The Case Study On The Application Of Dual-Class Share Structure In Xiaomi Corporation

In recent years,more and more excellent local unicorn companies have chosen to go to the United States or Chinese Hong Kong for listing.In 2018,many excellent unicorn enterprises such as Bilibili,Aiqiyi,Xiaomi,Buy Together and Meituan have listed in the United States and Chinese Hong Kong with dual-class share structure.According to the "2020 China Unicorn Companies Report " released by HengDa Research Institute,as of December 31,2019 there were 162 unicorn companies in China,with a total valuation of 787.03 billion US dollars.In order to attract new economic companies with high market capitalization,it is imperative to build a more mature capital market.When Alibaba,a well-known domestic e-commerce company,chose to list in 2014,it was rejected because it adopted a "partner system" similar to the dual-class share structure,which violated the long-held "one share-one vote" concept of the Hong Kong Stock Exchange.Alibaba finally ran away from the New York Stock Exchange of the United States.At this point,China's top unicorn companies,such as Tencent,Alibaba,JingDong,Baidu and so on,have almost all fled to overseas capital markets.Hong Kong's famous lawyer,Mr.Luo,has also expressed his worries about this phenomenon.Outstanding domestic unicorn enterprises have entered overseas markets one after another.On the one hand,it may lead to the disclosure of core business information due to strict information disclosure requirements abroad,on the other hand,it may also lead to the loss of national assets.Although there are many factors that lead domestic excellent unicorn companies to list abroad,foreign capital markets allow enterprises to adopt dual-class share structure,which is indeed attractive to these enterprises.In order to enhance the inclusiveness of Hong Kong's capital market and attract more high-quality enterprises to list in Hong Kong,the Hong Kong Stock Exchange revised its listing rules in April 2018 to allow enterprises with differentiated voting rights structure to list on Hong Kong's main board.In July of the same year,Xiaomi Corporation listed in Hong Kong with dual-class share structure.Xiaomi Corporation is the first enterprise successfully listed in Hong Kong with dual-class share structure.Therefore,this paper takes the dual-class share structure design of Xiaomi Corporation as the research object,and on the basis of summarizing the research results of domestic and foreign scholars on the dual-class share structure,summarizes and describes the financing process,shareholding and voting rights of Xiaomi Corporation as well as the restrictive measures adopted by Hong Kong capital market to protect external investorson listed companies with dual-class share structure.This paper analyzes the motivation of Xiaomi Corporation 's application of dual-class share structure,the rationality of setting up the dual-class share structure,the potential risks and the implementation effect of the dual-class share structure.In terms of motivation,Xiaomi Corporation set up the dual-class share structure to solve the financing problems of the company on the premise of ensuring the founder's control,in addition,to meet the diversified investment needs of different investors.In terms of the rationality of setting up the dual-class share structure,by reasonably planning the voting rights proportion of super voting rights shareholders,not only the decision-making efficiency of the enterprise is improved,but also the decision-making risks brought by strengthening the control rights of a single shareholder are avoided to a certain extent.In terms of the potential risks of dual-class share structure,the separation of cash rights and control rights leads to the risk that Xiaomi Corporation has actual controllers who use the advantage of control rights to satisfy their personal interests.In addition,actual controllers may also use social network capital to weaken the independence of independent directors and reduce the effectiveness of internal supervision of the company.Incomplete information disclosure system reduces shareholders' sense of security and the attractiveness of the company to investors.In terms of the effect of the implementation of the dual-class share structure,the company has made full use of the advantages of the dual-class share structure,improved the level of corporate governance,ensured the steady implementation of long-term strategy and enhanced the core competitiveness of the enterprise.Through the case analysis of Xiaomi Corporation's dual-class share structure listing,the study found that the advantages and disadvantages of dual-class share structure are very obvious.Through reasonable system design,we can not only give full play to the advantages of dual-class share structure to ensure the control rights of the founder team,to transmit positive signals to the market,to improve the decision-making efficiency of the enterprise and to ensure the steady implementation of the long-term strategy of the enterprise,but also avoid the disadvantages of dual-class share structure such as raising decision-making risks and forming permanent control rights.However,the founder of Xiaomi Corporation has the risk of using social network capital to weaken the substantial independence of independent directors and the problem of incomplete information disclosure in the application process ofdual-class share structure.It should also attract the attention of other enterprises willing to adopt weighted voting rights structure.Only by protecting the legitimate rights and interests of ordinary voting rights shareholders can the system of different rights for the same share be better used and the long-term value of enterprises be enhanced.