Control Risk of Major Shareholder: A Concern for Weibo Sports' IPO

One key question in Shanghai Securities Exchange's inquiry letter to Weibo Sports Technology Group (hereinafter referred to as "Weibo Sports") is whether the company's governance and internal control are effective, and if so, what measures can be taken to prevent actual controllers from abusing their powers and protect the interests of small investors. This issue has been raised due to the fact that Weibo Sports' major shareholder, Chen Chaobo, holds a total of 91.50% of the company's shares.

Recently, Weibo Sports updated its listing application review status and responded to the inquiry letter, which included 21 questions such as "historical development," "customer concentration," "income," "market," "related parties and transactions," and "cash flow verification."

Among these questions, the one that has garnered the most attention is the historical development of Weibo Sports' major shareholder, Chen Chaobo, who holds 27.00% of the company's shares directly and 58.48% indirectly through his control of Zhejiang Wibi Holdings Co., Ltd. (hereinafter referred to as "Wibi Holdings") and Jinhua Xinfang Enterprise Management Partnership Limited (Limited Partnership) (hereinafter referred to as "Xinfang Partnership").

Furthermore, Chen Chaobo's spouse, Zheng Xiaohong, brother, Chen Chaowei, and sister-in-law, Chen Diaoying, have also obtained shares of Weibo Sports through their connections with Chen Chaobo. Chen Chaowei serves as a director and vice president of Weibo Sports, while Chen Diaoying works for one of the company's subsidiaries.

It is worth noting that Weibo Sports has revealed in its prospectus that Chen Chaobo and his brother have used company funds on several occasions, including to purchase houses, pay household expenses, and invest in other projects. In 2020, the company wrote off a total of RMB 17.677 million (approximately USD 2.5 million) due to these transactions.

How can Weibo Sports prevent control risks or mitigate the potential impact of its major shareholder's influence on its business operations? This may be one of the key concerns for Weibo Sports' IPO going forward.