A Study On The Motivation And Influence Of Dual-Class Share Structure In Chinese Internet Companies

With the rapid development of China’s Internet industry and the previous restrictions on "same shares with different rights" in Chinese capital market,a large number of Chinese Internet companies could only choose to go public in the United States around 2014.In recent years,my Chinese capital market has continued to explore supply-side reforms.In 2018,the Hong Kong Stock Exchange and Chinese Science and Technology Innovation Board announced that they would try to accept companies with the same-share but different rights structure.In 2020,it will implement a dual-shareholding structure.The successful listing on the Science and Technology Innovation Board filled the gap of "same shares with different rights" in A shares.The dual-shareholding structure has been used in family businesses and news media from the beginning and now become the mainstream choice of the Internet industry with economy changes.As we all know,the Internet industry has sufficient fixed assets and its asset-light nature restricts the financing channels of the Internet industry.If the same equity system is used,private equity financing will inevitably bring about dilution or even change of corporate control,which is highly dependent on their founders’ abilities,so a large number of Internet companies choose to resolve the contradiction between financing and control rights with the help of dual equity structure.Based on the research of this phenomenon,to explore the role and significance of the dual ownership structure for my country’s Internet companies,which has important practical significance for the progress of my country’s enterprises and the reform and perfection of the capital market.This article first defines the core concept,and then summarizes the theoretical basis of the dual-shareholding structure,and integrates the previous studies,mainly from the perspective of the implementation motivation and implementation advantages and disadvantages of the dual-shareholding structure.Selecting the dark horse of e-commerce Pinduoduo as a research case,starting from the growth process and financing history of Pinduoduo to briefly introduct to Pinduoduo,which has quickly emerged in just a few years and then turns to the internal and external motivations of the governance structure.Then it analyzes the effect of Pinduoduo’s dual-shareholding system from the financial and non-financial perspectives,and exposes the risks that the dual-shareholding system brings to Pinduoduo.Combining the theoretical analysis and case study of the article,it can be concluded that the dual equity structure,an innovative equity structure,satisfies the actual needs of the development of Internet companies.While alleviating the financing difficulties of Internet companies,it effectively protects the founder’s Control rights.The founders who have control rights have the space to give full play to their human capital,to maximize their technical and business management skills,and bring a series of positive effects from financial and non-financial perspectives.At the same time,the dual-shareholding structure also has brought problems and risks to Internet companies,such as information disclosure,protection of the rights and interests of small and medium shareholders and other related issues.This article has enriched the relevant research on the dual-shareholding structure,and provided some guidance for the development of Internet companies and further reform of Chinese capital market.