Zhang Yiming transfers stake in Bytedance’s mainland assets

The founder has seemingly transferred his 98.8% stake in the company's main Chinese VIE, raising questions about how the company will align interests between foreign investors and the new VIE owners.

Bytedance are seemingly continuing its reorganisation following founder Zhang Yiming stepping down as CEO. According to tianyancha, he has transferred his 98.8% stake in the top-level VIE that holds the group's mainland assets to a Xiamen holding company set up at the end of 2022, and partly controlled by finance chief Li Ying.

The reshuffle raises questions about how Bytedance will align the interests of its VIE shareholders, who effectively own its lucrative Chinese business, with those of its offshore investors. Interest alignment is key to effectively managing VIE structure risks, especially from the viewpoint of foreign minority shareholders, and having employees rather than large shareholders in the foreign listco own the shares can create issues.

While the move is in line with the founder taking a step back from the operational side of the company it’s still notable that the largest shareholder in the off-shore entity has given up all ownership in the VIE. And it’s a level of uncertainty that the company could probably do without.

With the breakup of the Alibaba empire currently in the news, the further side-lining of another tech entrepreneur could be seen as the state continuing to assert its power and influence, even if the moves are motivated by streamlining operations cleaning up the corporate structure for further liquidity events.