Hong Kong Stock Exchange

Multiple-market structure can help attract start-ups, says London Stock Exchange chief

Bourse is considering bringing its ‘ELITE’ programme, which offers 18 months of support and mentoring to companies to prepare them for a listing, to Asia

PUBLISHED : Thursday, 17 November, 2016, 5:17pm
UPDATED : Thursday, 17 November, 2016, 11:15pm

London’s multiple-market structure enables companies ranging from innovative start-ups to mature, established firms to raise funds, according to London Stock Exchange chief executive Xavier Rolet.

He declined to comment on whether listing reforms in Hong Kong – which might include introducing additional boards with different listing requirements – could help attract more e-commerce and technology companies to list their shares there.

But he did say that in his experience it was advantageous to offer several different markets catering for a broader range of prospective companies.

“I can only share our experience that shows it would be better to have different markets to meet the different needs of companies,” he said.

London Stock Exchange agrees with the Hong Kong stock exchange principle of “one share, one vote”, which prevents companies with a dual-class structure from floating their shares, because it is fair to investors, said Rolet.

However, he said he understands why some e-commerce founders might be against it because they want to maintain control of their company despite holding a minority stake. In a dual-share listing, the stocks carry unequal voting rights.

The London Stock Exchange allows firms with this dual-share structure to list on its High Growth Market, which is in between the AIM, the standard market and premium market.

“The four markets have different [listing] requirements and can meet the needs of different types of companies,” said Rolet.

Hong Kong is currently consulting the market on listing reforms which propose to set up two separate committees – a listing policy committee to set policies and a listing regulatory committee to approve complicated listing applications. The latest consultation period ends this Friday.

Calls for reform came after e-commerce giant Alibaba chose New York over Hong Kong for its US$25 billion IPO two years ago because the former allows dual-share listings. The structure has been banned in Hong Kong since the 1980s because it is seen as breaching the long-held “one share, one vote” principle.

Regulators refused Alibaba’s request for exemption from the rule, which would have allowed founder Jack Ma and key executives to nominate a majority of the board. Alibaba is the owner of the South China Morning Post.

Ma earlier this month criticised the Hong Kong listing rule, saying it is outdated and cannot match the needs of a modern economy.

Rolet said the London Stock Exchange is aware of many start-ups and private companies that want to raise funds but are not yet qualified to list.

The bourse has thus set up a programme called ELITE which allows such companies to undergo 18 months of support and mentorship to prepare them for a listing. Senior executives participate in a number of workshops aimed at helping them review and change their business model.

When they are ready, the companies can try to raise funds through investors or apply to list on the stock exchange.

“We have had 450 companies in 27 countries in Europe, America and Africa [on the programme],” said Rolet. “We are considering bringing it to Asia where there are many high growth companies.”

“Our youngest participant company in the ELITE programme is just seven months old, and the oldest one is a 700-year old wine making company. Some are start-ups while some of them are family-owned businesses.

“There is no guarantee that these companies will succeed and some of them may collapse. But on average, these companies go on to have an annual growth rate of 60 per cent.”