Chinese online broker concentrates power

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The logo of housing platform Beike, owned by KE Holdings, is seen at the World Artificial Intelligence Conference (WAIC) in Shanghai, China, July 8, 2021. REUTERS/Yilei Sun

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HONG KONG, July 30 (Reuters Breakingviews) - China's answer to Zillow has decided to keep control concentrated after its legendary founder Zuo Hui's unexpected passing in May. Ke's (BEKE.N) top shareholder, a company controlled via a trust of the Zuo family, has transferred its class B shares, representing nearly 80% of voting rights, to an entity originally affiliated with him. That gets around a rule that such a transfer outside the family would automatically downgrade his weighted stake to ordinary shares. Long-serving Chief Executive Peng Yongdong and an executive director on the partnership will inherit Zuo’s votes.

Dual-share structures, banned in China for a long time, led many Chinese entrepreneurs to list in New York where they are common . They protect founders interests and give them latitude to think long-term – but also enable abuse. Ke claims that this move will enable the company to preserve Zuo’s vision. But it can do that without granting managers with small economic stakes outsized power. Ke's shares have already fallen 60% this year, and a wave of Chinese delistings and take-privates may be building. The online real-estate broker, caught in two simultaneous crackdowns on internet and property companies, might be preparing to make decisions ordinary shareholders won’t like. (By Yawen Chen)

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Editing by Pete Sweeney and Katrina Hamlin

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