Hong Kong mulls changes to ‘one vote, one share’ policy

After Alibaba opts to list in New York, exchange could allow weighted voting rights

The Hong Kong stock exchange is considering introducing some changes, including the introduction of dual-class shares, after Alibaba opted to launch its initial public offering in distant New York instead of Hong Kong.

Exchange owner Hong Kong Exchanges and Clearing (HKEx) has asked market participants whether to allow weighted voting rights and scrap its current policy of one vote per share after the failure of talks with Chinese e-commerce giant Alibaba, which sought to maintain its ‘partnership’ structure after its IPO.

A 108-page ‘concept paper’ published by the exchange floats the idea of allowing weighted voting rights and asks for comments by a November 30 deadline. If reaction is firmly in favor of a change, an additional process would be required to determine how and when to change.

‘Almost 25 years have passed since the restriction on weighted voting right structures was implemented in the listing rules,’ David Graham, HKEx’s chief regulatory officer and head of listing, says in a note announcing the paper. ‘Our aim in publishing the concept paper is to provide a formal opportunity for an informed debate on a topic that is of great market interest and potential significance to Hong Kong, and which has been the subject of much discussion and commentary.’

Alibaba wanted a structure that allowed its partners, who own 10 percent of the company, to keep control of the board. After announcing plans to launch the IPO in New York, Alibaba reserved the right to appoint two shareholders to its board without shareholder approval, ensuring the company a majority on the board.

The concept paper says a change could help the exchange gain mainland Chinese listings in the future. ‘We principally compete with US exchanges for mainland Chinese listings. These exchanges permit WVR (weighted voting rights) structures,’ the paper says. ‘However, the permissive nature of the US regime has to be put in the context of the rights of shareholders investing in such companies.’


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