Singapore’s Dual-Class Shares Change Looks Like Just a First Step

Singapore Backs Dual-Class Shares
  • Listing advisory committe votes in favor of structure
  • Dual-class shares will be subject to governance safeguards

Singapore’s stock exchange won approval from its listing advisory committee to allow dual-class shares, as it seeks to lure international businesses.

Companies will be permitted to have weighted voting rights, subject to various corporate governance safeguards to mitigate the inherent risks of such structures, according to the report by Singapore Exchange Ltd.’s committee published Monday.

The move may help narrow the city’s gap with Hong Kong, Asia’s biggest market for new listings, where minority-control voting structures aren’t permitted. Hong Kong lost Alibaba Group Holding Ltd.’s $25 billion initial public offering to the U.S. after regulators rejected the Chinese e-commerce company’s governance structure. Singapore paved the way for dual-class shares by amending laws governing companies earlier this year.

“Definitely, this is a positive move,” said Steve Melhuish, chief executive officer of Singapore-based PropertyGuru, which raised the second-largest amount by a tech company in Southeast Asia last year. “But there is still some work to be done,” including lack of comparable tech startups and difficulty in valuing companies in the market, he said.

Singapore has been introducing rules to try to attract more public companies, including allowing the listing of resource firms without an earnings track record and dual-currency trading for stocks and exchange-traded funds. Any change to the listing rules will only occur after a public consultation process, SGX Chief Executive Officer Loh Boon Chye said in an e-mailed statement.

“The envisaged dual-class share structure listing framework is intended to enhance SGX’s attractiveness as a listing venue and to broaden and deepen Singapore’s capital market,” the advisory committee said in its report. “Unlike many other countries, Singapore does not have a vast hinterland providing a continuous pipeline of IPO-ready listing applicants.”

The committee said the “one-share, one-vote” structure will remain the default for new listings unless there’s a compelling reason for a dual-class model.

The listing group’s approval ends a debate over whether such structures compromise the city-state’s levels of corporate governance, a discussion ignited in 2011 when Manchester United Plc was considering to list in Singapore. The U.K. soccer club scrapped its Singapore sale due to market conditions and eventually listed in the U.S. under a dual-class share structure.

In the U.S., listed companies with more than one type of share class, including Alphabet Inc. and Facebook Inc., are subject to more stringent reporting requirements and shareholders have the ability to band together on lawsuits.

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