Memory inheritor

Chapter 138 Contradictions

After a brief incident, Lin Fangzhe took to the podium and began to give a briefing on the company's operations for the first half of the year.

His presentation lasted for more than half an hour, after which he explained the budget plan for increased R&D investment in the second half of the year on behalf of the company's management team.

Following this explanation, shareholders questioned and debated issues related to cash flow usage, dividend expectations, and R&D risks.

The discussion was quite lively, with some people even being rather sharp, but the language wasn't particularly aggressive and remained within the bounds of rational discussion. Most shareholders simply asked a few questions without making any official statements.

Wei Hongsi thought to himself, "When I go up there later, all the shareholders must not be so polite."

He's just there to be a target. If everyone just gives a few polite comments and then briefly rejects his idea, then he's wasted his time on that stage.

Therefore, some strategy is still necessary. If the shareholders don't react, then we need to find a way to take the initiative.

Wei Hongsi listened attentively to Lin Fangzhe's report and the shareholders' speeches, which he found very helpful. He gained a deeper understanding of the company's current situation, which will be beneficial for his future performance.

This was the first time he had gained a relatively comprehensive understanding of Zhiwei Technology's operations.

Adding to the company's articles of association that I recently reviewed, and considering the company's equity structure, it becomes clear what the fundamental conflict is between Mr. Dai and the shareholders.

Zhiwei Technology has net assets approaching 1000 billion yuan, encompassing core technology patents, hardware production bases, data centers and computing infrastructure, as well as other assets such as the Zhiwei Technology Building. The company achieved revenue of approximately 450 billion yuan in the first half of the year, maintaining its leading growth rate in the industry.

Based on assessments from multiple leading asset appraisal agencies and well-known securities research institutes, Zhiwei Technology's current market valuation is between 2000 billion and 3000 billion yuan.

Zhiwei's shareholders can be roughly divided into three categories.

The first category consists of two current managers. Mr. Dai holds 52% of the shares, and Mr. Xia holds 5%. The latter is currently unable to perform his duties normally.

The second category consists of former senior executives of the company's founding team, including Mr. Li and Mr. Liu, whom Mr. Ji mentioned at noon, as well as Mr. Tai Liqun, who just gave Wei Hongsi a little hard time. There are eight people in total, each holding 3% of the shares, totaling 24%.

The third category consists of investors who entered the company in its early and middle stages. They have never participated in the company's management or operations; there are a total of eight of them, each holding 2% of the shares, for a combined 16%.

In total, Mr. Dai holds 52% of the shares, while the other shareholders hold 45%.

In addition, another 3% of the shares originated from investors who withdrew during the early stages of the company's development. These shares were then used as an option pool, with 1.5% held by Mr. Dai on behalf of the company and the remaining 1.5% held by other shareholders on behalf of the company.

Therefore, at the shareholders' meeting, Mr. Dai could actually represent 53.5% of the voting rights, while the other shareholders held a total of 46.5%.

With Mr. Dai holding more than half of the shares, he has the final say on matters such as personnel appointments and dismissals, financial plan reviews, and business operations.

However, matters requiring special resolutions, such as amendments to the company's articles of association, changes in capital, and equity incentives, must be approved by shareholders representing more than two-thirds of the voting rights. This is not something that Mr. Dai can decide alone.

There are three main conflicts between General Manager Dai and other shareholders.

The first issue is the dispute over increasing R&D investment and demanding cash dividends.

From the company's business strategy perspective, only by continuously increasing investment can we maintain our technological barriers, safeguard our core competitiveness, and ensure our industry position. This is the shared goal of General Manager Dai and the current management team.

However, shareholders believe that the company has ample cash flow and should distribute a large proportion of its profits as dividends. They argue that cutting-edge R&D requires huge investments with uncertain returns, which would ultimately harm shareholders' current interests.

Former senior executives and shareholders of the company inevitably have a sense of being ousted, having lost their sense of belonging to Zhiwei, and therefore focus more on the present. The investors, on the other hand, have a simpler objective: to profit from the very beginning.

Take the project that Wei Hongsi is going to report on, for example. If the company invests 100 million yuan, each shareholder will have to receive 2 to 3 million yuan less, which they will certainly not be willing to do.

Let alone what benefits this project will bring in the future, who knows what Zhiwei's situation will be like then, or what their situation will be like?

Secondly, the conflict between insisting on independent development and cashing out through listing is likely the deepest contradiction between the two sides.

If Zhiwei goes public, the company's core AI technology, data, and business structure will be forced to be disclosed, and it will constantly face short-term performance pressure. It will also be subject to the constraints of the capital market and public shareholders, which is something that Mr. Dai and the current management team absolutely do not want to see.

The shareholders (especially the investor shareholders) believe that only by going public can they realize their profits and secure their gains. With billions in hand, they can relax and not care about the company's future development – ​​this is their ultimate goal.

Some former executives and shareholders may even be hoping to use the IPO to completely change the company's power structure and weaken CEO Dai's absolute power.

Third, there is the dispute over the implementation of equity incentives for senior executives and shareholders' opposition to the dilution of profits.

The company's current senior executives generally do not have equity and do not enjoy company bonuses beyond their salaries. Using option pools to bind core teams and prevent talent loss is a common practice for many companies.

Shareholders argue that while the 3% option pool is small, it still means equity dilution, and future dividends will be diluted. It's like executives taking their salaries but still wanting a share of the shareholders' pie.

These three contradictions are not isolated, but intertwined.

Mr. Dai holds more than half of the shares, and he is unwilling to take the company public, leaving the other shareholders with no recourse. His attempt to implement equity incentives also fails due to a lack of support from the other shareholders.

Regarding the issues of R&D investment and dividends, although Mr. Dai can forcefully pass them, other shareholders can unite to coerce him by linking them to other matters, such as capital changes, major asset disposals, etc.

The current game between the two sides is in a delicate balance, but this balance could be broken at any time.

The shareholders cannot give up their pursuit of maximizing profits, and Mr. Dai and the senior management team do not want to be held back by the shareholders.

After completing this segment, Lin Fangzhe stepped down from the stage and took his seat.

Just as Dai Songquan was about to announce the start of the next agenda item, Tai Liqun raised his hand again: "President Dai, I have something to say."

Wei Hongsi had already stood up and was preparing to go on stage, so he stood still and looked at Tai Liqun.

"Please speak, Mr. Tai," Dai Songquan said calmly.

Tai Liqun smiled and said, "I'm sorry, Mr. Dai, I drank too much tea. I'm getting old, and nature calls."

Then someone else said, "Now that Mr. Tai has mentioned it, I'd also like to use the convenience."

Someone else said, "Oh dear, I'm craving a cigarette."

Dai Songquan smiled and said, "Alright, let's take a break and everyone can use the restroom."

Wei Hongsi found it somewhat amusing; was this an attempt to teach him a lesson that would eventually be exhausted?