Share Based Compensation

12 Months Ended

Dec. 31, 2023

Disclosure of terms and conditions of share-based payment arrangement [abstract]

Share Based Compensation

24.Share based compensation

(a)Share-based compensation plans of the Company

The Group has adopted three share-based compensation plans, namely, the 2014 Share Incentive Plan, the 2017 Restricted Share Scheme and the 2017 Option Plan.

(i)2014 Share Incentive Plan

2014 Share Incentive Plan was approved by the then board of directors of the Company in October 2014 prior to the Merger. According to the 2014 Share Incentive Plan, 96,704,847 ordinary shares have been reserved to be issued to any qualified employees, directors, non-employee directors, and consultants as determined by the board of directors of the Company. The options will be exercisable only if option holder continues employment or provides services through each vesting date. The maximum term of any issued stock option is ten years from the grant date.

Some granted options follow the first category vesting schedule, one-fourth (1/4) of which shall vest and become exercisable upon the first anniversary of the date of grant and one-eighth (1/8) of which shall vest and become exercisable on each half of a year anniversary thereafter. Some granted options follow the second category vesting schedule, one-fourth (1/4) of which shall vest upon the first anniversary of the grant date and one-sixteenth (1/16) of which shall vest on each three months thereafter. Under the second category vesting schedule, in the event of the Company’s completion of an IPO or termination of the option holder’s employment agreement by the Company without cause, the vesting schedule shall be accelerated by a one-year period (which means that the whole vesting schedule shall be shortened from four years to three years). For the third category vesting schedule, all options shall vest upon the first anniversary of the grant date, and in the event of the Company’s completion of an IPO.

The option holders may elect at any time to exercise any part or all of the vested options before the expiry date.

	Number of			Weighted- average exercise price		Weighted- average grant date fair value
	options			(US$)		(US$)
Outstanding as at January 1, 2021		5,983,900			0.23		1.93
Exercised		(2,992,122	)		0.24		1.92
Outstanding as at December 31, 2021		2,991,778			0.22		1.94
Vested and expected to vest as at December 31, 2021		2,991,778			0.22		1.94
Exercisable as at December 31, 2021		2,991,778			0.22		1.94
Non vested as at December 31, 2021		-			-		-
Outstanding as at January 1, 2022		2,991,778			0.22		1.94
Exercised		(1,579,006	)		0.23		1.94
Outstanding as at December 31, 2022		1,412,772			0.22		1.93
Vested and expected to vest as at December 31, 2022		1,412,772			0.22		1.93
Exercisable as at December 31, 2022		1,412,772			0.22		1.93
Non vested as at December 31, 2022		-			-		-
Outstanding as at January 1, 2023		1,412,772			0.22		1.93
Exercised		(479,788	)		0.25		1.90
Forfeited		(21,920	)		0.27		1.93
Outstanding as at December 31, 2023		911,064			0.20		1.95
Vested and expected to vest as at December 31, 2023		911,064			0.20		1.95
Exercisable as at December 31, 2023		911,064			0.20		1.95
Non vested as at December 31, 2023		-			-		-

The weighted average price of the shares at the time these options were exercised was US$9.90 per share (equivalent to approximately RMB63.07), US$2.85 per share (equivalent to approximately RMB19.63) and US$3.92 per share (equivalent to approximately RMB27.86) during the years ended December 31, 2021, 2022 and 2023.

Share options outstanding at the end of the year have the following expiry date and exercise prices:

			As at December 31,
Expiry date	Exercise price		2022		2023
10 years commencing from the date of grant of options		US$0.000076		256,210		219,210
		US$0.27		1,156,562		691,854
Total				1,412,772		911,064
Weighted average remaining contractual life of    options outstanding at end of year:			2.91			1.88

(ii)2017 Restricted Share Scheme and 2017 Option Plan

Followed the completion of the Merger, the Company has reserved certain ordinary shares to be issued to any qualified employees of Tencent Music Business transferred to the Group.

Pursuant to the RSUs agreements under the 2017 Restricted Share Scheme, subject to grantee’s continued services to the Group through the applicable vesting date, some RSUs follow the first category of vesting schedule, one-fourth (1/4) of which shall vest eighteen months after grant date, and one-fourth (1/4) every year after. Some granted RSUs shall follow the second vesting schedule, half (1/2) shall vest six months after grant date, and the other half shall vest six months thereafter. Other granted RSUs shall follow the third vesting schedule, which were divided into range of half, one to third and one to fourth tranches on an equal basis as at their grant dates, and the tranches will become exercisable in each subsequent year.

