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 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 raked in over 33 million users; on the other side, persistent “burning of cash” has resulted in performance losses and mounting financial pressure. During the period of expanding new businesses and facing performance headwinds, Chinese Online has submitted its filing to the Hong Kong Stock Exchange, planning to list in Hong Kong to “raise fresh 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 platform for ‘AI + IP + short dramas.’” In 2021, Chinese Online became one of the first batches of companies in China that both produced and distributed short dramas, and it soon set its sights on overseas short drama markets. In August 2022, Chinese Online’s subsidiary CMS (Maple Leaf Interactive) launched a global short drama app—ReelShort. Later, CMS switched to independent operation, while Chinese Online still holds a stake.

From 2023 to 2024, competition in China’s short drama market intensified. Chinese Online’s related businesses declined, prompting it to shift the focus of its domestic short drama operations from a to-C model to high-end short dramas and a to-B model, prioritizing collaboration with leading third-party platforms supported by internet giants. Overseas, Chinese Online launched two major platforms in succession—Sereal and UniReel—to explore short drama markets in overseas regions such as Southeast Asia and Japan. In April 2025, Chinese Online launched its flagship overseas short drama business, FlareFlow. After FlareFlow launched, it quickly achieved a surge in popularity, reaching the No. 1 spot on both the free entertainment app charts on Google Play in the US and the App Store at its highest point. As of February 18, 2026, cumulative registered users have exceeded 33 million.

Behind Chinese Online’s “high traffic” overseas short drama platforms is “high cost” and “high marketing.” In its Hong Kong stock listing application, Chinese Online candidly admitted that the company’s overall business model heavily depends on distribution costs and marketing expenses. In the first three quarters of 2023, 2024, and 2025, the company’s distribution costs were 5.64 billion yuan, 4.72 billion yuan, and 3.08 billion yuan, respectively, accounting for 72.3%, 60.6%, and 46.4% of cost of sales.

Under continued “cash burn,” Chinese Online finds itself in a bind of “increasing revenue without increasing profit.” In late January 2026, its performance forecast released by Chinese Online indicated that the company may face “two consecutive years of losses.” For fiscal year 2025, the company’s net profit attributable to shareholders is expected to be a loss of 5.8 billion yuan to 7 billion yuan, with losses expanding year over year by 139% to 188%. The company attributed the losses to expanding the scale of its overseas business and increasing promotional investment in its overseas short drama operations.

While profit performance faces pressure, the company’s debt scale has also continued to rise. According to data from Tushare, 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 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 liabilities were 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 and enhancing its overall competitive strength. On March 1, 2026, the company submitted its filing to the Hong Kong Stock Exchange. Although in its performance forecast for fiscal year 2025 the company stated that its investment in overseas business expansion is intended for long-term planning, given its deteriorating financial performance, the market interpreted the plan to list in Hong Kong as raising “fresh capital” to “shore up the balance sheet.”

In its Hong Kong stock listing application, Chinese Online stated that after the 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 consolidate the content ecosystem; to repay part of its bank and other borrowings over the next year; and to use funds for working capital and general corporate purposes.