Chapter 4

Control and Capital

One person decides how Yatsen's remaining cash is used. Founder-CEO Jinfeng Huang holds about a third of the economics but 90.4% of the votes [1], so the second half of the through-line — whether the IPO windfall is being returned faster than the business earns it — turns on trusting his stewardship. The record is mixed: ¥757m of acquired goodwill written off, US$202m of buybacks, and now a US$120m convertible from insiders that a large shareholder objected to before joining.

Who controls the company

Yatsen runs a dual-class structure. Class B shares carry twenty votes each and Class A shares one, and Huang owns every Class B share. On the company's own headline basis that leaves him with 32.0% of the economics and 90.4% of the vote, and makes Yatsen a "controlled company" under NYSE rules [2]. He is both Chairman and CEO, on a board of five directors, three of them independent [3].

Source: FY2025 Annual Report (Form 20-F), Item 3 Risk Factors [4] and Item 6.E Share Ownership [5].

The rest of the register is institutional. On the ownership table's basis — which strips out the treasury and incentive-trust shares and so reads the founder's stake a little higher, at 34.3% of shares and 90.7% of votes — the next two holders are early backers, not the public float: Hillhouse at 13.8% and ZhenFund at 11.9%, each with under 2% of the vote. CFO Donghao Yang, a former Vipshop finance chief, holds 4.4% [6].

Source: FY2025 Annual Report (Form 20-F), Item 6.E Share Ownership, beneficial ownership as of 28 Feb 2026 (excludes repurchased/trust shares from the base) [7].

The control has two edges. Because Huang holds more than half the vote, Yatsen may rely on NYSE exemptions from the requirements for a majority-independent board and independent nominating and compensation committees [8]. It has not taken the board exemption — three of five directors are independent — but the option, and the concentrated vote behind it, means minority holders cannot force an outcome the founder opposes. That matters most when the company transacts with the founder himself, as it now does.

What management is paid

Cash pay is small and, in the manner of a foreign private issuer, disclosed only in aggregate — individual amounts are not broken out. In 2025 the executive team was paid ¥7.5 million in cash plus ¥0.3 million of benefits, with US$0.2 million to the independent directors [9]. Aggregate cash pay has run between ¥7 million and ¥10 million a year — ¥7.1 million in 2023 [10] and ¥9.5 million in 2024 [11] — a rounding error against a company that has accumulated years of losses.

The compensation that matters is equity. Share-based compensation ran ¥77.5 million in 2023, ¥91.2 million in 2024 and ¥59.0 million in 2025, the decline tracking headcount reduction and front-loaded vesting [12]. Over three years that is roughly ¥228 million of stock granted — about ten times the cash payroll — and it dilutes the same shareholders the buybacks were shrinking.

Source: FY2023–FY2025 Annual Reports (Form 20-F), Item 6.B Compensation and Item 3 Risk Factors [13]; [14]; [15].

The read here is favourable to alignment. Huang is not extracting a large salary; he is paid, overwhelmingly, through a 32% ownership stake whose value has already fallen roughly 93% from the IPO (After the Crash). His incentive is the share price, not the payroll. The offset is disclosure: the aggregate-only format leaves an outside holder unable to see how pay splits between the founder and the professional managers around him, or how option strikes were set.

The capital-allocation record

The stewardship question is not about pay; it is about what has been done with the money. Yatsen raised US$577 million of net proceeds at its November 2020 IPO and earmarked part of it for "potential strategic investments and acquisitions" [16]. Those acquisitions — the premium skincare brands Eve Lom, DR.WU and Galénic — are the same ones whose economics Marketing Economics found have not yet lowered the marketing bill. On the balance sheet they left a larger mark: goodwill was written down by ¥354.0 million in 2023 and ¥403.1 million in 2024, ¥757 million in all, mostly against the Eve Lom unit as results came in below plan [17].

