Why Zijie跳动 (ByteDance) Remains Unlisted: A Deep Dive into Zhang Yiming's Control
Today, we'll explore why ByteDance, the parent company of TikTok and Douyin, hasn't gone public. While surface-level explanations like regulatory hurdles and political risks exist, the underlying reason lies in Zhang Yiming's strategic pursuit of unwavering control. This article will analyze the issue from multiple angles, revealing the true reasons behind ByteDance's IPO delay.
External Factors: Stubbornness and Audit Policies
While seemingly reasonable, attributing ByteDance's lack of listing solely to a stubborn stance or stringent audit policies is insufficient. These factors serve more as convenient excuses than the core drivers behind Zhang Yiming's decision. The global market has warmed up and many investors have sold stocks, so waiting is not the issue.
Internal Structure: Zhang Yiming's Power Control Strategy
The key to understanding ByteDance's IPO status lies in Zhang Yiming's deliberate strategy to maintain control over the company. This involves designing a specific company structure that safeguards his power, even without a majority shareholding. Comparing ByteDance to companies like Alibaba and Xiaomi highlights how listing and management can lead to a loss of control.
Debunking Common Explanations for IPO Delay
Valuation Targets Not Achieved
The argument that ByteDance's valuation target hasn't been met doesn't hold up. While a peak valuation exceeding $500 billion was anticipated, market fluctuations have lowered expectations. The question is why not list TikTok or other platforms individually, as Alibaba has done with its various entities?
Audit Regulations and Geopolitical Risks
While concerns about Chinese and US audit regulations and the US's scrutiny of TikTok are valid, they aren't insurmountable obstacles. Other leading Chinese tech companies like Alibaba, Pinduoduo, and JD.com have navigated similar challenges and successfully listed in the US and Hong Kong. Therefore, it's not about the ability to list but about Zhang Yiming's ability to maintain control after listing.
Zhang Yiming's Core Strategy: Maintaining Control
Zhang Yiming's primary concern isn't just growing the company, but preserving his control. He doesn't want to list the company under the existing structure, which could potentially weaken his influence due to the dynamics of the board and voting structure.
Strategies for Maintaining Control:
Zhang Yiming employs several strategies to maintain control despite a relatively low shareholding:
1. Board of Directors Arrangement: Vaulting Control
Zhang Yiming strategically controls the board of directors by ensuring that a significant portion (three out of five to seven seats) is held by the founding team. This arrangement allows the team to maintain control even when investors hold a majority of the shares.
* **Voting Control:** This principle emphasizes that control lies in leading the vote, not necessarily holding the most shares. The founder can control the vote through board of directors, voting agreements, and company governance mechanisms.
* **Example:** If the founder (Zhang) holds 18% shares, investor A holds 25%, and investor B holds 22%, Zhang can still maintain control. This is done by securing the right to nominate and appoint a specific number of seats on the board of directors. For instance, out of a five-person board, Zhang nominates three, and the investors nominate the remaining two.
2. Split-Layer Holding Stock and Offshore Structure
ByteDance uses a complex, multi-layered holding structure with its parent company located in the Cayman Islands. This involves a chain of entities across various jurisdictions (Cayman, Hong Kong, BVI, mainland China). Investors typically invest in the holding companies rather than the operating entities.
* **VIE (Variable Interest Entity) Structure:** ByteDance uses a VIE structure, common among Chinese tech companies seeking US funding. Foreign capital indirectly gains profit and control rights through contracts, without directly holding shares. Investors have a set of contracts for profit and share, but do not participate in the management. Zhang Yiming maintains control through the top-level holding body.
3. Voting Agreements
Instead of relying on a dual-class share structure (which can attract scrutiny), Zhang Yiming opts for voting agreements. This means consolidating voting rights within the founder's group, even without altering the formal share structure. This achieves control without the potentially negative perception of a "dictatorial" founder.
Lessons from Other Chinese Tech Giants
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Alibaba: Ma Yun lost control after the dismantling of the partner system due to regulatory intervention. His influence waned, and the board is no longer controlled by the founders.
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Xiaomi: Despite Lei Jun's dual-class equity structure, the company still faces market pressures and external oversight, leading to a balance between the founder's desires and the needs of the market and institutions.
Conclusion: Power Over Growth
Zhang Yiming prioritizes maintaining control over rapid growth and public listing. His focus is on creating a management plan that secures his power while allowing the enterprise to flourish. The future of ByteDance hinges on its ability to devise a governance structure that balances power and growth. This highlights the intricate relationship between corporate structure and power dynamics in the world of business.