The9 Signed a Definitive Share Purchase Agreement to Invest in AI Unmanned Retail Store Platform KuaiJin

Rhea-AI Summary

The9 announced a definitive share purchase agreement with KuaiJin Shidai to acquire a 15% stake in KuaiJin, an AI unmanned retail platform in China. The deal involves a cash payment of $1.5 million and the issuance of 318,448,800 restricted Class A shares. The9 also secured an option to purchase up to 51% of KuaiJin within two years, based on a valuation of $60 million. KuaiJin has already transformed over 500 retail stores across 100 cities, offering 24/7 operation and reduced payroll costs via AI-powered systems. The release of The9's shares is contingent on market cap milestones and other conditions.

Positive

• The9's investment could significantly enhance its portfolio in the AI retail sector.
• KuaiJin has successfully transformed over 500 retail stores, showcasing a viable and scalable business model.
• The9's option to acquire up to 51% of KuaiJin indicates a strong commitment to the partnership.
• The use of AI reduces payroll costs and shoplifting risks, potentially increasing profitability for KuaiJin's clients.
• The9 can leverage its experience in GenAI to enhance KuaiJin's platform capabilities.

Negative

• The issuance of 318,448,800 restricted shares could lead to shareholder dilution.
• The release of restricted shares depends on The9 reaching significant market cap milestones, which may not be achieved.
• The investment's success is contingent on KuaiJin's continued growth and market acceptance of its technology.
• Potential risks if The9 fails to exercise its purchase option within the stipulated two years.

Insights

Financial Analyst

The9's recent investment in KuaiJin signifies a strategic move into the AI-powered unmanned retail sector, a burgeoning industry in China. In the short term, this could potentially boost The9’s valuation and diversify its revenue streams. The deal involves a cash consideration of $1.5 million and the issuance of 318,448,800 restricted Class A ordinary shares (equivalent to 1,061,496 ADSs). The lock-up conditions tied to The9's market cap milestones—$200 million, $500 million and $1 billion—ensure alignment of KuaiJin's interests with The9's stock performance.

Long-term implications include the potential for The9 to exercise its option to acquire a majority stake (up to 51%) in KuaiJin, which would give it significant control over the AI retail platform. This could be pivotal if KuaiJin continues its rapid growth, having already transformed over 500 retail stores across more than 100 cities. However, investors should be cautious of potential dilution from the issuance of new shares and the uncertainties tied to market cap targets and KuaiJin’s future performance.

This strategic move indicates The9’s intent to leverage AI to streamline operations and reduce costs in the retail sector, which could be a game-changer if executed well. Yet, the market cap milestones are ambitious and achieving them will depend on both The9’s and KuaiJin's performance in a competitive and evolving market.

Tech Expert

The integration of AI technology in traditional retail through KuaiJin’s platform is significant. KuaiJin’s system enables existing retail stores to transform into unmanned AI-operated stores within 48 hours, utilizing AI-powered 360-degree surveillance cameras and intelligent hardware. For retail store owners, this means drastically reducing operational costs, particularly payroll and minimizing losses due to shoplifting. Additionally, the AI system allows for 24/7 operation, enhancing revenue potential.

The mention of data capitalization is particularly noteworthy. By digitizing customer behaviors and transactions, KuaiJin can provide valuable insights for targeted marketing and inventory management. This could make small retail stores more competitive against larger chains and e-commerce platforms.

However, the technology's success hinges on its robust deployment and maintenance. Issues like system glitches or security vulnerabilities could potentially disrupt operations. Also, the widespread adoption of such technology depends on the willingness of small store owners to invest in and trust these AI solutions.

SHANGHAI, May 20, 2024 /PRNewswire/ -- The9 Limited (Nasdaq: NCTY) ("The9"), an established Internet company, today announced that it signed a definitive share purchase agreement (the "Agreement") with Kuaijin Shidai (Xiamen) Technology Co., Ltd. ("KuaiJin"), a company operating unmanned retail store platform in China, to purchase 15% of KuaiJin by cash and issuance of The9's restricted shares. The9 is also granted a purchase option to purchase up to 51% of the total shares of KuaiJin. The purchase option is exercisable within 2 years and will be based on KuaiJin's valuation at US$60 million.

KuaiJin provides standardized cost-effective solution to retail stores in China. Within 48 hours, traditional retail stores can be transformed into AI unmanned retail store by installation of KuaiJin hardware and software. The AI unmanned retail stores can be opened 24 hours a day, 7 days a week, under the monitor of AI-powered 360-degree surveillance cameras. After such transformation, the payroll cost will be significantly reduced. The chance of getting shoplifting will also be reduced. Profit of the retail stores will be increased accordingly. Due to this clear business model, KuaiJin has already transformed more than 500 retail shops in more than 100 cities in China.

Pursuant to the Agreement, The9 will pay cash consideration of US$1.5 million and will issue 318,448,800 restricted Class A ordinary shares (equivalent to 1,061,496 ADSs) to KuaiJin. The restricted Class A ordinary shares to be issued to KuaiJin will be subject to lock-up conditions and will only be released according to the following schedule: (i) when the market capitalization of The9 reaches US$200 million, 20,940,900 Class A ordinary shares (equivalent to 69,803 ADSs) of The9 will be released from the lock-up; (ii) when the market capitalization of The9 reaches US$500 million, 1,894,800 Class A ordinary shares (equivalent to 27,921 ADSs) of The9 will be released from the lock-up, and (iii) when the market capitalization of The9 reaches US$1 billion, 4,188,300 Class A Ordinary shares (equivalent to 13,961 ADSs) of The9 will be released from the lock-up. The rest of the restricted shares shall be released from the lock-up when either of the following conditions are met: KuaiJin completes a qualified IPO and its shares owned by The9 become freely tradable in the open market; or if and when the The9 exercises its purchase option and, as a result, holds a minimum 51% of the then total share capital of KuaiJin.

