Short drama exports continue to "burn money"; Chinese Online plans to list in Hong Kong to "raise funds"

From “China’s first listed digital publishing company” to “an AI-driven global digital entertainment and culture platform,” Chinese Online (300364.SZ) is entering a critical phase of transformation. On one side, its overseas short drama business is booming: the flagship platform FlareFlow launched less than a year ago and has already won more than 33 million users; on the other side, however, it has continued to “burn cash,” resulting in performance losses and mounting financial pressure. Amid a period of expanding new business and facing earnings pressure, Chinese Online has submitted its application to the Hong Kong Stock Exchange, planning to list in Hong Kong to “inject capital.”

Founded in 2000 and known as “China’s first listed digital publishing company,” Chinese Online in recent years has been undergoing a deep transformation from a “traditional digital publishing company” into a “global digital entertainment and culture platform built around ‘AI + IP + short dramas.’” In 2021, Chinese Online became one of the first batches of companies in China to produce and distribute short dramas, and it soon turned its attention to overseas short drama markets. In August 2022, a company under Chinese Online, CMS (Maple Leaf Interactive), launched a global short drama app—ReelShort. After CMS became an independently operated entity, Chinese Online still holds a stake.

From 2023 to 2024, competition in China’s short drama market intensified, with Chinese Online’s related businesses declining. It began to shift the focus of its domestic short drama business from a to-C model to high-end short dramas and a to-B model, and prioritized cooperation with leading third-party platforms supported by internet giants. Overseas, Chinese Online has rolled out two major platforms in succession—Sereal and UniReel—to explore short drama markets in regions such as Southeast Asia and Japan. In April 2025, Chinese Online launched its flagship overseas short drama business FlareFlow. After FlareFlow went live, it quickly achieved a breakout: at its peak, it ranked first on both the U.S. Google Play and App Store entertainment apps free charts. As of February 18, 2026, cumulative registered users have exceeded 33 million.

Behind Chinese Online’s overseas short drama platforms’ “high traffic” is “high cost” and “high marketing.” In its application documents for listing on Hong Kong stocks, Chinese Online openly acknowledged that the company’s overall business model is highly dependent on distribution costs and market promotion expenses. In the first three quarters of 2023, 2024, and 2025, the company’s distribution costs were 564 million yuan, 472 million yuan, and 308 million yuan, respectively, accounting for 72.3%, 60.6%, and 46.4% of cost of sales.

Under continued “burning cash,” Chinese Online has fallen into a “growth in revenue but not in profits” predicament. At the end of January 2026, the company’s earnings preannouncement showed that it may face a “two consecutive years of losses.” For fiscal year 2025, the company’s net profit attributable to shareholders is expected to be a loss of 580 million yuan to 700 million yuan, with the year-on-year loss expanding by 139% to 188% compared with the prior year. The company attributes the losses to expanding the scale of its overseas business and increasing promotional investment in its overseas short drama operations.

While profits are under pressure, the company’s debt level has also continued to rise. According to Eastmoney, the company’s asset-liability ratio increased from 38.45% at the end of 2024 to 66.56% in the third quarter of 2025. As of September 30, 2025, the company’s bank loans and other borrowings were 432 million yuan. A large portion of the bank borrowings are short-term loans, which also puts pressure on the company’s working capital and cash flow. As of January 31, 2026, the company’s outstanding debt was 528 million yuan.

On December 15, 2025, Chinese Online announced that it was planning to list in Hong Kong, with the purpose of further advancing the company’s global strategy layout and enhancing its overall competitiveness. On March 1, 2026, the company submitted its application to the Hong Kong Stock Exchange. Although the company stated in its earnings preannouncement for fiscal year 2025 that its investments in expanding the scale of its overseas business were intended for long-term planning, given its deteriorating financial performance, the market has interpreted the plan to list in Hong Kong as raising funds to “inject capital.”

In its application documents for listing on Hong Kong stocks, Chinese Online stated that after listing, the funds will be used to develop and improve AI technology to strengthen content creation and distribution capabilities; to build an overseas short drama ecosystem; to strengthen the content ecosystem; to repay some bank loans and other borrowings over the next year; and for working capital and general corporate purposes.