February 16, 2017 / 11:31 AM / a year ago

UPDATE 1-Singapore kicks off public consultation on dual-class share structures

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By Fathin Ungku

SINGAPORE, Feb 16 (Reuters) - Singapore took another step towards making dual-class share structures a reality in the city-state, with the Singapore Exchange Ltd (SGX) kicking off a public consultation on the controversial market mechanism.

SGX, which has seen a slump in initial public offerings (IPOs) in recent years, said on Thursday the two-month long public consultation will look into admission criteria and safeguards against possible risks.

The structure of dual-class shares, which typically gives one set of shareholders greater voting rights than others, has been favoured by many owners of new age industries such as technology, with the extra voting power given to top executives seen as protection against pressure for short-term returns.

But the structure has also come in for criticism from corporate governance activists, who have warned of its potential abuse by company insiders.

The criticism is a key reason why the structure is still not permitted in Hong Kong, despite a years-long debate sparked by Chinese e-commerce giant Alibaba Group’s decision more than two years ago to make its record $25 billion IPO not in Hong Kong but in New York where dual-class shares are allowed.

SGX also lost out on the IPO of Manchester United to New York in 2012 because it could not obtain approval for a dual-class share structure.

Worried about its competitiveness as an IPO destination, Singapore has moved to re-examine its position on dual-class shares, and last year SGX’s Listings Advisory Committee gave the stock exchange the green light to allow companies to list with such structures.

And earlier this month, a key Singapore advisory panel, the Committee on the Future Economy (CFE), recommended the introduction of the dual-class share structure as part of its plan to ensure the city-state maintains an economic growth of 2-3 percent.

“If we collectively do this right... (dual-class share structures) could radically change the business landscape, create jobs and transform our economy,” Chew Sutat, SGX’s head of equities and fixed income, told a news conference.

SGX is looking at an admission criteria “over and above” current prerequisites such as a minimum market capitalisation of S$500 million ($352 million) and prohibiting the issuance of multiple vote shares for companies which are already listed, the bourse said. ($1 = 1.4190 Singapore dollars) (Reporting by Fathin Ungku and Anshuman Daga; Editing by Sam Holmes and Muralikumar Anantharaman)

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