Chapter 290: Mr. Qu's Pig Brain Overload

After Christmas comes New Year's Day. The calendar turns and time slowly enters 2015.

On January 1, Tencent officially announced the acquisition of Shanda Literature and the establishment of China Literature Group and the Pan-Entertainment Business Unit.

At the same time, at the headquarters of Panda TV, a young man with deep eye sockets, a little stubble and a tie entered the conference room first, unbuttoned his suit and sat at the first seat on one side of the long table. Several men and women who were also waiting solemnly sat down silently on the side of him.

"Are you all here?"

Sitting opposite each other on the other side of the long table, a bookish young man was in a relaxed posture, with an exquisite brooch in the shape of a grapefruit leaf pinned on the chest of his formal suit.

There are English characters engraved on it: see you, Grapefruit Capital - several colleagues around me are like this.

"Then start?"

Mr. Qu of Wanda Finance coughed lightly to ease the atmosphere. No matter what happened under the table, as long as they could sit down at the negotiation table, there was hope.

Zhou Hongyi and his men occupied the lower half of the long table, their expressions solemn and dignified, without any of their usual frivolous smiles.

Jin Xiu, an elite standing on the mountainside of the venture capital industry, formulated a perfect plan; Wang Gongzi, a mediocre man standing on the top of the field of young masters, implemented the plan into a suffocating deadlock.

He and Lao Qu, two veterans who have been working in the business world for decades, are now trying to turn the tide.

Do you think I am Nuwa who repaired the sky?
After meeting Xie Jingxing at the private restaurant a few days ago, Zhou Hongyi was exhausted and couldn't help but have questions from the bottom of his soul.

"We insist that our demands remain unchanged."

Less than ten minutes after the negotiations began, He Chuan repeated this sentence for the third time, and the temperature in the conference room dropped to freezing point.

Mr. Qu pretended not to hear, opened the folder in front of him, and wrote down two sets of data on one side: 17% and 62.5%.

This is the worst outcome. Mr. Wang's CEO position and super voting rights will be invalidated. After the next round of financing, Grapefruit Capital will control 17% of the super voting rights with a 62.5% stake.

Relying on its status as a small shareholder, the investor suppressed Banana Entertainment, the absolute controlling shareholder, at the shareholders' meeting and board level, which is like a financial merger and acquisition in a sense of a snake swallowing an elephant.

Therefore, this is their bottom line in negotiations, apart from destroying Panda TV, and all exchanges of interests should be based on this.

"First, we can accept a change in CEO."

Mr. Qu raised his head and said, "But the chain reaction of the sunset clause needs to be taken into consideration. I can assert based on my decades of professional experience that a company with only small shareholders holding super voting rights in the AB share structure has no future."

“Who would dare to invest in such a company? How should the management team exercise its management authority?”

He leaned back, looked around with a scrutinizing gaze, and made a gesture of throwing something: "Child's play."

"We are a seed round investor, and we can even say we are a co-founding shareholder. Our co-founder, Mr. Xie Jingxing, has made significant contributions to the development of Panda TV over the long term!"

He Chuan broke out in a cold sweat on his back, and he avoided the main point and emphasized his words.

The ethical accusation made by an industry leader after decades of working in the industry is very dangerous. What he said is not just a reputational issue, but to a large extent a common "moral hazard" in the actual operation of economics.

Xiyou is not the largest stakeholder of Panda TV. Who can guarantee that it will not use its actual control to seek personal gain? In the European and American financial circles of the 1980s, this was a barbaric act that was even more notorious than KKR and Soros.

“Ever since Google, Facebook and other European and American Internet giants started the trend of AB equity structure, the game between founders and investors has become increasingly distorted. Investors have paid costs but cannot gain equal rights.”

Xie Jingxing took over the conversation calmly: "Of course, this is a macro problem facing the entire industry, and we will not discuss it today. Specifically for the Panda TV project, the sunset clause held by Xiyou was originally just to protect our legitimate rights and interests."

"Since there are problems at the execution level, we can make adjustments at any time."

He looked at Zhou Hongyi: "Super voting rights have never been the crux of the issue."

