The online literature company lost up to 850 million yuan last year, largely due to a massive charge related to its New Classics Media video acquisition
Image Credit: Bamboo Works
Key Takeaways:
- China Literature warned it expects to report a net loss of up to 850 million yuan for last year
- Much of the loss owes to a 1.8 billion yuan goodwill impairment charge related to New Classics Media, which China Literature bought for 15.5 billion yuan in 2018
Its name may sound relaxing, but recent stock volatility has left shareholders of online reading platform China Literature Ltd. (0772.HK) hardly feeling any of the calm that typically comes from the calming type of good read implied by the company’s name.
After peaking at HK$45.50 late last October, China Literature’s stock suddenly went into a tailspin that wiped out 20% of its value within two months at the end of last year. It began to rebound early this year, only to suddenly shift gears again and tumble after an “incident” on Jan. 24 involving an uprising of its authors that we’ll describe in more detail shortly. Then, investors suddenly piled back in after management unveiled its 2026 strategy, fueling a 27% surge in the stock over two days.
But just as the bulls were returning, the company wrote yet another new chapter for its stock by issuing a profit warning last week saying it expected to report a net loss of between 750 million yuan ($108 million) and 850 million yuan for last year. That was enough to unleash the bears again, as the shares plunged 8% the next day.
The filing disclosed that recoverable goodwill for the company’s New Classics Media unit fell below the division’s carrying value, necessitating an estimated goodwill impairment charge of 1.8 billion yuan. Excluding that, the company would have reported a non-IFRS net profit of 800 million yuan to 900 million yuan last year, down between 21% and 30% from the 1.14 billion yuan it earned in 2024.
Headwinds gradually easing
Despite …