The Impact Of Ucloud’s Introduction Of Double-tier Equity Structure On Corporate Performance

With the two-tier shareholding structure formally introduced in the domestic capital market,this special share structure with equal cash flow rights but different voting rights,which helps protect the control of the founders over the company,has received great attention from investors.2020,the first cloud computing company in China to adopt a two-tier shareholding structure,Ucloud,was formally listed in the Science and Technology.This dissertation reviewed the annual reports of Ucloud from 2016 to 2021,the third quarterly report for 2022,prospectuses,articles of association and data publicly available on other financial websites to explore the affect of a two-tier structure of shareholding on corporate performance.By reviewing the relevant literature on the impact of a two-tier shareholding structure on financial performance as well as non-financial performance,this dissertation analyses the case of Ucloud’s introduction of a two-tier shareholding structure in its IPO on the Science and Technology Innovation Board based on the principles of control,principal-agent principle and information asymmetry.The study also examines the impact of the two-tier shareholding structure on the financial and non-financial performance of the company and then proposes specific countermeasures.The study found that: Firstly,although the financial performance after listing was less than satisfactory,the short-term performance in the initial period of listing was good,with the turnover efficiency of asset better than other companies in the same industry,and the company has greater potential for future development as the larger investment in data centre projects gradually yields returns.Secondly,the two-tier shareholding structure safeguards the founder’s absolute control of the company,help the founders to make use of their professional human capital and guide companies to continuously improve their scientific and innovative production and also to decrease their representation expenses.Thirdly,since the implementation of the two-tier shareholding structure in Ucloud,many provisions have been made in terms of internal governance and special voting rights governance,but there is still an infringement of the interests of small and medium investors,internal regulatory failure and voting rights abuse.To avoid the risks,this dissertation recommends the establishment of the following solutions and recommendations: in the financial aspect,firstly,to reduce operating costs and increase gross profit margins,secondly,to set a performance floor and reserve a margin of safety,and thirdly,to improve the sunset clause to enhance operating performance;in the non-financial aspect,to strictly formulate an information disclosure system,to establish a special voting rights abuse penalty mechanism,and also robust litigation mechanism for minority investors.