Photographer: Sanjit Das/Bloomberg

Malaysia Weighs Dual-Class Shares as Exchanges Battle for IPOs

  • Decision comes as Singapore, Hong Kong consult on share class
  • Shareholder rights advocates see regional ‘race to the bottom’

Bursa Malaysia Bhd. said it’s considering whether to allow companies with dual-class share structures.

If the bourse operator goes ahead, it would be the third Asian jurisdiction -- after Singapore and Hong Kong -- to take a close look at the contentious issue, opening another front in the battle over shareholder rights.

The structures give company founders and leaders outsized powers that are seen by investor advocates as undermining the one share, one vote system of corporate governance. Approval by Malaysia’s bourse would mean opponents of the structures would face an increasing number of stock exchanges willing to list firms with multiple classes of stock.

“We may undertake a study on its feasibility and whether such a structure is suitable in the context of our capital market,” the exchange said this week in an emailed response to Bloomberg queries. “Bursa Malaysia is always open to exploring new areas in developing our market to ensure that we remain competitive.”

Click here to read a QuickTake Q&A about dual-class shares.

The debate over multi-class shares intensified in recent weeks after index compilers FTSE Russell, a unit of London Stock Exchange Group Plc, and S&P Dow Jones Indices placed restrictions on such structures, under pressure from clients whose trillions of dollars track their gauges.

Hong Kong Exchanges & Clearing Ltd. is consulting on starting a new exchange where dual-class shares would be allowed. In Singapore, the government supported a proposal to allow dual-class shares as part of a package to drive economic growth.

Race to the Bottom

“This is what a race to the bottom looks like,” said Melissa Brown, partner at financial advisory firm Daobridge Capital and a former member of Hong Kong exchange’s listings committee. 

“Bursa Malaysia has worked very effectively to improve the governance foundations of their market, but even Bursa cannot resist the pressure to consider dual-class shares if Singapore and Hong Kong exchanges convince themselves that quantity of IPOs matters more than quality of the overall market,” she said.

Matthew Gibbs, a spokesman for Australian exchange operator ASX Ltd., said it has no plans to allow dual-class shares, but that the company is “closely following” the debate in Hong Kong and Singapore, as well as the U.S., where the structures are allowed.

Y.K. Park, the Hong Kong-based director for responsible investment at APG Groep NV, said South Korea and Japan may follow. The predominance of family-run businesses in the Asia-Pacific region means multi-class structures could have broad appeal for many companies, she said by phone.

“The endgame will be more relaxed rules,” said Park.

— With assistance by Andrea Tan

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