SCHEDULE 13D: Hesai Group Co-Founders Formalize Control with Concert Party Arrangement, Consolidating Voting Power

Hesai Group's co-founders, including Dr. Kai Sun, have entered into a Deed of Concert Party Arrangement, formalizing their collective control over approximately 72% of the company's total voting rights and strategic decisions.

Summary

• Dr. Kai Sun and Fermat Star Limited filed a Schedule 13D detailing their beneficial ownership in Hesai Group.
• The filing highlights a Deed of Concert Party Arrangement, effective April 24, 2025, between co-founders Dr. Yifan Li, Dr. Kai Sun, and Mr. Shaoqing Xiang.
• This Deed formalizes their agreement to act in concert, consult with each other, and unanimously exercise all voting rights and control powers on significant company resolutions, including amendments to constitutional documents, changes in share capital, and strategic acquisitions or disposals.
• As a result of this Deed, Dr. Kai Sun is deemed to have shared voting power over 27,163,892 shares, representing 20.5% of the Class B ordinary shares (calculated as a single class with Class A shares as of March 31, 2025).
• This shared voting power includes 9,228,622 Class A ordinary shares held by Fermat Star Limited (wholly owned by Dr. Kai Sun) and an additional 17,770,239 Class A ordinary shares and 165,031 Class B ordinary shares controlled through the Deed from Dr. Yifan Li's and Mr. Shaoqing Xiang's entities.
• Collectively, the three co-founders control approximately 72% of the total voting rights in Hesai Group, based on their individual beneficial ownership percentages as of the Deed date (Dr. Li: 23.7%, Dr. Sun: 24.6%, Mr. Xiang: 23.7%).
• Fermat Star Limited, wholly owned by Dr. Kai Sun, beneficially owns 9,228,622 Class A ordinary shares, representing 7.0% of the total outstanding shares.
• Dr. Kai Sun, through Fermat Star Limited, sold a total of 1,028,325 Class B ordinary shares in the form of ADSs between March 13, 2025, and March 20, 2025, at weighted average prices ranging from US$20.1 to US$22.5 per ADS in open market transactions.

Sentiment

Score: 7

Explanation: The formalization of a concert party arrangement among co-founders provides stability and unified control, which is generally positive for corporate governance. However, the recent share sales by a co-founder introduce a slight negative sentiment, though they are disclosed as open market transactions.

Positives

• The formalization of a concert party arrangement among co-founders provides a clear framework for unified control and strategic decision-making, potentially enhancing corporate stability.
• The collective control of approximately 72% of total voting rights by the co-founders ensures strong, consolidated leadership.
• The agreement acknowledges a historical relationship of acting in concert since the company's founding in 2014, suggesting continuity in management approach.

Negatives

• Dr. Kai Sun, a co-founder, director, and chief scientist, sold over 1 million ADSs (Class B ordinary shares) in the open market between March 13 and March 20, 2025, which could be perceived negatively by some investors.

Risks

• The high concentration of voting power (approximately 72%) among the co-founders could limit the influence of other shareholders on corporate decisions.
• While the Deed aims for unanimity, potential future disagreements within the concert party could lead to internal instability.

Future Outlook

The Deed of Concert Party Arrangement indicates a continued commitment by the co-founders to act in concert, aiming to consolidate control and ensure unanimous decision-making on significant company matters. This suggests a stable and unified leadership approach for the foreseeable future, as long as the parties continue to hold interests in the company.

Management Comments

• The document states that the parties to the Deed 'acknowledge their historical relationship of acting in concert with respect to the operation and material decisions of the Company since co-founding the Company in 2014, and hereby confirms and agrees, jointly and severally, that starting from the date of this Deed and continuing during such time as each Party shall directly or indirectly hold any interest in the Company until the date of the Termination, the Parties shall act in concert to cooperate to consolidate control of the Company.'

Industry Context

This filing primarily concerns internal corporate governance and ownership structure rather than specific industry trends. However, in the technology and automotive LiDAR industry where Hesai Group operates, strong and unified leadership can be crucial for navigating rapid technological advancements, intense competition, and evolving market demands. The formalization of a concert party arrangement among key founders could be seen as an effort to maintain strategic agility and control in a dynamic sector.

Corporate Governance

Related Party Transactions

• The Deed of Concert Party Arrangement is a significant related party transaction, as it involves the co-founders (Dr. Yifan Li, Dr. Kai Sun, and Mr. Shaoqing Xiang) agreeing to act in concert regarding their shareholdings and voting rights in Hesai Group.
• The beneficial ownership structures detailed, such as Fermat Star Limited being wholly owned by Dr. Kai Sun, and ALBJ Limited and Galbadia Limited being wholly owned by Dr. Yifan Li and Mr. Shaoqing Xiang respectively, highlight the interconnectedness of the parties involved in the concert arrangement.

Stakeholder Impact

• Shareholders: Non-founding shareholders may experience reduced influence over corporate decisions due to the consolidated voting power of the co-founders. The formalization of control could provide stability but also limit minority shareholder impact.
• Management/Employees: A unified leadership team resulting from the concert party arrangement could lead to clearer strategic direction and potentially more stable internal operations.
• Creditors/Suppliers: The enhanced stability in corporate governance might be viewed positively by creditors and suppliers, indicating a consistent management approach.

Next Steps

• The concert party members will continue to consult and exercise unanimous voting rights on all proposed resolutions of Hesai Group.
• The Deed will remain in force until terminated by mutual agreement or if a party ceases to hold any interest in the company.

Key Dates

Recommendation

Keywords

Hesai Group, Schedule 13D, Concert Party Arrangement, Beneficial Ownership, Voting Rights, Corporate Governance, Co-Founders, Share Sales, Class A Shares, Class B Shares, ADSs, Kai Sun, Yifan Li, Shaoqing Xiang