Reborn: Billionaire in College

Chapter 230 Prelude to IPO: Building a large red chip structure
The group buying market presents a rather funny situation.

Lashou, Wowotuan, 24quan and Nuomi are fighting each other, and Meituan and Renrengou are also having a lot of fun fighting each other.

The Renren Iron Army is quite aggressive. Having been nurtured with the wolf culture for a long time, they are not afraid at all when facing the provocation of their opponents.

Especially Chen Pingjiang's apparent attitude, showing that he was willing to cover the bottom.

These two companies have a big fight every three days and a small fight every two days.

What makes Gan Jiawei depressed is that he suspects that Renrengou’s door-to-door sales have been specially practiced. Otherwise, why do they always lose unless they have an absolute advantage in numbers?

In the end, no one called the police for minor frictions.

Because no matter who hits whom, as long as they fight back, they will be taken away together.

"I've never encountered such a damaging company in my fucking sales career." Gan Jiawei cursed angrily.

To be honest, his fledgling team is no match for Renrengou.

It’s outrageous that everyone is buying and selling at such a low price.

Every stall set up by Meituan’s ground promotion is always accompanied by a stall set up by Renrengou’s ground promotion.

Meituan said, if you can’t afford to offend me, just hide away, right?

Sorry, I can’t get away once I’m stuck with you.

Renrengou doesn’t have door-to-door promotion anymore. I’ll go wherever you go.

In the end, Meituan’s sales staff was so angry that they threw up their arms and wanted to fight. When Renrengou saw that the situation was not right, they immediately called for help.

…………

After Chen Pingjiang handed the group buying matter to Gao Songbin, he returned to the company and convened this year's Renren board meeting.

The meeting was of a very high standard, with the heads of the Asia-Pacific regions of three investment institutions, namely Sequoia China, IDG, and Singapore's sovereign wealth fund Temasek, all attending.

In the conference room, as soon as Shen Nanpeng and Xiong Xiaoge met, their faces changed and they smelled a hint of something unusual.

Before Chen Pingjiang arrived at the meeting room, Shen Nanpeng leaned over and said, "I didn't expect Chen Pingjiang to call us all over. It looks like it's a big deal."

Xiong Xiaoge nodded: "I guess we should prepare for the listing."

"I think so too. Otherwise, why would they call us here with such great force?"

In the past two years, Renren has grown rapidly and has already met the requirements for listing on the Nasdaq.

Renren has 1.75 million registered users, Weibo also performs well, and social games and online games also have considerable revenue.

There has long been strong calls from the outside world for Renren to go public.

At all levels, Renren has met the requirements for listing on Nasdaq.

When the Asia-Pacific chairman of Temasek arrived, the ideas of Shen Nanpeng and Xiong Xiaoge were further confirmed.

After a while, Chen Pingjiang and Guan Yifeng hurried to the meeting room.

It had been a long time since we last met. After a while of greeting, Chen Pingjiang spoke.

"We are all old acquaintances now, so I won't hide it anymore. It's time to let Renren go public."

When these words were spoken, not only the investors were beaming with joy, but the other directors present were also quite excited.

A feast of wealth is about to begin.

"In fact, I wanted to list on the A-share and Hong Kong stock markets, but considering the actual interests of all shareholders, I decided to list on Nasdaq yesterday."

Capital is always profit-seeking. Objectively speaking, the money raised through Nasdaq listings is indeed much more than that of the A-share and Hong Kong stocks. This is why so many Chinese stocks are flocking to them.

Chen Pingjiang continued, "Due to Nasdaq's regulatory restrictions, it is difficult for Renren to be listed directly there. Before going public, we need to design a large red chip structure. I have arranged for someone to set up a company in the Cayman Islands, and also registered several companies in the BVI (Virgin Islands). This time I called everyone here because I want everyone to enter the same BVI company together."

As soon as Chen Pingjiang finished speaking, the faces of the heads of the three major investment institutions present changed. The one who changed the most was Shen Nanpeng, because Sequoia China is actually the second largest shareholder of Renren.

Temasek's chairman, Li Shuhao, frowned: "Mr. Chen, you are kidnapping us. In fact, if you want to stabilize the control, we can cooperate and sign a concerted action agreement. There is no need to go through so much trouble, right?"

Chen Pingjiang smiled and shook his head: "We are in the same BVI company. In the future, equity transactions can be conducted in this company. It doesn't need to be so troublesome, right?"

Xiong Xiaoge and Li Shuhao both turned their eyes to Shen Nanpeng, wanting to hear his opinion. After all, he was the boss of the investment institution present.

However, what people did not expect was that Shen Nanpeng smiled very straightforwardly: "Facts have proved that Renren has made rapid progress under the leadership of Mr. Chen. You are the only suitable captain. Sequoia China is willing to join your BVI company."

Wow, Xiong Xiaoge and Li Shuhao finally understood it. It turns out that the two of them had actually discussed it privately, otherwise why would Shen Nanpeng agree so readily.

When the eldest brother led the rebellion, Xiong Xiaoge and Li Shuhao no longer had any capital and could only nod their heads with their noses held high.

Due to Nasdaq's supervision, domestic companies must adopt a large or small red chip structure when listing on the U.S. stock market.

The way to do this is to first set up a Cayman company in the tax haven of the Cayman Islands, which is an offshore company in the traditional sense.

