3 Things You Should Know About SGX Dual-Class Share Listing
16/09/2016 at 10:54 am #535
The Singapore’s stock exchange (SGX) is likely to allow dual-class share structure after given the go-ahead by the Listings Advisory Committee (LAC). Having suffered a 17-year low of $430 million worth of deals in the year 2015, a dual-class shares structure might help lure international businesses to the exchange.
With the ongoing debate about the pros and cons of a dual-class share structure, here are 3 interesting facts about dual-class shares structure Singaporeans should know.
1. Manchester United
One of Singaporean’s favourite football team, Manchester United, had the intention to launch its Initial Public Offering on SGX in 2012. However, SGX lost out New York Stock Exchange because it was unable to obtain approval for a dual class share structure.
2. Class A Shares vs Class B Shares
A dual-class share structure mainly consists of Class A and Class B shares, where the rights and voting power of each class differs. The class of shares offered to company founders and controlling shareholders usually carries more voting rights and control over the company, compared to the class offered to the general public.
This means that the dual-class share structure allows a small group of privileged shareholders control over the company despite holding smaller stakes.
3. Protecting the Longer Term Vision of Founders
The concept of dual-class share structure is not foreign to companies such as Google and Ford, which are listed on the New York Stocks Exchange. Insiders of Google were given Class B shares which come with 10 votes each, compared to publicly sold Class A shares that come with only 1 vote each. The Ford family controls 40% of the voting power despite having only 4% of the total equity in the company.
It is easy to dislike a dual-class share structure as it seems unfair to the general public. However, founders of companies often have a longer term vision in mind compared to investors who tend to be more focused on short-term gains. The structure hence, protects the founders against short-term pressure for returns, while allowing public equity market to provide financing. The path is clear, the general public will be the ones providing the majority of the capital required for the company while the management will be the ones making decisions on company’s direction.
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