From Heaven to Hell: Why Did NetEase's NASDAQ Listing Nearly Cost Ding Lei Everything?
Key Takeaways
- The capital market is an amplifier; it can magnify your success, but it can also magnify your failure. Never lose yourself at the peak of success.
- During a systemic crisis, a founder's cash flow management and survival instinct are more important than any grand strategy.
- The temptation to give up is greatest in the most difficult times. But only by persevering do you have a chance to see the light at the end of the tunnel.
Prologue: The Bell Rings, Then the Fall
June 30, 2000, New York City, NASDAQ Stock Exchange.
A 29-year-old Ding Lei, dressed in a sharp suit, stood spiritedly at the center of the world. As the opening bell rang, NetEase was officially listed for trading under the ticker NTES.
That moment was the brightest in his three years as an entrepreneur. From the 8-square-meter room in Guangzhou to the top hall of global capital markets, Ding Lei had created a miracle for the Chinese internet with his technology and persistence.
However, before Ding Lei and his team could enjoy their success, an unprecedented disaster was quietly unfolding.
Just months before NetEase's IPO, the tech-heavy NASDAQ index began a sudden, precipitous decline. The global dot-com bubble burst crisis had officially begun.
NetEase, unfortunately, became a classic example of being "born at the wrong time" in this storm.
On the day of its listing, NetEase's stock price fell below its issue price of $17. In the following months, it went into a freefall.
Ding Lei's personal wealth, like numbers on paper, evaporated at an astonishing rate every day. He quickly fell from a celebrated "internet nouveau riche" to a byword for "failure."
Act I: "I Want to Sell the Company"
By 2001, the situation had worsened.
NetEase's stock price had plummeted to a desperate $0.60. The company's market capitalization shrank from $470 million at its IPO to less than $20 million, which was even less than the cash on its books.
A more fatal blow came from a financial scandal. Accused of "accounting misstatements," NASDAQ announced in September 2001 that it was suspending trading of NetEase.
This meant that NetEase's stock had become a pile of untradeable "waste paper."
Inside the company, panic spread, and employee morale hit rock bottom. The passion and dreams of the past were shattered by the harsh reality.
During those days, Ding Lei was under pressure that ordinary people could not imagine. Every day he woke up to a flood of bad news and endless losses.
For the first time, he began to doubt himself.
"Was I really wrong? Am I not cut out to run a company?" he asked himself repeatedly, sitting alone in the empty office late at night.
A huge sense of despair led him to consider giving up.
"I want to sell the company," he said one day to his core executives.
This was not just a business decision but a declaration of "surrender." He contacted many potential buyers on the market, offering a price so low it was almost unbelievable.
However, in that "winter" of the internet, everyone was terrified of anything related to the web. No one dared to take over this "mess."
"I can't even sell it." This was the last straw that broke Ding Lei's spirit. He locked himself at home for days, unwilling to see anyone.
Act II: Gaming, the Last "Lifeline"
Just as Ding Lei was on the verge of a breakdown, something pulled him back from the abyss of despair.
He discovered that while the capital market was in turmoil, one type of internet business seemed completely unaffected and was even growing against the trend—online gaming.
At that time, a Korean online game called "The Stone Age" was extremely popular in the Chinese market. Players would line up at internet cafes to buy game point cards.
This phenomenon rekindled a spark in Ding Lei's heart.
He keenly realized that in times of economic downturn, people's demand for entertainment actually increases. And the "pay-by-time" model of online games could bring a stable and continuous cash flow to the company.
For the extremely "anemic" NetEase at the time, this was like a final "lifeline."
"Let's make our own online game!" Ding Lei made a do-or-die decision.
He invested all the company's remaining funds into in-house game development. He personally served as the project manager, leading a young development team, and worked day and night on code and art design.
This time, he was betting his entire fortune and NetEase's last breath.
Epilogue: From $0.60 to China's Richest Man
In December 2001, NetEase's first self-developed large-scale online role-playing game, "Westward Journey Online," was officially launched.
This game, full of rich Chinese style, quickly won the love of players upon its release. For the first time, NetEase's servers were "in the red" due to too many players.
The huge success of the game brought a steady stream of cash flow to NetEase, and the company's financial situation improved rapidly.
In January 2002, after a suspension of more than four months, NetEase successfully resumed trading on NASDAQ.
Supported by the strong gaming business, NetEase's stock price began a miraculous comeback. From less than $1 upon resuming trading, it soared.
By October 2003, NetEase's stock price had miraculously risen to $70. With his company shares, Ding Lei topped the Forbes China Rich List with a net worth of 7.6 billion RMB, becoming the youngest "richest man in China" at the time.
From the brink of bankruptcy to the richest man in China, it took Ding Lei less than three years.
This experience, from hell to heaven, became the most profound mark on Ding Lei's life. It taught him the cruelty of capital and helped him find NetEase's most solid "growth engine" for the next decade.
More importantly, it forged Ding Lei's "unflappable" character. He no longer easily believed in external praise, nor was he easily swayed by external doubts. He only believed that a good product that could create value for users and bring cash flow to the company was the most powerful weapon against all uncertainty.