Set up several BVI companies on the Cayman Islands, each with a small stake to isolate risks, and then have these BVI companies control the Cayman Islands company. A more sophisticated approach is to set up a family trust and a charitable foundation on the BVI, but Chen Pingjiang doesn't need this for the time being.

This offshore company established in the Cayman Islands will then control a Hong Kong company, which will then control the mainland company.

The benefits of this setup are, first, it complies with Nasdaq listing requirements, and second, it avoids taxes.

The domestic tax rate for foreign investment is 10%, but the tax rate for Hong Kong companies is 5%. Just by setting up a Hong Kong company, you can save 5% of taxes.

Such an equity structure is called a big red chip structure.

But it is not so simple for Renren, because Renren is a social and new media industry, involving a large amount of user data and personal privacy. According to regulatory requirements, Hong Kong companies cannot directly hold shares in Renren.

Therefore, a separate VIE structure must be arranged.

The specific way of playing is that the Hong Kong company does not directly hold shares in Renren.com, but instead establishes a wholly foreign-owned enterprise in China, and then lets this wholly foreign-owned enterprise sign a large number of agreements with Renren.com, such as equity pledge, exclusive service agreement, and equity incentive agreement, in order to actually control Renren.com.

This wholly foreign-owned enterprise located in China can obtain all the profits of Renren.com and also has control over Renren.com.

Finally, the equity structure is roughly as follows:
BVI (multiple companies) - Cayman Islands companies - Hong Kong companies - domestic and foreign wholly foreign-owned enterprises - Renren.com.

After completing this set of structures, Renren initially met the requirements for listing on NASDAQ while maximizing reasonable tax avoidance.

If the founder of a listed company wants to reduce his holdings and cash out, he must issue an announcement in the A-share market, and there is a strict deadline. This is why many companies suddenly distribute dividends before the stock is listed. Because after the dividend is distributed, it becomes a debt, and the debt will be repaid after financing.

But it is different in the United States. As long as the reduction in holdings does not exceed 5%, no announcement is required.

In addition, Chen Pingjiang also divided the stocks into AB shares again.

A类股票1股比1股，1股只有1股的表决权，B类股票1股比10股。

If Chen Pingjiang holds 10% of Class B shares, he will have 100% of the voting rights of Renren, and there is no possibility for anyone else to control Renren.

The founding shareholders hold Class B shares of the company, and when diluting the financing, they give investors Class A shares. Although the equity is diluted, the control is still firmly in their hands.

After the meeting, Shen Nanpeng found Chen Pingjiang and expressed his doubts.

"You listed these AB shares a year earlier than I expected, which makes me a little confused. Are you cashing out and reducing your holdings?"

Chen Pingjiang smiled and said, "Was what I did so obvious?"

"Of course, with Renren's current development momentum, especially with Weibo now dominating the market and game revenues increasing, things will only get better and better. There's actually no need to be so anxious."

Chen Pingjiang thought about it, took out the mobile phone in his arms and waved it in front of Shen Nanpeng.

"This is an HTC smartphone, but I think it's poorly made. It's still far from what I want a smartphone to be. So why can't I make one? If I control the market and pre-install Renren, Weibo, and Renrengou on my phone, how can other companies compete with me? Especially since this is related to the future of mobile Internet."

"You should know Lei Jun, right?"

Shen Nanpeng nodded: "Who in China doesn't know Mr. Lei?"

"He arranged for UC Browser to be built into Meizu phones, and I even heard that Lei Jun is looking to invest in Meizu recently."

This is the best time to enter the mobile phone market.

Smartphones were gradually becoming popular, but there was no Xiaomi in this world. Meizu had plenty of talent, and as long as Chen Pingjiang acted fast enough, he would be able to snatch them all.

Put it all in my bowl!
In fact, Lei Jun did want to invest in Meizu, but the cooperation was not successful in the end. Instead, he started a new business and founded Xiaomi.

In the story that everyone has heard, Lei Jun and Meizu's Huang Zhang have a long history of love and hate.

Lei Jun has become an ungrateful, secret-stealing, two-timing villain.

Huang Zhang became a petty, narrow-minded, and foul-mouthed villain.

There appear to be no beneficiaries.

If given the chance, Chen Pingjiang would like to say to Lei Jun: "Mr. Lei, don't make mobile phones anymore. I will help you recruit people, and I can even make the SU-7 for you in the future."

After hearing what Chen Pingjiang said, Shen Nanpeng was so surprised that he didn't say anything for a long time.

The young man in front of him was only 21 years old, but his ambition was beyond Shen Nanpeng's imagination.

At this age, he has become the "leader" of domestic social media and has a net worth of tens of billions. Normal people would have already started thinking about retirement and enjoying the world of pleasure.

I didn’t expect that Chen Pingjiang actually wanted to cross over and make mobile phones?

This is not a leap from Renren to Weibo or group buying, but a step from Internet companies to real industries and high-tech industries!

But Shen Nanpeng had to admit that this was a good move.

After owning their own terminals, as their market share continues to increase, other Internet manufacturers are indeed unable to compete.

Chen Pingjiang did not take this step on a whim.

This is because even powerful companies like Alibaba, Tencent, and Baidu have all made mobile phones before, but they were just unlucky and failed to succeed.

(End of this chapter)