convertible preferred stock gives the holder a more flexible choice of return. Some companies issue convertible preferred stock for overseas financing before listing. These convertible preferred shares can be converted into ordinary shares at the agreed proportion after the companys listing is completed. The agreed price is often significantly lower than the issue price per share after the listing. In the accounting measurement, the international financial reporting standards require the difference between the value of the common stock and the conversion price as a loss, which is why many companies account for a huge loss from the convertible preferred stock. It can be said that the change in the fair value of convertible preferred stock is only a kind of accounting treatment, and the effect on the net profit of the company is a non cash item, which does not have an effect on the companys sustainable management in essence. PWC Jie Shen had previously read to reporters, priority shares to ordinary shares to be agreed beforehand, after the turn does not make fair value measurement, that is, no profit and loss fluctuations. In an interview yesterday, Li Kaifu, one of US investors and founder of Innovation workshop, said in an interview yesterday that there were few large Internet companies listed in Hong Kong stocks, and the investors in the Hong Kong stock market were more accustomed to measuring the value of a company with their financial data. According to the development trend of revenue and profit data in the next few years, we should evaluate the reasonable price earnings ratio to judge the value. For example, for example, the Internet Co usually has multiple rounds of convertible redeemable preferred stock. Under international accounting standards, the preferred stock will be reflected as debt to shareholders. The rise in fair value will be recorded in the loss of the companys accounts, but in fact, the company has not lost such a loss, to the public. The actual operation of the company has no effect. The so-called debt figure will disappear at the moment of listing. Xu Xiaoping, founder partner of the real fund, also mentioned that first is the understanding of the relationship between company growth and valuation. It is more customary for investors in Hong Kong stocks to calculate the right price earnings ratio for the companys existing profitability, and the value of a new economic company is largely determined by the growth of the future. The value of a Internet Co often needs to predict the growth trend of revenue and profit for the next 1 to several years in accordance with the current development momentum, and then based on this figure to assess the reasonable price earnings ratio. For some Internet Co or biotechnology companies that are not yet profitable, the impact of this thinking is even greater. For investors, there is an adaptation problem of thinking transformation. He said that after April 30th, the large Internet Co listed in Hong Kong shares were sure to have the value of redeemable, convertible preferred stock in the prospectus, and the number could be huge because of the size of the company. The bigger the number, the more valuable the company is. But whether the market and the vast majority of investors will be misread in the face of this figure and whether it is accurate to judge the true value of the company may be a challenge. Now that the policy gate is the first step, the markets understanding and acceptance of the value of innovative companies is the key to the long term. Xu Xiaoping said. However, for other common stock buyers, the conversion of convertible preferred stock into common stock will increase the total number of shares, similar to Orienteering, equivalent to the same enterprise overall value corresponding to more stocks, the equity is diluted, and the price per share of ordinary shares will have a certain impact.