The second use of cash was buybacks. The program was enlarged three times — from US$100 million (2021) to US$150 million (2022) to US$200 million (2023) — and by February 2026 the company had repurchased 40.2 million ADSs for US$202.2 million [18]. That retired stock at depressed prices and cut the weighted share count from 2,195.8 million to 1,862.6 million, down 15% in two years [19]. It was also, as After the Crash established, larger than the cash operations burned over the same span. The most recent signal is caution: the May 2025 replacement program is capped at just US$30 million [20].

Sources: FY2025 Annual Report (Form 20-F) — buybacks and minority buyouts, Consolidated Statements of Cash Flows [21]; goodwill impairment [22]; Note 23 Subsequent Events [23]; IPO proceeds [24].

Read together, the record is neither reckless nor distinguished. The acquisitions were the clear misstep — roughly a fifth of the IPO haul now sits impaired. The buybacks were defensible: retiring shares below the company's own cash-per-share is accretive, and management scaled them back as the cushion thinned. Against that, ¥181 million was also spent buying out subsidiary minority interests [25]. The through-line's worry — capital leaving the business faster than it is earned — is visible in the M&A write-offs and the buyback pace, and only partly answered by the recent restraint.

The insider convertible

The newest capital action is the one that tests governance directly. On 11 March 2026 Yatsen agreed to sell about US$120 million of RMB-denominated convertible senior notes, in two equal tranches, to an investment vehicle affiliated with the private-equity firm Trustar Capital — a vehicle named Polaris Veristas Investment Limited — alongside founder Huang himself [26]. A net-cash, debt-free company was adding financing while still burning operating cash (Path to Breakeven), and doing it with its own controlling shareholder on the buy side.

Source: FY2025 Annual Report (Form 20-F), Note 23 Subsequent Events [27].

The terms sit between debt and equity, and lean toward debt. The notes carry a 1.5% coupon, convert only after the first year at US$4.63 per ADS, and — the decisive feature — give holders the right to put them back to Yatsen for cash on the third anniversary at a price set to yield a 4% return [28]. The conversion price is about 35% above the US$3.43 the ADS traded at on 28 July 2026, so the insiders convert only if the stock climbs; otherwise they hold cheap, senior paper and can demand their money back with interest. Attached warrants, struck at US$10.00 per ADS, are a small long-shot kicker. If both tranches convert, they would create roughly 26 million new ADSs — about 28% more than the 94 million outstanding — so the dilution is real but contingent on a recovery that has not happened.

Source: FY2025 Annual Report (Form 20-F), Note 23 Subsequent Events [29]; company news, 21 May 2026 [30].

That sequence is the chapter's most telling fact. A related-party financing, arranged by a board the founder controls, drew a formal objection from a large outside shareholder who felt its interests were not protected — and the dispute was resolved not by changing the terms for everyone but by letting the objector, Hillhouse, buy in alongside the insiders [31][32]. The financing also quietly rewrites the balance-sheet story: the US$120 million adds cash, but it ranks ahead of the common equity and carries a cash put, so the debt-free cushion that After the Crash valued now sits behind up to US$120 million of insider-held senior claims.

The read

On the evidence, alignment is genuine but control is close to absolute, and the two are now visibly in tension. Huang's 32% economic stake, modest cash pay, and willingness to put his own money into the convertible all point to an owner-operator whose incentives track other shareholders'. The offset is that he can act without their consent, the acquisitions he directed cost ¥757 million in write-downs, and the first financing that pitted his interests against a large minority holder was settled by admitting that holder to the same terms rather than by an arm's-length process.

The strongest fact against a benign reading is the objection itself: a sophisticated 13.8% owner looked at an insider deal and concluded it needed contesting. The strongest fact for one is that the deal is cheap capital — a 1.5% coupon and an above-market conversion price — from investors betting on the same recovery. What would move the read is concrete and checkable: the terms on which the second tranche closes and whether other minority holders get comparable access; any return to debt-funded, goodwill-heavy M&A; and whether the buyback restraint holds or the founder resumes returning cash while the business still burns it.