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May 01, 2018

Hong Kong exchange approves dual-class shares

Move hailed as start of ‘exciting new era’

After much discussion in the region, Hong Kong Exchanges & Clearing (HKEX) has approved the use of dual-class share structures.

It is a move that will radically transform the IPO rules on the exchange and throw down the gauntlet to compete with New York for the listings of some of the world’s major companies.

The decision ensures firms with shares that have with different voting rights will now be able to list in Hong Kong – abolishing rules that stopped Alibaba from listing on the HKEX. Companies will be able to apply under the new regime starting immediately.

‘After a remarkable four-year journey of careful deliberation, HKEX’s new listing regime is finally open for business. We are now at the dawn of an exciting new era for Hong Kong’s capital markets,’ says HKEX CEO Charles Li in a statement. He adds that a ‘double-digit’ number of firms are planning to list under the new regime rules and the first dual-class IPO will happen by July.

Last year Hong Kong lost its IPO crown to New York, but expectations are that it will regain it this year, driven by the new rules.

Some of the world’s largest technology companies, including Facebook and Google, have share classes with different voting rights. The aim is usually to protect the vision and power of the company founder after going public. The structures have created much debate among investors and corporate governance advocates because they ultimately reduce the rights of other shareholders and investors, and some observers have voiced concern over HKEX’s plans.