Jordan Sports has seen a significant increase in its accounts receivable. Date: 2014-06-25 09:17
Before the resumption of its IPO, Jordan Sports and Birds were both promoted by the market as the most anticipated initial public offerings (IPOs) in 2014. Guiren Bird Co., Ltd. successfully listed on the A-share market on January 24, 2014. Among the 27 companies competing for the second batch of new shares that year, Jordan Sports was also among them, aiming to make another attempt at going public or becoming the second sports apparel brand to land on the A-shares.
In recent new share issues, Noble Bird fell below its issue price of 10.60 yuan on April 28, reaching a low of 10.51 yuan, becoming the first new stock to break. Compared to Noble Bird’s struggles, can Jordan Sports manage to succeed in its IPO and meet its fundraising target of 1.064 billion yuan?
A major obstacle for Jordan Sports' listing is the controversy surrounding its reputation. The company became widely known for the 2012 lawsuit involving Michael Jordan, a basketball legend, who accused Jordan Sports of unauthorized use of his name and image. This legal dispute raised concerns about the company's brand legitimacy and may have contributed to the delay in its IPO plans.
On February 23, 2012, Michael Jordan filed a lawsuit against Jordan Sports in a Chinese court, claiming that the company used his name without permission, including his jersey number 23 and even his child’s name in business activities. He stated that the purpose of the lawsuit was to protect his personal identity and brand.
In Jordan Sports’ prospectus, trademark and trade name risks are highlighted as the top risk factor. According to the document, the company holds the rights to the "Jordan" and "Qiaodan" trademarks, along with corresponding graphic marks. Over the years, it has registered several defensive trademarks globally to safeguard its intellectual property and brand identity.
Among these trademarks are names like Jeffrey Jordan, Marcus Jordan, JIEFULIQIAODAN, and MAKUSIQIAODAN — all of which closely resemble the names of Michael Jordan’s two sons. In response, Jordan Sports emphasized that it legally owns the trademarks and that they do not infringe on Nike’s MICHAEL JORDAN trademark in China. It claims that the names are distinct enough to avoid consumer confusion.
In 2013, there was a role reversal when Jordan Sports sued Michael Jordan for what it claimed were malicious lawsuits. Both sides stood by their positions, leading to further legal battles.
The most direct impact of these lawsuits is the potential delay in Jordan Sports’ IPO. It is clear that any suspension of the offering could significantly affect the company’s financial strategy.
At the same time, the domestic sports apparel industry is facing a challenging period. After years of rapid growth, many brands are now encountering stagnation, declining performance, and inventory issues. For Jordan Sports, this is an especially tough time in the winter of the sports apparel market.
Jordan Sports primarily operates through a dealer-based sales model. While this model allows the company to receive cash upfront, it also involves granting credit to dealers, allowing them to purchase goods within certain limits and repay later. This practice has led to a sharp rise in accounts receivable, raising concerns about liquidity and operational stability.
According to the prospectus, accounts receivable as a percentage of current assets were 33.29% as of June 30, 2011, 20.89% at the end of 2009, and 30.49% at the end of 2008. These figures indicate a growing trend in receivables, which could put pressure on the company’s cash flow.
To address these challenges, Jordan Sports plans to raise 1.06 billion yuan on the Shanghai Stock Exchange for projects such as expanding its shoe production base and building direct-operated stores. The strategy involves opening 27 strategic stores in first-tier cities to serve as hubs for expanding its retail network through dealer stores. This approach aims to strengthen brand control, improve sales performance, and better manage dealer relationships.
In summary, Jordan Sports faces a dual challenge: ongoing legal disputes over brand rights and a struggling industry environment. To move forward, the company must focus on strengthening its brand value, reducing inventory, and investing more in product innovation. These steps will be crucial for its long-term success and ability to navigate the current market difficulties.
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