"There are more than 5 million retail stores in China alone around the world. These small retail stores are like capillaries, distributed in the streets and alleys of cities, and together they form a huge offline real-time retail network. They are indispensable business format in the daily life of most people. However, millions of small retail store owners and operators have long been faced with the problem of not having the freedom to expand their businesses since they need to guard the store. On the other hand, with the high popularity of mobile payments in China nowadays, the checkout actions in retail stores have become extremely standard and simple. In this context, the low-cost intelligent transformation solution provided by Kuaijin effectively solves the storekeeping problem. It uses intelligent hardware and AI to replace manual storekeeping. It can especially free up the operators' time at night, so that the retail stores can be open 24 hours a day throughout the year without having to stay up late to guard the store. More importantly, through AI-empowered transformation, data on customers, products, locations and financials will no longer be scattered and difficult to collect, data can truly be capitalized. In the past, fast-moving consumer product brands hired a large number of offline service personnel to maintain customer sentiment in small retail stores to ensure effective display and sales of products, which was costly and inefficient. It is extremely difficult for brands to conduct data analysis or implement marketing activities for millions of stores with different operators. This is precisely the reason why the channel value of small retail stores has been limited for a long time. However, for the small retail stores cooperating with Kuaijin, customers' entry, purchase, settlement, and departure are all served through in-store hardware and AI. Customers' behaviors are fully digitized without the need of changing the traditional consumer shopping process. On this basis, Kuaijin can effectively implement brand marketing plan such as promotion activities and new product recommendations. The membership system, AI customer service and video algorithms continuously collect and analyze huge amount of data collected. We can then continuously train algorithms by machine learning and fully embrace GenAI. With The9's investment, Kuaijin can leverage The9's experience in different GenAI business applications to help improving the GenAI capabilities of Kuaijin's platform. Kuaijin is keen to expand service scenarios, improve service experience, and create future AI retail stores recognized by store owners and operators, consumers, and brands," said Mr. JiaPao Wu, founder of KuaiJin.

As of the date hereof, the total number of issued and outstanding shares of The9 is 1,993,729,927 (equivalent to 6,645,766 ADSs), being the sum of 1,980,122,593 Class A ordinary shares and 13,607,334 Class B ordinary shares.

Safe Harbor Statement

This current report contains forward-looking statements. These statements are made under the "safe harbor" provisions of the United States Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. Such statements are based upon management's current expectations and current market and operating conditions and relate to events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond The9's control. The9 may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission ("SEC"), in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about The9's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: The9's goal and strategies; The9's expansion plans; The9's future business development, financial condition and results of operations; The9's expectations regarding demand for, and market acceptance of, its products and services; The9's expectations regarding keeping and strengthening its relationships with business partners it collaborates with; general economic and business conditions; and assumptions underlying or related to any of the foregoing. Further information regarding these and other risks is included in The9's filings with the SEC. All information provided in this current report is as of the date hereof, and The9 does not undertake any obligation to update any forward-looking statement, except as required under applicable law.

The9 Limited
17 Floor,
No. 130, Wu Song Road,
Hong Kou District,
Shanghai 200080, PRC

About The9 Limited 

The9 Limited (The9) is an Internet company listed on Nasdaq in 2004. The9 aims to become a global diversified high-tech Internet company, and is engaged in blockchain business including the operation of cryptocurrency mining. The9 is also stepping into AI application business in different industries.

Investor Relations Contact

Ms. Rebecca Cai
Investor Relations Specialist
The9 Limited
Tel: +86 (21) 6108-6080
Email: IR@corp.the9.com 

Website: www.the9.com

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SOURCE The9 Limited

FAQ

What is the share purchase agreement signed by The9 and KuaiJin?

The9 signed an agreement to acquire a 15% stake in KuaiJin for $1.5 million and 318,448,800 restricted shares.

What are the financial terms of The9's investment in KuaiJin?

The9 will pay $1.5 million and issue 318,448,800 restricted shares to KuaiJin.

What is KuaiJin's business model?

KuaiJin transforms traditional retail stores into AI unmanned retail stores, offering 24/7 operation and reducing payroll costs.

How many stores has KuaiJin transformed?

KuaiJin has already transformed over 500 retail stores across 100 cities in China.

What is The9's option under the agreement with KuaiJin?

The9 has an option to purchase up to 51% of KuaiJin within two years, based on a $60 million valuation.

How will the restricted shares issued to KuaiJin be released?

The shares will be released upon The9's market cap reaching $200 million, $500 million, and $1 billion, or other specified conditions.

What are the potential benefits for The9 from this investment?

The9 can enhance its AI capabilities and expand its portfolio in the retail sector, leveraging KuaiJin's technology and market presence.

What risks are associated with The9's investment in KuaiJin?

Potential shareholder dilution, dependence on market cap milestones, and the success of KuaiJin's continued growth and market acceptance.