Ucommune's Share Structure Changes and Governance Implications

In September 2025, Ucommune International Ltd. executed a significant overhaul of its share structure, amplifying the voting power of Class B ordinary shares and altering conversion rights to consolidate control for major shareholders. These amendments, approved at an extraordinary general meeting (EGM), reflect a strategic recalibration of corporate governance and shareholder dynamics. As the company navigates a competitive real estate and co-working market, the implications of these changes-both for its leadership and external investors-warrant close scrutiny.

Strategic Rationale: Strengthening Control, Mitigating Dilution

The most notable amendment increased the voting power of Class B shares from 55 to 170 votes per share, a move that effectively entrenches the influence of existing major shareholders, particularly the company's founding stakeholders. This adjustment aligns with broader trends in dual-class share structures, where concentrated voting rights are leveraged to shield long-term strategic goals from short-term market pressures according to research. By elevating the voting power of Class B shares, Ucommune aims to insulate its leadership from shareholder activism and ensure continuity in its operational and expansion strategies.

Complementing this, the conversion rights of Class B shares were revised to prevent automatic conversion to Class A shares upon transfer to non-affiliates. This change addresses a critical vulnerability in dual-class structures: the risk of diluting control when shares are sold to external parties. By blocking such conversions, Ucommune safeguards its governance framework against potential challenges from minority shareholders or activist investors.

Governance Implications: Balancing Power and Accountability

While these amendments bolster control for insiders, they also raise concerns about accountability. Dual-class structures inherently create an asymmetry between voting power and economic ownership, a dynamic that critics argue can lead to poor governance outcomes. For instance, in the 2024 proxy season, companies with dual-class structures reported disproportionately high shareholder approval rates for executive pay packages, skewed by insider voting. Ucommune's revised structure may similarly obscure the true sentiment of its broader shareholder base, particularly retail investors who hold Class A shares with limited voting rights.

The Delaware Supreme Court's 2024 ruling in In re Match Group Inc., Derivative Litigation adds another layer of complexity. The decision mandates that controlling shareholders in dual-class companies adhere to a heightened fiduciary standard in transactions where they receive disproportionate benefits. For Ucommune, this could mean increased scrutiny of executive compensation decisions or major corporate actions, necessitating procedural safeguards such as independent board committees or non-controlling shareholder approvals.

Shareholder Impact: A Double-Edged Sword

The amendments' impact on shareholder value is nuanced. On one hand, a dual-class structure can enable Ucommune to pursue long-term innovation and market expansion without being swayed by quarterly earnings pressures-a benefit highlighted in a 2024 Yale study, which found that dual-class companies outperformed single-class peers in both short- and long-term metrics. On the other hand, the lack of equal voting rights may erode trust among smaller investors, who could perceive the changes as a prioritization of insider interests over broader shareholder welfare.

This tension is further exacerbated by the absence of a sunset clause in Ucommune's new governance framework. While some recent tech IPOs have included time-bound transitions to single-class structures (e.g., 7–20 years post-IPO), Ucommune's amendments appear permanent according to industry analysis. Such permanence could deter institutional investors who favor transparent governance models, potentially limiting the company's access to capital in the future.

Conclusion: A Calculated Gamble

Ucommune's share structure amendments represent a calculated gamble to secure long-term strategic autonomy. By amplifying the voting power of Class B shares and restricting conversion rights, the company has fortified its governance model against external interference. However, this comes at the cost of heightened governance risks and potential shareholder distrust. As the market reacts to these changes, investors must weigh the benefits of strategic flexibility against the drawbacks of concentrated control. For Ucommune, the success of this strategy will ultimately depend on its ability to deliver tangible value-whether through operational efficiency, market expansion, or innovation-that justifies the trade-offs in governance transparency.