Original title: the myth of Xiaomi making wealth: the average annual salary is 1647 billion yuan
4hw.com.cn technology news with Xiaomi's application for initial public offering (IPO) on the Hong Kong Stock Exchange on May 3, a widely watched wealth making movement also began.
It will be the world's largest public transaction this year and the first time the mysterious financial data of the private company have been disclosed. In 2017, Xiaomi's sales revenue has exceeded 100 billion yuan, and more than one third of its employees hold options.
At present, there is a heated discussion on the valuation of Xiaomi in the primary market. Investors use Apple's 3.5 times P / S (market to sales ratio) in 2017 to estimate the value of Xiaomi, which is about US $62 billion. If Xiaomi is regarded as an Internet company, it can reach US $100 billion.
If the target of 100 billion market value can be achieved, the wealth of Lei Jun, the founder, chairman of the board and CEO of Xiaomi group, will reach US $31.4 billion (about RMB 1992 billion), and he will become the fourth richest person in China after Ma Huateng, Ma Yun and Li Jiacheng, and the wealth of several co founders will generally exceed US $1 billion (about RMB 19.2 billion) Thousands of employees may become multimillionaires.
Xiaomi employee Gao Lei (pseudonym) tells surging news（ www.thepaper.cn ）Reporter, before the beginning of 2012, some Xiaomi employees with job number less than 1000 and still in service may have freedom of wealth. "Some super large shareholders may hold millions of shares in Xiaomi. '
For more ordinary employees, whether they can survive the early start-up period of the company and resist the subsequent temptation of exercising power is a problem.
Hard times come to an end
Xiaomi's employee wealth is slightly higher than that of other Chinese Internet companies. In addition to the general equity incentive, it is mainly because in the early stage of Lei Jun, in order to improve the cohesion of employees, he generously sold the company's equity and let employees voluntarily hold shares. The people who bought the company's shares are now making a lot of money.
On August 4, 2017, at an activity held by Shunwei capital, Lei Jun disclosed that in the early stage, Xiaomi allowed employees to flexibly allocate the proportion between stock and cash as their own salary. After the voluntary choice, 15% of the people choose to take all the cash salary every month, 70% of the people take 70% - 80% of the cash and a few stocks, and 15% of the people only take a little living expenses but take more stocks.
Lei Jun said that employees have a entrepreneurial mentality and devote themselves wholeheartedly. "It's their own decision to make a profit, and no one will complain about a loss. '
During the round B financing of Xiaomi in 2012, Lei Jun also allowed employees to invest at their own expense, with a ceiling of 300000 yuan per person. 'at that time, there were more than 70 people in the company, nearly 60 of whom paid for it and invested a total of 14 million yuan. "Lei Jun said.
Lin bin, President of Xiaomi, also bought shares of the company out of his own pocket. Several of Xiaomi's co founders basically hold about 3%, while Lin bin holds 13.3%.
'in 2010, Lei Jun asked me to start a business. I agreed to a zero salary and asked if I was willing to invest in Xiaomi with my own money. I hesitated. But after thinking about it for a few days, I discussed it with my wife and decided to start a business. We are going to have a hard time for a few years. I sold the shares of Google and Microsoft and invested them all in Xiaomi. Lin Bin said in a speech at his alma mater Sun Yat sen University in 2015.
Lin Bin said that five years later, the book value of Xiaomi stock has increased by about 800 times. Now, according to Lin Bin's current shares, Lin Bin's wealth after the listing of Xiaomi would ideally reach US $13.3 billion (calculated by the market value of Xiaomi's sprint to US $100 billion).
According to the prospectus, as of March 31, 2018, 5500 of Xiaomi's 14513 employees held share based awards. This means that at least a third of Xiaomi employees have options. Option refers to the equity that employees can buy shares at the present price in the future, and the benefit is calculated by the difference when settling accounts.
As of the end of 2017, there were nearly 190 million options not exercised by Xiaomi, with an average exercise price of US $1.05. If the IPO price of 40 US dollars per share is calculated in the current market (the same below, except for special instructions), these options will bring 7.4 billion US dollars (about 47 billion yuan) to employees. Roughly speaking, each of the 5500 employees can earn an average of US $1.35 million (about 8.57 million yuan) after the listing of Xiaomi.
According to Lei Jun, "when I started Xiaomi, many people in China didn't make money on options. In particular, they are all hardware talents, and no one believes that stocks are valuable. Lei Jun believes that the whole set of incentive system is behind the miracle created by Xiaomi. "Xiaomi's flexible remuneration system, coupled with voluntary investment behavior, makes the company very cohesive in the early stage. Of course, as the CEO, I'm under a lot of pressure. Every now and then, my employees come to the office and ask me, "how's our company doing?"
'Many employees in non-technical positions have no options so far '
However, not everyone can get so many options. It's not easy to get Millet's options.
Gao Lei told surging news reporters that only the technical employees who joined Xiaomi in 2014 or earlier require lower salary, the more options they have. Whether they are fresh graduates or social recruits, they basically have more or less options. "They can basically get 5000 to 20000 shares. They all say that until the stock price soars to Ali's level, few people will convert them into cash. '
But not every employee who joined Xiaomi early has an option. Gao Lei said that many non-technical employees have no options so far. Only when the position level reaches the level of Alibaba P7, can the employee have the option. There are not many options, about 5000 shares, which can be exercised in five years. '
'only big men and big bulls, who are said to be able to hold millions of shares, and whose job number is less than 1000, can be rich and free. Other employees generally do not have many options, even within 1000 employees may not be able to get wealth freedom. 'Gao Lei revealed.