Mr. Qu breathed a sigh of relief, thinking that Lao Zhou was still very reliable, and that his taking the lead in organizing today's negotiations was not groundless.

If they can negotiate, then the bargaining chips of both parties will change, and Mr. Wang’s CEO position and Banana Entertainment’s super voting rights will inevitably be lost. Therefore, if Xiyou voluntarily surrenders the super voting rights, Banana Entertainment will have to exchange them for benefits.

In the absence of super voting rights for either party, Banana Entertainment, which holds absolute control, is undoubtedly the dominant party in Panda TV in all aspects, from management to financing.

However, neither party has super voting rights, so how can we talk about the future AB equity structure? In other words, as Panda TV gradually raises funds, the equity structure will be very dispersed.

Enter a very primitive board structure where whoever holds the majority of shares controls the company.

From this perspective, Xiyou's goal has been achieved. With equal rights for equal shares, Banana Entertainment's equity has been continuously diluted, and Panda TV has lost its absolute control over it.

"Then, in view of everyone's unanimous expectation of reconciling the conflict, Mr. Wang resigned from the position of CEO, and together with Grapefruit Capital, he voided the sunset clause and the dual-class share structure and other terms of the agreement."

Mr. Qu carefully clarified the terms first, and then gently tested the waters: "The new CEO will be selected by the board of directors within a time limit."

"We insist that our demands remain unchanged. After Mr. Wang resigned from the CEO position, he is no longer suitable to serve as chairman. The three management board seats added in the last round should be abolished." He Chuan jumped out to confront.

Everyone's eyes were directed at Zhou Hongyi. Mr. Wang handed over the position of chairman, resulting in a de facto three-seat board of directors. In addition, the company's management is currently filled with senior executives from Qihoo 360, headed by Zhang Juyuan.

As the conversation went on, he became the biggest beneficiary?
"Well, it is difficult for a CEO who does not serve as chairman to effectively assume management responsibilities. I suggest that the new CEO and chairman should be the same person, selected by Banana Entertainment. After all, you are the major shareholder and have a veto power." Zhou Hongyi chose to pass the ball calmly.

Mr. Qu felt like his brain was overloaded for a moment. He couldn't see what those little eyes were thinking, but he quickly responded and was unwilling to call out the price first: "It's not easy for everyone to mediate the conflict. Banana Entertainment respects the opinions of all shareholders. Let's discuss it with each other. What do you think, Mr. Xie?"

"The current board of directors is not sufficient to elect a CEO and chairman. I suggest adding five more board seats based on the current board structure." Xie Jingxing kept looking at Zhou Hongyi: "In addition, special restrictions should be imposed on the election method of board seats to avoid situations where directors cannot effectively perform their duties."

"This involves adjustments to the board's charter, which will take some time to discuss in detail." Mr. Qu practiced Tai Chi.

Adding more board seats will restrict the way directors are elected, which is clearly aimed at Banana Entertainment. The more seats on the board, the more diluted and dispersed the voting rights will be, and Banana Entertainment, as a major shareholder, will be restricted in its right to elect directors.

Even if the worst result is that Grapefruit has super voting rights, the most Banana Entertainment will be suppressed to this extent.

However, according to what Xie Jingxing said now, most of the power of Banana Entertainment's absolute controlling shareholder has been removed, but Grapefruit Capital does not have super voting rights... No matter how you calculate it, Qihoo 360 is taking advantage again...

President Qu frowned unconsciously, and even Prince Wang, who looked listless and haggard, noticed that something was wrong.

"Both chairman and CEO are important positions. It's hard to find suitable candidates in a short period of time. We can talk while we're selecting." Zhou Hongyi pushed his glasses, feeling very tired.

He secretly cursed that he was such a stupid teammate. If he really wanted to take advantage, he would have met with Xie Jingxing privately a few days ago and reached an agreement.

It would have been easy to just stab him in the back and cooperate with Xiyou to remove Prince Wang from his CEO position and voting rights at Banana Entertainment. There was no need for such difficult and strenuous negotiations.

