White Collar | Should dual-class shareholding firms be allowed into the Hang Seng Index?
Markets hate uncertainty. Hong Kong needs indices compliers’ final decision on dual-class share structure as quickly as possible
As Hong Kong Exchanges and Clearing (HKEX) busies itself consulting on detailed trading rule changes, to pave the likely way for companies seeking dual-class share structures to list in Hong Kong, it’s time to outline exactly what their inclusion in the city’s benchmark Hang Seng Index would mean.
According to a proposal by HKEX, a one-month consultation period ends on March 23.
Its plan is to attract three categories of new-economy companies to list here: large biotech companies without revenue, giant dual-class shareholding structured new economies companies, and US-listed mainland new-economy companies looking for a secondary listing.
Dual-class shareholding allows founders or key management to own a premium class of shares which gives them voting right over other shareholders.
They are popular among many tech firms such as US tech firm Google and Facebook, and pointedly mainland e-commerce giant Alibaba Group, which owns South China Morning Post. The fact Hong Kong could not then offer Alibaba a dual-class structure was seen as a strong reason why the tech giant chose New York for its record-breaking US$25 billion float in 2014.
With several “unicorns” (start-ups worth more than US$1 billion) expected to seek public funding in the not-too-distant future, such as Xiaomi, WeLab, Lufax, and Ant Financial Holdings, officials in Hong Kong are anxious not to have a repeat of Alibaba.