By: Kheng-Liang Tan
Seeking to lure international listings on the Singapore bourse due to a limited hinterland which may not provide a “continuous pipeline of IPO-ready listing applicants”, the Singapore Exchange (SGX) has gotten the nod from its listing advisory committee to allow dual-class shares.
Such an arrangement will allow a company to offer different classes of shares during its Initial Public Offering.
These different classes of shares carry different voting rights and are usually adopted by companies – including Facebook and Google’s Parent Company Alphabet – who wish to raise public capital but not give up the control via a listing.
In extreme cases, Charlie Ergen, CEO of NYSE-listed Echostar Communications, has about 5% of the company’s share, but his super-voting class-A shares give him a more than 90% of the voting rights.
In the US, such companies are subject to more stringent reporting requirements and shareholders have the ability to band together on lawsuits.
Under SGX’s proposed new structure, newly listed companies will now be permitted to have weighted voting rights.
The companies will have to provide a compelling reason to do so, and be subjected to safeguards to mitigate the risks associated with such structures.
However, existing companies will not be allowed to convert to such a structure as the existing shareholders did not invest in the company with knowledge of the risks associated with such structures.
According to Bloomberg, such a move may help narrow the city’s gap with Hong Kong, which is presently Asia’s biggest market for new listings.
Earlier in August, SGX has prepared a former offer to purchase London’s Baltic Exchange.
SGX has been struggling to revive investor confidence and securities trading volume against increasing competition, volatile global market conditions and a string of trading disruption.
In an earlier report, the move is “intended to enhance SGX’s attractiveness as a listing venue and to broaden and deepen Singapore’s capital market.”
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