FSDC proposes specialised listing boards in wake of Alibaba IPO loss

Advisory group wants specialised listing boards, including one for unique shareholder structures

PUBLISHED : Thursday, 19 June, 2014, 12:55am
UPDATED : Thursday, 19 June, 2014, 1:55am

Hong Kong's Financial Services Development Council proposed yesterday the creation of several new listing boards, including one specialising in companies with unique shareholding structures, in a widely anticipated report which came after the city lost the mega initial public coffering of e-commerce giant Alibaba Group to New York.

"We recommend that Hong Kong's policymakers, stock exchange and regulators should conduct an overall review on how to change our regulation and market structure to enhance Hong Kong's competitiveness to capture companies to have their IPOs here," said Bonnie Chan, the policy research committee member of the council, the government's highest level financial services advisory group.

By introducing specialised listing boards, Chan said it would "enable better matching between different types of issuers and investors" and "accommodate innovations in shareholding and management structure". This would help Hong Kong to develop as a hub for firms in specific industries such as mining and natural resources, she said.

A board recognising special shareholder structures would be welcomed by the likes of Alibaba, London-listed Jardine Matheson and US-listed English football club Manchester United which all have unique shareholding structures.

Laurence Li, convenor of the council's policy research committee, denied the changes are aimed at being tailor-made for any individual firm.

"After the Shanghai and Hong Kong stock through train scheme is implemented later this year, it will attract more companies to list here. We need to make sure our markets are ready for that," he said.

Alibaba was in talks last October with Hong Kong Exchanges and Clearing to list with a share structure that would allow its founders and top management to nominate most board members despite holding a minority stake. The exchange refused to grant an exemption because the Securities and Futures Commission felt such a structure would be in violation of the one-share-one-vote principle, prompting Alibaba to decide last March to list in the US, where dual class share structures are allowed.

The council proposed that Hong Kong follow London's lead with several markets catering to different companies and investors, including premium and standard boards for companies wanting different regulations. It also has different boards called the alternative, professional or specialist markets which appeal to different investors.

The report also looked at how to shorten the IPO period, the requirement of cornerstone investors and the mechanism to allocate shares between institutional and retail investors.