Research On The Motivation And Performance Of Pinduoduo Implementing Dual-class Share Structure

Internet companies require a large amount of capital for their development,and due to their long profit cycle,they often go through several rounds of equity financing in the early stages,which may dilute the founder’s equity and jeopardize their control over the company.They may also face the risk of hostile takeovers.Additionally,unlike traditional companies,the human capital represented by the founders is crucial to the development of internet companies.To secure funding while safeguarding the founder’s control,many companies choose to adopt a dual-class share structure.Early on,China prohibited companies from going public with a dual-class share structure,leading some companies to go public in the United States,resulting in the loss of many excellent listed companies in the Chinese capital market.With the continuous development of China’s capital market,the Science and Technology Innovation Board(STAR Market)has allowed eligible companies to choose a dual-class share structure for listing.Against this background,more companies are expected to adopt this structure in the future.In view of this,this thesis takes Pinduoduo,a company that has implemented a dual-class share structure,as the research object,and uses case study method,comparative analysis method,and other research methods to study the motives and performance of implementing a dual-class share structure.First,the thesis elaborates on the basic concept and relevant theories of dual-class share structure.Then,it studies the development history,financing history,and implementation path of the dual-class share structure in the case company Pinduoduo,and analyzes the motives for implementing this share structure.Next,the thesis explores the impact path of the dual-class share structure on Pinduoduo’s performance,and analyzes the company’s performance under this structure from three aspects: financial performance,non-financial performance,and market reaction.The potential risks of the dual-class share structure are also identified.Finally,conclusions are drawn,and relevant suggestions are proposed.Through the research,the thesis concludes that Pinduoduo chose to adopt a dual-class share structure to expand financing while safeguarding founder’s control,reducing risks associated with Variable Interest Entity(VIE)structure,effectively safeguarding human capital,and achieving long-term corporate development.The dual-class share structure to some extent reduces Pinduoduo’s short-term performance,but has a positive impact on long-term performance,although this impact is gradually slowing down.The research also reveals risks such as potential imbalance in internal and external supervision mechanisms,management’s excessive investment,and infringement of the interests of minority shareholders.Based on these findings,targeted suggestions are proposed,including strengthening the company’s supervision mechanisms,improving the investment efficiency of management,and enhancing the protection mechanisms for minority shareholders.Through this research,it is hoped to enrich and improve the relevant theoretical research on dual-class share structure in China,and provide some reference for Chinese companies that have adopted or plan to adopt this share structure,and contribute to the improvement of laws and regulations in China’s capital market.