On the evening of November 21, Douyu, a US-listed company, issued an announcement. The company learned on November 20 that Mr. Chen Shaojie, CEO and chairman of the board of directors, was arrested by Chengdu police on or around November 16. The company has not received any formal notification of the investigation into Mr. Chen or the reasons for Mr. Chen’s apparent arrest. Mr. Chen's continued detention and any subsequent related legal proceedings and enforcement actions against relevant parties could have a material adverse effect on the Company's reputation, business and results of operations.
Affected by the news, Douyu's stock price fell more than 7% before the market opened. After the opening, the stock price decline narrowed, and by the close, the stock price fell nearly 6%.
As early as early November, media reported that Douyu Chairman and CEO Chen Shaojie had lost contact for nearly three weeks. Douyu confirmed the news. There have been speculations in the game live streaming industry that Chen Shaojie’s loss of contact may be related to the gambling involvement of the “Changsha Village Death Squadron” in the Douyu live broadcast room.
Public information shows that the "Changsha Rural Death Squadron" used Douyu's various lottery rules to conduct suspected gambling activities. Douyu users can participate in virtual currency draws worth 1,000 yuan to tens of thousands of yuan by purchasing designated props within a period of time. "Changsha Rural Death Squadron" then purchases virtual currency in equal amounts through third-party channels such as Alipay or "Backpack Merchant" to cash out the bonus. According to statistics from a third-party live broadcast data platform, the revenue of "Changsha Rural Death Squadron" in 2020 was as high as 177 million yuan, with a single-day turnover of 13.1767 million yuan.
Currently, Douyu has not released its third-quarter financial report. Judging from the second quarter financial report, Douyu’s mobile monthly active users and quarterly average number of paying users have continued to decline for multiple quarters. The market has entered stock competition and traffic growth bottlenecks may be one of the reasons why leading live streaming platforms have refused to change despite repeated admonitions.
The sluggish performance is also reflected in the company's stock price. As of the latest, Douyu's stock price is trading at US$0.93/ADS, with a market value of only about US$300 million, down more than 90% from its 2021 high. On October 25, Douyu announced that it received a written notice from the staff of the Nasdaq Listing Qualification Department. For the past 30 consecutive business days, Douyu's closing price has been lower than the minimum bid price requirement of $1 per share stipulated in the Nasdaq listing rules. The company will have a 180-day compliance period to re-comply with the Nasdaq listing rules on or before April 22, 2024.