Chen Yizhi (a pseudonym) told reporters, "Xiaomi is not easy to recruit in its early days, so it gives high options, and some ordinary employees may have 200000 shares. '
After the rapid growth of Xiaomi, it is not easy to get the option of Xiaomi. On the above occasion, Lei Jun also mentioned that later, many colleagues who chose the first two flexible salary options (the scheme of taking more cash and less stocks) turned back and wanted to hold more stocks, but they were all rejected by him.
However, in 2015, the growth rate of Xiaomi began to slow down again. According to Li Wanqiang, co-founder of Xiaomi, quoted by the news agency, his previous stay up all night in 2016 turned into all night, occasionally taking a break, drinking beer, eating kebabs and smoking cigarettes. Analysts are looking at Xiaomi. At that time, Xiaomi relied on loans to maintain its operation, rather than seeking for venture capital, because it would face the risk that its valuation would be lowered.
According to the prospectus, 2015 was the only year for Xiaomi to exercise its options in the past three years. Some Xiaomi employees exercised 4507719 shares at a price of US $0.14, cashing out US $6311000 (about RMB 4 million).
'before 2015, Xiaomi exercised two or three times at a price of a few dollars. Chen Yizhi revealed that Lei Jun had always stressed that he would not be listed within five years, and not everyone could wait. But now I think that the employees who sold the shares at that time will have to regret it. '
The average annual salary of employees is only 160000 yuan?
In fact, in addition to options, Xiaomi has two types of equity incentives.
One is restricted stock. 'restricted stock 'is the stock granted to you by the company, but you need to achieve a certain number of years of work, or to achieve a certain work goal, in order to unlock the stock and obtain income from it.
As of the end of 2017, 22.21 million restricted shares have been unlocked, with an average purchase price of $2.46; 24.5 million shares have not been unlocked, with an average cost of $2.94. According to this calculation, in addition to the income generated by options, if all restricted stocks can be unlocked, it will bring about US $1.4 billion (about RMB 8.9 billion) return to employees, which will create a large number of millionaires among Xiaomi employees.
Another is the Xiaomi Development Fund for some employees who are invited to participate. If the employee leaves within five years after the investment, he can only charge the principal and interest of the initial investment. If you can stay for five years, you can become a fund equity holder. After that, Xiaomi can be required to buy back shares at fair value. During 2015-2017, the related expenses recognized in Xiaomi's profit statement were 69.1 million yuan, 57.37 million yuan and 100 million yuan respectively.
In addition to the equity incentive, the salary of the pure cash part of Xiaomi employees is not high.
According to the prospectus, in 2017, Xiaomi's employees' wages, salaries and bonus (Bonus) expenses totaled 2.428 billion yuan (excluding social security benefits, housing benefits, etc.), equivalent to an average annual salary of 167300 yuan per employee.
This led to market people questioning whether the company whitewashed its performance by lowering wages but increasing options before listing?
Chen Xin, a professor of Shanghai Senior School of finance at Shanghai Jiaotong University, told surging news that Xiaomi's salary and welfare expenses to employees during 2015-2017 were 2.03 billion yuan, 2.83 billion yuan and 4.05 billion yuan respectively. On the other hand, the share-based compensation expenses were 690 million yuan, 870 million yuan and 910 million yuan respectively, accounting for 34.0%, 30.8% and 22.5% of the employees' compensation and welfare expenses.
This shows that Xiaomi tends to give more equity incentive in order to enhance its attraction to excellent employees in the early stage, but it will give less equity incentive in 2017, which is close to listing. From this data, Xiaomi's accounting treatment is reasonable. "Chen Xin said.
In fact, it is also a common practice to use options to motivate employees, so that start-ups do not need to pay a lot of cash in the growth period when they are in urgent need of cash.
Lei Jun also said that Xiaomi still maintained a very high cash reserve during the difficult period of 2015, otherwise it would be closed. '
Lei Jun does not receive salary, but received a big red envelope before listing
According to the prospectus, the total salary of Xiaomi's top five earners in 2017 reached 196 million yuan, including 8.148 million yuan mainly related to wages, salaries and bonuses, and 18757.2 million yuan for options. On average, the average annual salary of the top five executives without options is more than 1.6 million yuan, while the average annual salary with options is close to 40 million yuan.
Xiaomi also listed the distribution range of the total salaries of the five high paid people. In 2017, there were 1 person with an annual salary of 100 million to 150 million yuan, 2 people with an annual salary of 30 million to 100 million yuan, and 2 people with an annual salary of 100 million to 300 million yuan.
However, according to the prospectus, all five are not directors of Xiaomi group. According to the arrangement of Xiaomi, the remuneration of its directors during the three years from 2015 to 2017 is zero.
Of course, by holding 31.41% of Xiaomi's shares, Lei Jun's wealth can reach $22 billion to $31.4 billion, about 140 billion to $200 billion (calculated according to the valuation range of Xiaomi's $70 billion to $100 billion).
In addition, according to the arrangement of the board of directors, on April 2, 2018, Xiaomi also issued about 64 million class B common shares to smart mobile holdings controlled by Lei Jun for us $000025, in return for Lei Jun's contribution to Xiaomi. Based on the price of 40 US dollars per share, the value of the reward is about 2.56 billion US dollars (about 16.2 billion yuan).
From the perspective of financial accounting treatment, Professor Chen Xin believes that the directors of Xiaomi do not need to get a return from salary, which can reduce the company's management expenses, but it seems that this is not the case.
Let alone whether it is reasonable for the company to award Lei Jun such a huge salary before listing. If it is in return for Lei Jun's contribution to Xiaomi