The9 Signed a Legally Binding Term Sheet to Acquire a Leading AIGC Driven Digital Human SaaS Platform ShenMa

Rhea-AI Summary

The9 Limited (Nasdaq: NCTY) announced the signing of a term sheet to purchase 51% shares of Shenma Limited, a digital human SaaS platform, using cash and restricted shares. Shenma's platform offers AI-generated content and digital human creation services, with plans for monetization and growth. The acquisition aims to capitalize on the growing AIGC market in China and expand The9's presence in the AI industry.

Positive

• The9 Limited (Nasdaq: NCTY) signed a term sheet to acquire 51% shares of Shenma Limited, a digital human SaaS platform.
• The acquisition involves a cash payment of US$1 million and issuance of restricted Class A ordinary shares worth US$14.3 million.
• Shenma's platform offers AI-generated content and digital human creation services, with a focus on monetization and efficient account management.
• The acquisition aligns with The9's strategy to capitalize on the growing AIGC market in China and expand its presence in the AI industry.
• The9 plans to leverage Shenma's technology for various applications, including digital human key opinion leader creation, live streaming, and information flow advertising.

Negative

• None.

Insights

Market Research Analyst

The acquisition of a 51% stake in Shenma by The9 Limited represents a strategic move into the burgeoning field of artificial intelligence-generated content (AIGC) and digital human SaaS platforms. This move aligns with broader market trends where companies are increasingly investing in AI to drive innovation and gain a competitive edge. The deal, which includes both cash and restricted share components, indicates The9's commitment to leveraging Shenma's technology to potentially diversify and strengthen its revenue streams.

Shenma's platform, which boasts a substantial user base and a rich library of digital content creation tools, positions The9 to capitalize on the growing demand for digital media and AI-driven content production. The lock-up conditions tied to The9's market capitalization milestones underscore a performance-based approach to the acquisition, ensuring that value is tied to tangible growth metrics. This could reassure investors of the strategic intent to drive shareholder value over time.

Financial Analyst

The financial structure of the deal, with a relatively modest cash consideration of US$1 million and a significant equity component valued at US$14.3 million, suggests The9's confidence in the future valuation of its shares. The use of a 20-day average closing price for determining the share value provides a measure to mitigate short-term volatility in the pricing of the deal. Investors should note the potential dilutive effect of the new share issuance on existing shareholders, although the lock-up conditions could mitigate immediate impacts on share price.

From a financial perspective, the milestones related to market capitalization are particularly noteworthy. They not only align the interests of The9 and Shenma but also provide a clear framework for the release of locked shares. This structure incentivizes performance and could be viewed positively by the market as it ties the success of the acquisition to the broader success of The9.

Technology Industry Analyst

The acquisition highlights the strategic importance of AIGC and digital human technologies as pivotal elements in the future of media interaction and content creation. Shenma's platform capabilities, including its proprietary cloning technology and the ability to monetize digital human creations, suggest a high potential for disruption in traditional advertising and social media industries. The mention of Shenma's intellectual property holdings in China adds a layer of competitive advantage, potentially protecting the technology from competitors and creating barriers to entry.

Given the mention of The9's existing cryptocurrency mining business and its diversification into AI and digital humans, it is evident that the company is seeking to balance its portfolio and reduce reliance on the volatile cryptocurrency market. The reference to China's AIGC market size exceeding RMB10 billion in 2023 provides context for the market opportunity that The9 is aiming to capture with this acquisition.

SHANGHAI, March 5, 2024 /PRNewswire/ -- 

The9 Limited (Nasdaq: NCTY) ("The9"), an established Internet company, today announced that it signed a legally binding term sheet (the "Term Sheet") with Shenma Limited ("Shenma") to purchase 51% shares of Shenma by cash and issuance of The9's restricted shares. Pursuant to the Term Sheet, The9 will pay cash consideration of US$1 million and will issue restricted Class A ordinary shares to Shenma or its shareholders with the value of US$14.3 million. The value of each share will be determined by the average closing price of The9's American depositary shares ("ADS"), each representing 300 Class A ordinary shares of The9, for a period of 20 trading days prior to the signing of the definitive agreement. The restricted Class A ordinary shares to be issued to Shenma 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, 33,938,400 Class A ordinary shares (equivalent to 113,128 ADSs) of The9 will be released from the lock-up; (ii) when the market capitalization of The9 reaches US$500 million, 13,575,300 Class A ordinary shares (equivalent to 45,251 ADSs) of The9 will be released from the lock-up, and (iii) when the market capitalization of The9 reaches US$1 billion, 6,787,800 Class A Ordinary shares (equivalent to 22,626 ADSs) of The9 will be released from the lock-up. The rest of the restricted Class A ordinary shares will be released from the lock-up when Shenma completes a qualified IPO and its shares owned by The9 become freely tradable in the open market.

Shenma developed and operates Shenma.io, a leading digital human SaaS platform driven by artificial intelligence-generated content (AIGC). The platform has 350,000 registered users, 150,000 short video scripts model library, 9,000 digital human creators and different brand customers. Using Shenma's proprietary cloning technology, users can create 1:1 digital human clone character with image and voice. Together with different contents supported by AIGC, each user can manage a large number of accounts efficiently. The digital human creators using Shenma platform can monetize their products on different social platforms 24 hours a day, 7 days a week with much lower cost compared to real people. Shenma platform also offers video, audio and text automatic replies to enhance the monetization of products.

"With the continuous breakthroughs in technology, AI generates content and digital humans express content. The combination of these two new technologies will become a new form of media interaction in the future. Traditional advertising industries will be disrupted by these two new technologies and social media. We have already obtained multiple intellectual properties in China. Our proprietary digital human SaaS platform can assist our users in many application scenarios including digital human key opinion leader creation, live streaming, information flow advertising, training courses, etc. Users just need to enter text or import audio, and then we can quickly generate digital human broadcast video with precise mouth shapes and rich expressions," said Mr. Jianjun Ma, founder of Shenma.

"While we are continuing our cryptocurrency mining business and benefiting from the recent increase in value of the 300 Bitcoins that we hold as of today, we believe AIGC will bring revolutionary changes to almost every industry. In 2023, China's AIGC market exceeded RMB10 billion. After the proposed investment in a leading AI SaaS legal service platform 365LAWHELP.COM, this time we plan to directly acquire a leading AIGC driven digital human SaaS platform ShenMa. We will continue to participate in the explosive growth of AI application opportunities through investments and acquisitions in specific industries and markets," said Mr. George Lai, CFO and Director of The9.

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 announcement 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.

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SOURCE The9 Limited

FAQ

What is the recent announcement made by The9 Limited (Nasdaq: NCTY)?

The9 Limited announced the signing of a term sheet to purchase 51% shares of Shenma Limited, a digital human SaaS platform.

How will The9 Limited pay for the acquisition of Shenma Limited?

The9 Limited will pay US$1 million in cash and issue restricted Class A ordinary shares worth US$14.3 million for the acquisition.

What services does Shenma Limited's platform offer?

Shenma Limited's platform offers AI-generated content and digital human creation services, enabling efficient account management and monetization.

What is the strategic goal behind The9 Limited's acquisition of Shenma Limited?

The acquisition aims to capitalize on the growing AIGC market in China and expand The9's presence in the AI industry.

Who is the founder of Shenma Limited?

Mr. Jianjun Ma is the founder of Shenma Limited, the digital human SaaS platform acquired by The9 Limited.