Core Viewpoint - Drip Irrigation Investment, a new financial innovation, aims to provide a financing channel for small and micro enterprises in mainland China through cash flow investments, leveraging its unique model and the backing of experienced founders [2][3][4]. Group 1: Company Overview - Drip Irrigation Investment was established less than a month ago and is seeking to list on the Hong Kong Stock Exchange [2]. - The company was incubated by Drip Irrigation, founded by Li Xiaojia and Zhang Gaobo, with a focus on cash flow investment [3][4]. - Following a Series C funding round in 2023, Drip Irrigation's valuation reached $1.7 billion, making it a unicorn [4]. Group 2: Financial Performance - As of July 1, 2025, Drip Irrigation has raised a total of 5.573 billion Macanese Patacas (approximately 4.937 billion RMB) [4]. - The company has invested 4.4 billion RMB of its own funds into small micro stores [21]. - The funding structure primarily consists of nearly 90% self-funding, indicating limited cash flow financing capabilities [23]. Group 3: Investment Model - Drip Irrigation's investment model involves two phases: initially investing in small micro stores and later securitizing these investments for public market release [30][32]. - The company plans to issue 3 billion shares, with the issuance price yet to be determined [26]. - The investment strategy targets three types of investments: business-type, asset-type, and enterprise-type [46]. Group 4: Regulatory Environment - Drip Irrigation Investment is pursuing an IPO under Chapter 21 of the Hong Kong Stock Exchange rules, which allows companies without actual business operations to list [7][14]. - The last case of a Chapter 21 company listing occurred 14 years ago, leading to market skepticism regarding Drip Irrigation's IPO prospects [16][17]. Group 5: Risk and Transparency - Concerns exist regarding the transparency of cash flow investments, as investors may struggle to assess the financial health of the underlying businesses [47][49]. - Drip Irrigation plans to implement a digital system called "Drip Star" to enhance transparency and investor access to information [51][60]. - The company aims to address potential moral hazards and ensure accurate tracking of cash flows through partnerships with payment systems and e-commerce platforms [48][50].

Core Viewpoint - The IPO of Drip Irrigation Investment marks a new era for the controversial Drip Irrigation model, transitioning from cash flow rights to a more structured financial approach [1] Group 1: Investment Structure - Drip Irrigation Investment focuses on investing in small and micro entities primarily in the chain industry, acquiring cash flow rights based on agreed profit-sharing ratios and terms [1][2] - The model represents a shift from non-standard cash flow rights to a standardized investment vehicle, aiming to raise funds for cash flow rights [1][2] - The underlying asset's cash flow is clear, derived from the immediate cash flow of invested enterprises, resembling asset-backed securities (ABS) investments [2][3] Group 2: Comparison with Traditional ABS - Unlike traditional ABS, which involves risk isolation through special purpose vehicles (SPV), Drip Irrigation's cash rights cannot achieve legal isolation and rely on contractual agreements [2][3] - Traditional ABS cash flows are linear and predictable, while Drip Irrigation's cash flows are subject to greater variability and shorter duration due to shared profits with invested entities [3][4] Group 3: Market Dynamics and Challenges - The investment scenarios for Drip Irrigation are limited to immediate cash settlement models, primarily in retail, dining, and service sectors, which are currently experiencing intense competition and oversupply [6][7] - The financial resources injected into franchisees and physical stores may exacerbate industry oversupply and competition [6][7] - Recent statistics show a significant decline in profits for major dining enterprises, highlighting the challenges faced by the sector [7] Group 4: Future Directions and Risks - Drip Irrigation is exploring new investment types, including asset-type investments for liquidity support and enterprise-type investments for operational payments, but faces competition from banks in the market [8] - The potential for market space and industry cycle risks remains a concern for Drip Irrigation and its investment strategies [8][9] - The success of Drip Irrigation in gaining market acceptance for cash flow rights investments will depend on robust risk control and transparency [9]