After Zhao Chen thought for a moment, he asked for the mobile phone from Su Wantang.
Lin Shicheng's words "Era Vanguard will become the largest institutional shareholder of Nvidia" still echoed in his ears, but he had a question in his heart -
Why are Equity Structure of Nvidia so scattered?
He picked up the phone again and dialed back.
"Lawyer Lin, there is another question."
"You said."
"Why are Nvidia's shares so dispersed? Huang Renxun is the founder and CEO, and holds only about 3.5% of the shares.
Vanguard is the most Major Shareholder, which is only 7.7%. This kind of structure is not common among technology giants."
Lin Shicheng pondered on the other end of the phone for a few seconds.
"Zhao Zong, this question is a long story, but it is indeed worth explaining clearly.
Because it is directly related to Era Vanguard's future holding space and strategy."
"The reason why Nvidia's equity is so dispersed can be traced back to its listing in 1999."
Lin Shicheng's voice is neither fast nor slow,
"In January 1999, Nvidia was listed on NASDAQ at a price of 12 US Dollar per share. At that time, the market value was only over 600 million US Dollar.
At the time of listing, Huang Renxun's shareholding ratio was approximately 12.8%. This ratio was not high among technology founders at the time, but it was not too low either."
He paused.
"What really led to the continuous dilution of equity was the three core factors in the next two decades."
"First, the launch time is too early.
Zhao Zong, if you think about it, none of the technology companies that went public in 1999 adopted a super voting structure--
Google is a dual-class share structure first pioneered in 2004, Facebook in 2012, and Ali in 2014.
At the time when Nvidia was listed, 'same shares, same rights' was the mainstream rule for NASDAQ.
This means that each share of Huang Renxun has only one vote.
He neither locked up voting rights with Class B shares like Mark Zuckerberg later did, nor did he control Board of Directors through the partnership system like Jack Ma did.
After listing, every time new shares are issued to raise funds and every time Options is distributed to employees, the shareholding ratio of Huang Renxun will be diluted."
"Second, GPU research and development is too expensive.
Nvidia is not an asset-light company. Each generation of its GPU architecture--
From the earliest NV1 to later Tesla, Fermi, Kepler, Maxwell, Pascal--
R&D costs can easily reach hundreds of millions or even billions US Dollar.
After being listed in 1999, Nvidia has gone through multiple rounds of additional financing. With each round of additional issuance, the founding team's equity was diluted.
By 2018, Huang Renxun's individual shareholding ratio had dropped from 12.8% when it was listed to about 3.5%."
He paused.
"But you know, the reason why Huang Renxun was not driven away is precisely because the equity is dispersed enough.
Major Shareholder Vanguard holds only 8.32% of the shares. No single shareholder has the ability to initiate a change of power alone.
Huang Renxun is the largest natural person shareholder, and with his prestige and performance in the industry, Board of Directors simply cannot find a more suitable person to take the helm."
Zhao Chen nodded slightly.
This logic is similar to the Board of Directors structure of Henglong--
When the equity is sufficiently dispersed, the largest natural person shareholder has a disproportionate say.
"Third, employee equity incentives."
Lin Shicheng continued,
"Nvidia is one of the global technology companies that is most willing to issue stocks to employees.
GPU design is an industry with a high concentration of top talents. To retain these talents, high salary alone is not enough; equity must be provided.
Huang Renxun himself is the staunchest promoter of this strategy. He believes that 'making engineers shareholders' is the only way to maintain combat effectiveness.
But the price is that a large number of new shares are continuously issued for employee incentives, and the equity interests of all Existing Shares owners are being diluted simultaneously, including Huang Renxun himself."
He paused for a moment, as if waiting for Zhao Chen to digest the information.
"What about Vanguard and BlackRock? How did they become Major Shareholder?" Zhao Chen asked.
"Natural accumulation of passive index funds."
Lin Shicheng's tone contained a hint of calmness unique to professional lawyers,
"Vanguard and BlackRock did not actively choose Nvidia,
Instead, their S&P 500 Index fund and Nasdaq 100 Index fund must passively allocate Nvidia stocks according to the index weight.
The higher the weight of Nvidia in the index, the heavier the positions they allocate.
They don't care whether Nvidia's stock price goes up or down tomorrow, their only task is to track the index.
In other words, the shareholding ratio of Vanguard and BlackRock is the 'effect' of the increase in Nvidia's market value, not the 'cause'."
Zhao Chen put down the tea cup and looked at the skyline Manhattan outside the window.
The tea was already a little cold, but he didn't care.
Lin Shicheng's words made him understand one thing - Nvidia's dispersion of ownership was not the result of poor management, but was done deliberately by Huang Renxun.
If a founder still hangs on to 30% of his shares twenty years after listing, his company will not be successful.
Huang Renxun chose to exchange Equity Dilution for technological leadership and talent density. This was his choice to exchange personal wealth for the future of the company.
"Now back to your primary concern."
Lin Shicheng's voice became solemn,
"What does this dispersed shareholding structure mean for the increase in holdings of Era Vanguard? I will analyze it from three perspectives."
"First, there is room for accumulation."
Lin Shicheng Open a document,
"Era Vanguard holds about 10.4% of the shares after completing the position establishment, surpassing Vanguard to become the largest institutional shareholder.
But Nvidia's total holdings exceed 600 million shares, and 10.4% means that Era Vanguard only took about 63 million shares.
Theoretically, as long as there are sufficient funds, there will be no obstacles at the Equity Structure level if we continue to increase our holdings to 15% or even higher.
There is no 'Poison Pill Plan' for Nvidia, there is no super voting barrier, and there is no concerted action agreement between Major Shareholder--
Because it has never encountered a situation where a single external shareholder holds more than 10% of the shares. Era Vanguard is the first company."
"Second, regulatory red lines."
Lin Shicheng's speaking speed slowed down a bit,
"After holding more than 10% of the shares, every step of Era Vanguard will be subject to double scrutiny by the SEC and antitrust agencies.
In terms of SEC, every revised declaration of 13D will pop up on Bloomberg Terminal, and Wall Street will track every Add Position of Era Vanguard in real time.
The Hart-Scott-Rodino Antitrust Improvements Act of 1976 stipulates that equity acquisitions exceeding a certain size require filing an HSR declaration with the Federal Trade Commission and the Department of Justice and waiting for a review period of at least 30 days.
Although Era Vanguard, as a pure Financial Investment investor, as long as he does not seek Board of Directors Control, antitrust risks are relatively controllable, but the procedures must be strictly followed.
Every time you increase your holdings by one percentage point, you need to synchronize with our Lawyer Team in advance to ensure that all declaration nodes are foolproof."
Zhao Chen tapped his fingers lightly on the armrest.
If so, then he can be more aggressive.