This is an English adaptation of a FoodBud historical article originally published on November 27, 2021.
On November 24, 2021, Everbright Securities issued a risk warning saying that Shanghai Shoule E-commerce Co., Ltd., the parent company of online cake brand Best Cake and a listed company on China’s NEEQ market, had been accepted by a court for bankruptcy liquidation. Everbright said Shoule faced the risk of compulsory delisting and being declared bankrupt by the court.
In July 2021, Everbright had already warned that Shoule failed to disclose its 2020 annual report on time, its shares faced delisting risk, and the company’s actual controller could not be reached. Shoule missed the April 30, 2021 deadline, suspended trading from May 6, and still had not filed the report by June 30. Everbright said relevant personnel including the actual controller and board secretary were unreachable, and the company had taken no measures to remove the delisting risk.
Shoule was once marketed as the “first O2O bakery stock” in China. Its best-known asset was Best Cake, a viral online cake brand.
In December 2020, Everbright, as Shoule’s supervising brokerage, warned that the company was seeing prepaid cards that could not be redeemed, unexplained order cancellations, and cakes not being delivered. Government departments and consumer-protection bodies had received complaints, while TV stations and online platforms were covering the dispute. Everbright said the company could face major compensation liabilities, and that Shoule’s actual controller was overseas and unreachable.
That same month, Best Cake’s official WeChat account posted an emotional response saying management had mortgaged homes, sold cars, postponed weddings, and used wedding savings in an effort to keep the company alive. The post blamed lower cake demand after the pandemic, bank loan withdrawals, capital-market pressure, unstable dairy imports, internal problems, staff departures, job changes, and arbitration cases.
Shoule listed on the NEEQ in 2016, issuing 870,900 shares and raising RMB 26.85 million. Subscribers included Everbright Securities, Orient Securities, and Linzhuo Investment.
In 2017, Best Cake announced a strategic Pre-IPO investment of several tens of millions of yuan from Talent Capital. The same year, Best Cake spent RMB 21 million on a two-year endorsement agreement with actress Tang Yan.
With multiple investors behind it, Best Cake expanded quickly. By the end of 2017, it had entered Shanghai, Wuxi, Suzhou, Beijing, Tianjin, Chongqing, Chengdu, and other markets. That land-grab model created pressure on operating cash flow. Financial reports showed repeated losses, and 2018 net profit fell nearly 80%.
Shoule then sought a sale to Maiquer Group, an A-share listed company, at a proposed acquisition price of RMB 134 million. After about a year of talks, the deal collapsed and Shoule terminated its NEEQ listing. Maiquer said at the time that the termination was mainly due to changes in the external environment and Shoule’s high valuation.
A separate investor arrangement also became a problem. When SAIF Investment injected capital, it set performance-bet terms with Shoule and founder Wu Zifeng. Shoule was expected to complete a “qualified listing” within five years after the capital increase on a securities market recognized by SAIF and Shoule. The qualified listing required a pre-IPO valuation of at least RMB 750 million and IPO financing of at least RMB 250 million.
The five-year period passed without a qualified listing. Under the arrangement, Wu Zifeng was to repurchase SAIF’s shares with his own funds according to the agreement. The original November 12, 2014 agreement said SAIF would invest RMB 30 million, with RMB 1.5 million added to registered capital and the premium booked as capital reserve. The investment valued the company at RMB 150 million, calculated as 1x expected 2015 sales of RMB 150 million. The redemption price was the investment amount plus a 12% annual internal rate of return, excluding undistributed profits attributable to the investor’s equity. The article notes that this bet was between SAIF and founder Wu Zifeng, not directly with the company.
A bakery industry participant cited in the article argued that store operating cost was a major constraint on new cake brands. In first- and second-tier Chinese cities, independent operators often face much higher rents than chain brands in comparable locations. Over the past decade, many “internet + bakery” companies emerged using a no-store model: a few central kitchens in each city, online ordering, and offline logistics fulfillment.
FoodBud’s analysis was that brands like Best Cake depended on heavy early marketing spend, financing rounds to amplify brand influence, and eventually an IPO or acquisition exit. If the capital chain broke, the whole operating system could fail.
Shoule’s model combined online B2C and offline B2B sales:
FoodBud described the pandemic as the final blow, but the financial data showed pressure well before that.
From 2015 onward, Shoule’s annual revenue was RMB 120 million, RMB 180 million, RMB 210 million, RMB 230 million, and RMB 230 million. Net profit attributable to shareholders of the listed company was RMB -9.98 million, RMB -72.29 million, RMB 11.22 million, RMB 2.41 million, and RMB 16.2 million.
In the first half of 2020, affected by the pandemic, Shoule generated RMB 110 million in revenue, down 3.37% year on year. Net profit attributable to shareholders was RMB 11.73 million, down 26.98%.
Cash flow was tighter. From 2015 to the first half of 2020, net operating cash flow was RMB -20.96 million, RMB -36.6 million, RMB 1.55 million, RMB 5.99 million, RMB -32.25 million, and RMB -12.26 million. Only 2017 and 2018 were slightly positive.
A bakery industry source quoted by The Beijing News said Shoule looked more like a shell company skilled at telling capital-market stories and executing according to investor wishes. The source argued that trying to sell itself after seven years suggested the company had not focused enough on product quality and brand maintenance.
Note: IPO, valuation, financing, acquisition, redemption, and forward-plan figures above are historical figures from the source article.