Movements in the number of RSUs for the years ended December 31, 2021, 2022 and 2023 are as follows:

	Number of awarded shares
	Year ended December 31,
	2021			2022			2023
Outstanding as at January 1		41,011,362			43,728,098			59,463,350
Granted		19,136,384			35,601,446			20,502,878
Vested		(13,096,270	)		(14,787,382	)		(23,885,214	)
Forfeited		(3,323,378	)		(5,078,812	)		(5,355,522	)
Outstanding as at December 31		43,728,098			59,463,350			50,725,492
Expected to vest as at December 31		39,425,569			53,009,743			45,097,852

The fair value of the restricted shares was calculated based on the fair value of ordinary shares of the Company. The weighted average fair value of restricted shares granted during the years ended December 31, 2021, 2022 and 2023 was US$5.82 per share (equivalent to approximately RMB37.06 per share), US$2.15 per share (equivalent to approximately RMB14.83 per share) and US$3.78 per share (equivalent to approximately RMB26.83 per share), respectively.

Share options granted are generally subject to a four-batch vesting schedule as determined by the board of directors upon the grant. One-fourth (1/4) of which shall vest nine months or eighteen months after grant date, respectively, as provided in the grant agreement, and one-fourth (1/4) of which vest upon every year thereafter.

	Number of options			Weighted- average exercise price (US$)		Weighted- average grant date fair value (US$)
Outstanding as at January 1, 2021		21,151,186			4.45		2.68
Granted		8,543,982			5.54		2.81
Exercised		(4,360,740	)		1.92		2.26
Forfeited		(541,488	)		5.70		2.90
Outstanding as at December 31, 2021		24,792,940			5.24		2.79
Vested and expected to vest as at December 31, 2021		23,552,634			5.21		2.79
Exercisable as at December 31, 2021		9,580,612			4.00		2.64
Non vested as at December 31, 2021		15,212,328			6.03		2.88
Outstanding as at January 1, 2022		24,792,940			5.24		2.79
Granted		24,957,454			2.05		1.02
Exercised		(566,612	)		0.68		2.67
Forfeited		(1,079,240	)		4.78		2.25
Outstanding as at December 31, 2022		48,104,542			3.65		1.89
Vested and expected to vest as at December 31, 2022		45,601,007			3.68		1.91
Exercisable as at December 31, 2022		14,272,122			4.93		2.75
Non vested as at December 31, 2022		33,832,420			3.11		1.52
Outstanding as at January 1, 2023		48,104,542			3.65		1.89
Granted		1,958,914			3.81		2.18
Exercised		(3,851,238	)		2.16		1.42
Forfeited		(2,398,792	)		4.49		2.15
Outstanding as at December 31, 2023		43,813,426			3.74		1.93
Vested and expected to vest as at December 31, 2023		42,189,736			3.77		1.94
Exercisable as at December 31, 2023		21,062,538			4.65		2.42
Non vested as at December 31, 2023		22,750,888			2.90		1.47

The weighted average price of the shares at the time these options were exercised was US$9.52 per share (equivalent to approximately RMB60.68), US$3.13 per share (equivalent to approximately RMB21.59) and US$3.96 per share (equivalent to approximately RMB28.08) during the years ended December 31, 2021, 2022 and 2023, respectively.

The fair value of share options were valued using the Binomial option-pricing model.

Assumptions used in the Binomial option-pricing model are presented below:

	Year ended December 31,
	2021	2022	2023
Risk free interest rate	1.22%-1.63%	2.15%-2.92%	3.46%-3.83%
Expected dividend yield	0%	0%	0%
Expected volatility	43.5%-50%	55%-60%	60%
Exercise multiples	2.2-2.8	2.2-2.8	2.2-2.8
Contractual life	10 years	10 years	10 years

Share options outstanding at the end of the year have the following expiry date and exercise prices:

Expiry date	Exercise price		December 31,		December 31,
			2022		2023
10 years commencing from the date of grant of options		US$0.27		818,024		539,620
		US$1.93		15,952,792		14,213,356
	US$2.24~US$2.32			12,871,384		10,527,104
		US$3.32		307,792		2,011,512
	US$4.04 ~ US$4.24			579,952		254,952
		US$5.29		5,803,160		5,283,344
	US$6.20 ~ US$6.37			4,015,280		3,767,380
	US$7.05 ~ US$7.61			7,587,078		7,047,078
		US$9.53		169,080		169,080
Total				48,104,542		43,813,426
Weighted average remaining contractual life of options outstanding at end of year:				8.12		7.22

(b)Share-based compensation plans of Tencent

Tencent operates a number of share-based compensation plans (including share option scheme and share award scheme) and granted certain share options and shares awards to the employees of the Group prior to the Merger in July 2016 or any employees of Tencent Group transferred to the Group. No new grant to the employees of the Group by Tencent occurred during the years ended December 31, 2021, 2022 and 2023. As at December 31, 2023, there was no share options exercisable or RSUs under share-based compensation plans of Tencent.

(c)Expected retention rate of grantees

The Group has to estimate the expected yearly percentage of grantees that will stay within the Group at the end of the vesting periods of the options and awarded shares (the “Expected Retention Rate”) in order to determine the amount of share-based compensation expenses charged to the consolidated income statement. As at December 31, 2022 and 2023, the Expected Retention Rate of the Group was assessed to be 87%-95%.