All in all, it doesn't matter if it's a public-to-public negotiation and they take the opportunity to gain some benefits from the senior management team and strengthen the control of the management from a third-party perspective.

It would be too offensive to accompany Xie Jingxing to trick Xiao Wang.

I just want to mediate the conflict and take advantage of it, why is it so difficult? Zhou Hongyi lamented.

Mr. Qu's frown relaxed, and Xie Jingxing couldn't hide his sarcasm and smiled. After careful consideration for many days, the result was to be a good guy, and he also wanted to take advantage of it?

Then you can have enough.

"How about this, COO Zhang Juyuan will temporarily serve as CEO, the chairman position will be vacant, the board of directors will remain unchanged, and adjustments will be made after the next round of financing."

Xie Jingxing pressed his hands down: "End it as soon as possible, that's it."

"…It's getting late. Let's take a break and have lunch. We can talk again in the afternoon?"

President Qu was slightly stunned, then he was moved and decisively proposed to adjourn the meeting temporarily.

Xie Jing Xing nodded his chin to Prince Wang without making any comment, indicating that he wanted to chat with him alone. The latter tugged at his tie expressionlessly, leaning forward with his hands on the table.

…………

Everyone filed out of the conference room. President Qu pulled Zhou Hongyi into his office alone and handed him a bottle of mineral water. "Old Zhou, things are a bit tense."

"Brother Qu, my ability is really limited."

Faced with the hidden questioning, Zhou Hongyi felt angry and lightly blocked the conversation.

Xie Jingxing's meaning was very clear. He wanted Prince Wang to hand over the positions of CEO and Chairman first, and then maintain the current board structure to negotiate how much benefit Xiyou's super voting rights would be exchanged for.

During this period, the company's management rights were handed over to a third party, Qihoo 360.

"The problem is that President Wang was the first to kick Xiyou out, and Xiyou fought back passively, using the sunset clause to protect himself and not wanting to fight you endlessly until it reaches the point of going to court. You should hand over the positions of CEO and chairman first, and make sure that you won't cause trouble during the negotiations, and then Xiyou will feel at ease to sit down and talk to you."

Zhou Hongyi thought about it and said in a somewhat sarcastic tone, "As a third party, I have to pledge my shares for you and balance the relationship during the negotiation. I have to offend people on both sides. What do I want?"

What's wrong with me asking for some management rights? Don't go too far, momma. If it weren't for Lao Wang's face, I would have eaten up that useless second-generation rich kid in your family.

Mr. Qu's face flushed. He thought the same thing, but he still had to try his best: "Old Zhou, this is what we say, but it's not how we do it. Let's compromise first. If he changes his mind and holds on to the super voting rights, won't we be stuck?"

"Haha, then he is really stupid. He extended the time limit until the next round of financing."

"... Lao Zhou! It's hard for me too, can you just be considerate of me?"

"Then what do you want to do?" Zhou Hongyi swung his arms and turned his back.

Mr. Qu's mind raced. Originally, Xiyou was using his veto power to force Banana Entertainment to give up its super voting rights before launching the next round of financing. If it followed Xie Jingxing's conditions, it would be a two-level reversal of the initiative exchange.

Banana Entertainment, in turn, used its veto power to force Grapefruit to give up its super voting rights before launching the next round of financing.

Just like Zhou Hongyi's sarcasm, Xie Jingxing is not a fool. His willingness to negotiate means that his psychological bottom line is not to kill Panda TV. Besides, if Panda TV dies, what's the use of him holding the super voting rights? Is he going to take it home and use it as toilet paper?

Time. The only problem now is the time difference. Banana Entertainment must hand over power first, and Grapefruit will hand over power later.

Although we can use the veto power to block Xiyou during this period, we still lack a lot of initiative. If they offer a price that is neither too high nor too low and disgusting, should we agree to it or not?

"Old Zhou, can you tell me the truth? Does Xie Jingxing think highly of the future of Panda TV?" Mr. Qu asked after he had finally decided what to do.

Zhou Hongyi gave an indescribable smile: "He doesn't think highly of your President Wang."

"..."

This was the end of the conversation, and Mr. Qu was speechless.

(End of this chapter)