Tech Giants: Starting from Bankrupt Companies

”The total valuation of the seven companies: 10.5 trillion.” Xu Zhenyu reported the figure, ”And Spark Technology’s current total market value is 3.2 trillion. This means that after the split, the overall valuation will increase by 228%.”

The conference room was quiet enough to hear breathing.

An independent director spoke up: ”Mr. Xu, I understand the valuation. But after the split, how will the issue of control be resolved? With seven companies listing independently, Mr. Su’s shareholding ratio will inevitably be diluted.”

Xu Zhenyu switched to the next page.

Spark Holdings Equity Structure

The pyramid chart showed:

Top layer: ’Chenxing Investment,’ 100% owned by Su Chen.

Second layer: Chenxing Investment holds 100% equity of ’Spark Holdings’.

Third layer: Spark Holdings holds 51% - 70% equity in the seven subsidiaries.

Fourth layer: After the seven subsidiaries go public, public shareholders will hold 30% - 49%.

”Mr. Su maintains absolute control over each subsidiary through a two-layer holding structure,” Xu Zhenyu explained, ”The listing dilutes Spark Holdings’ shareholding ratio in the subsidiaries, but it does not affect Mr. Su’s control over Spark Holdings. Moreover, the 51% minimum shareholding is written into the company’s articles of association; any additional issuance requires the consent of the controlling shareholder.”

Another director asked: ”Why split? Isn’t it fine as it is now? Business synergy, resource integration.”

Xu Zhenyu looked at Su Chen.

Su Chen nodded, answering the question himself.

”Director Li, let me ask you a few questions,” Su Chen said, ”First, is the valuation logic for the semiconductor business the same as for consumer electronics?”

”No. Semiconductors look at technological barriers, while consumer electronics look at market share.”

”Second, how much overlap is there between the customers of the power battery business and the chip business?”

”Less than 30%.”

”Third, if we don’t split, how will the capital market price us?” Su Chen continued, ”Should a company that makes chips, cars, batteries, and materials be valued as a tech stock or a manufacturing stock?”

Director Li fell silent.

”The rule of the capital market is: specialized companies have higher valuations,” Su Chen said, ”TSMC only does manufacturing, and its market value is 4 trillion. Tesla makes complete vehicles, and its market value is 5 trillion. If we put all our businesses together, the capital market won’t understand it and can only give us a discount.”

He walked to the whiteboard and wrote down three words:

Transparency, Specialization, Incentivization

”The first goal of the split: to make the finance, operations, and strategy of each business segment completely transparent. Listed companies must disclose regularly and accept supervision, which can force management to improve.”

”The second goal: to allow each segment to finance independently. If the semiconductor business needs to expand production, it can issue shares privately; if the automotive business wants to acquire overseas brands, it can issue convertible bonds. There’s no need to put all the pressure on the parent company.”

”The third goal: equity incentives.” Su Chen emphasized, ”The employee stock ownership plan for Spark Electronics has already been designed. After listing, all employees who have been with the company for more than a year can purchase company stock at 80% of the market price, with a cap of three times their annual salary.”

He paused: ”We have 20,000 employees. If everyone becomes a shareholder, how will they work?”

In the conference room, the directors exchanged looks.

”But the split process is very complex,” the CFO reminded, ”Taxation, asset stripping, personnel diversion, contract resigning... it will take at least a year.”

”That’s why we are doing it in steps,” Xu Zhenyu replied, ”The first step is to split off the most mature consumer electronics business — Spark Electronic Technology. This company has independent operations, clear financials, and stable customers, making the split the least difficult.”

He displayed the timeline:

Spark Electronic Technology Split Listing Process

February 10th (Today): Board resolution, announcement of the split plan.

February 11th - March 10th: Exchange inquiries, company responses, supplementary materials.

March 15th: CSRC approval.

March 20th - 31st: Roadshow, inquiry, pricing.

April 1st: Listed on the Shenzhen Stock Exchange.