The recent turbulence in the stock price of East Buy (1797.HK) has sparked controversy—initially, New Oriental founder Yu Minhong commented in a live broadcast that "East Buy is in a mess," followed by public criticism of the sales tactics used in East Buy's live broadcasts; during the Dragon Boat Festival, Dong Yuhui expressed his "aversion to selling products" in a program.

East Buy's market value evaporated by 4.3 billion Hong Kong dollars in 5 days, and Yu Minhong publicly apologized.

On May 31st, Yu Minhong stated in a live broadcast: "East Buy is currently in a mess, without any ability to give you suggestions." On June 3rd, the topic "Yu Minhong said East Buy is in a mess" was trending, and on that day, East Buy's stock price plummeted by 9.92%. Moreover, since May 31st, over the course of five trading days, East Buy's stock price continued to decline, with a cumulative drop exceeding 20%, and the market value evaporating by more than 4.3 billion Hong Kong dollars.

In the early morning of June 7th, Yu Minhong issued a letter titled "To East Buy's Customers, Shareholders, and Investors." In the letter, he stated that saying "East Buy is in a mess" was merely a modest expression among friends and did not anticipate causing so much turmoil and interpretation. Subsequently, the stock price of East Buy responded positively, rising nearly 7% in the morning of the 7th, and closing up by 2.41%.

Dong Yuhui's resistance to live sales leads to a significant drop in East Buy's stock price.

After the mainland star anchor Dong Yuhui left East Buy at the beginning of the year to establish his own business, the accompanying data changes during the 618 period on the accounts under East Buy marked his withdrawal from live broadcasts as a dangerous signal. During the Dragon Boat Festival, Dong Yuhui stated in a program that he does not enjoy live product sales and strongly dislikes being referred to as an "internet celebrity." He said: "I am very resistant to selling products. To be honest, I do not enjoy this job to this day." This may have intensified the pessimism in the market sentiment.

On June 11th, East Buy's stock price opened lower and fell more than 11% at one point. In June, the drop in East Buy exceeded 25%, and the stock price was halved within the year, setting a new low in two years. According to Wind Information, since 2024, the stock price of East Buy has fallen by more than 45%, and the drop from the high at the beginning of 2023 is nearly 80%.

(Source: Investing.com, June 13, 2024)

Performance not meeting market expectations, how should East Buy enhance investor confidence?

Earlier this year, East Buy released its financial report for the mid-term of 2024, from June 1, 2023, to November 30, 2023, with total revenue of 2.8 billion yuan and a net profit attributable to the company's shareholders of 249 million yuan, with an adjusted net profit of 509 million yuan. However, the year-on-year data showed an increase in revenue without an increase in profit, with revenue growing by more than 30% year-on-year, while net profit fell by nearly 60% year-on-year, and adjusted profit fell by 13.3% year-on-year.

Once the performance was announced, East Buy's stock price fell the next day, with the highest drop exceeding double digits, and fell more than 20% within three trading days.

East Buy needs to take measures as soon as possible to enhance investor confidence. The company must solidify its supply chain in the e-commerce industry, ensuring that product quality and pricing are competitive in the market. Secondly, East Buy should strengthen team building, especially in the field of live e-commerce, where it is crucial to cultivate capable anchors and operational teams. The company also needs to leverage the potential of live e-commerce, expand sales channels, and increase user touchpoints.

In terms of transparent communication, it is necessary to communicate with investors in a timely manner during crises, demonstrating the company's sense of responsibility and determination to solve problems. At the same time, it is essential to convey a clear long-term strategy and vision to investors, showing its continuous innovation and growth potential in the field of live e-commerce. In addition, continuously exploring and implementing new business models and technologies, establishing effective risk management mechanisms, preventing and responding to potential crises, and reducing negative impacts on the company's operations and stock prices are also important aspects of enhancing investor confidence.