Royole Frozen
We have mentioned flexible OLED panel producer Royole (pvt) a number of times over the years, first as the winner in the race to produce a commercial foldable OLED display (although it was a developer’s kit), beating small panel OLED leader Samsung Display (pvt) and Samsung Electronics (005930.KS), who now dominate the space, and later as the company repeatedly touted itself as the leader in China’s foldable OLED development’ and its leader as a genius who beat the leaders at their own game. The company was able to raise over $1.1b from Chinese investors, venture firms and regional and state-owned banks and filed an S-1 with the SEC for an IPO in 2020 at a valuation of ~$6b. Unfortunately the documents seem to indicate that very few of the company’s foldable phones had actually been sold and raised questions about the company’s Gen 6 flexible OLED production line, said to have cost a fraction of typical OLED fab costs due to its ‘unique’ processes, which eventually caused IPO plans to be scrapped.
The company continued its development plans with the release of a 2nd generation foldable later in 2020 and announced plans to build another flexible OLED fab ($2.4b) in Qingdao in cooperation with a number of local state-run organizations and file papers for listing on the Chinese STAR board where requirements were a bit less onerous. Unfortunately the company did not meet those requirements and the STAR IPO was rejected as rumors of missed payments to employees and suppliers began to surface. There was considerable talk of potential bailout partners for a few months late last year and early this year but by May Royole management issued a notice to many employees requesting that they take long (3 month) vacations, which did little but to stimulate workers to protest to the local government. Some workers were paid missing wages by the local government but it seems the handwriting was already on the wall and no bailout appeared, leaving creditors hanging as to when or if they were to get paid as the company continued to flounder.
Recently a number of those creditors filed redress documents against the company and further investigation led to the discovery that there were a number of pending disputes between the company and construction companies, service providers, public relations firms, and advertising companies, which forced a review of the company’s standing by the courts. As of the end of last month the courts ruled in favor of the plaintiffs and froze what came to $5.3m in assets held by a company holding entity, essentially preventing the company from access to any capital, potentially signaling the end to the company’s operations, at least until the courts can sort out the complete asset and creditor lists.
As we had noted a number of times, we have doubted Royole’s abilities from the start, as we could find few who had any customer relationships with the company, and once we were able to see paperwork from the IPO filings, it became obvious that there had been considerable speculation as to the company’s prospects when early funding was made, especially around the time of the aborted STAR listing, which placed a $2+b valuation on the company. It was not that we doubted the ability of a small company to find a shorter path to building a better mousetrap than its infinitely larger brethren, but that the massive hype behind the company’s founder’s ability to create a process that cost a small percentage of the manufacturing cost of flexible OLED production, without any details ever being disclosed, seemed a bit of artifice, which it seems it was. While we don’t know what the courts will ultimately decide, we expect Royole will likely be shut down, a sad day for unicorns everywhere given the hopes originally placed on the company’s success, but sooner or later Royole had to pay the piper….
The company continued its development plans with the release of a 2nd generation foldable later in 2020 and announced plans to build another flexible OLED fab ($2.4b) in Qingdao in cooperation with a number of local state-run organizations and file papers for listing on the Chinese STAR board where requirements were a bit less onerous. Unfortunately the company did not meet those requirements and the STAR IPO was rejected as rumors of missed payments to employees and suppliers began to surface. There was considerable talk of potential bailout partners for a few months late last year and early this year but by May Royole management issued a notice to many employees requesting that they take long (3 month) vacations, which did little but to stimulate workers to protest to the local government. Some workers were paid missing wages by the local government but it seems the handwriting was already on the wall and no bailout appeared, leaving creditors hanging as to when or if they were to get paid as the company continued to flounder.
Recently a number of those creditors filed redress documents against the company and further investigation led to the discovery that there were a number of pending disputes between the company and construction companies, service providers, public relations firms, and advertising companies, which forced a review of the company’s standing by the courts. As of the end of last month the courts ruled in favor of the plaintiffs and froze what came to $5.3m in assets held by a company holding entity, essentially preventing the company from access to any capital, potentially signaling the end to the company’s operations, at least until the courts can sort out the complete asset and creditor lists.
As we had noted a number of times, we have doubted Royole’s abilities from the start, as we could find few who had any customer relationships with the company, and once we were able to see paperwork from the IPO filings, it became obvious that there had been considerable speculation as to the company’s prospects when early funding was made, especially around the time of the aborted STAR listing, which placed a $2+b valuation on the company. It was not that we doubted the ability of a small company to find a shorter path to building a better mousetrap than its infinitely larger brethren, but that the massive hype behind the company’s founder’s ability to create a process that cost a small percentage of the manufacturing cost of flexible OLED production, without any details ever being disclosed, seemed a bit of artifice, which it seems it was. While we don’t know what the courts will ultimately decide, we expect Royole will likely be shut down, a sad day for unicorns everywhere given the hopes originally placed on the company’s success, but sooner or later Royole had to pay the piper….
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