Bourse Steps Up Its Game -- WSJ
February 24 2018 - 2:02AM
Dow Jones News
By Gregor Stuart Hunter
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (February 24, 2018).
Hong Kong's stock exchange, losing listings to New York and
London, is advancing a plan to permit initial public offerings that
restrict shareholders' voting rights.
Hong Kong Exchanges and Clearing Ltd. is beginning a
public-comment period on a proposal to permit listings by companies
with so-called weighted voting-rights structures. The controversial
structure, which allows founders to exercise disproportionate
voting powers, is used by many U.S. technology companies.
News Corp., the owner of The Wall Street Journal's parent, Dow
Jones & Co., has two classes of shares, giving Rupert Murdoch
and his family greater influence.
The consultation period will close March 23, with conclusions
expected in late April.
The Hong Kong exchange also proposes allowing secondary listings
by Chinese and international companies already listed in the U.S.
or U.K., as well as primary listings by biotech companies that
haven't turned a profit. Both are forbidden under current
rules.
The proposals were first unveiled in December.
The exchange is hoping to attract companies such as smartphone
maker Xiaomi, which is seeking a $100 billion valuation for its IPO
this year. The change could also draw internet stocks that trade
elsewhere, such as China-based e-commerce giant Alibaba Group
Holding Ltd., which in 2014 opted to list on the New York Stock
Exchange.
"We are proposing a listing regime that will boost Hong Kong's
attractiveness for a new generation of companies as well as
investors, bringing more dynamism to our stock market," said
Charles Li, Hong Kong Exchanges' chief executive.
A previous "concept paper" on weighted voting rights was struck
down in 2015 by the Securities and Futures Commission, the city's
financial-market regulator. It warned of damage to the city's
reputation.
At the behest of the Hong Kong government -- headed by a new
chief executive since July 1 -- the exchange and regulator sought a
compromise to avoid losing out to other financial centers.
Hong Kong Exchanges has proposed safeguards, including limiting
restricted voting rights to "innovative companies" with market
capitalizations of at least 10 billion Hong Kong dollars (US$1.28
billion), and capping voting power at 10 votes a share.
Secondary listings would be permitted only for companies already
trading on qualified exchanges, namely in the U.S. or the U.K.
"If we start to get more big name companies here that will
increase the turnover," said Jonathan Garrick, who manages the
Neutron Asia Absolute Return Fund, which would help support the
broader market.
Asset managers in the West have pushed back against structures
that favor controlling shareholders at the expense of new
investors. And last week weighted voting drew criticism from a U.S.
Securities and Exchange Commission member, who said companies
should be required to give up the system after a limited number of
years.
Index firms including FTSE Russell and MSCI have sought to
exclude some companies that limit voting power from their global
benchmarks -- a decision triggered by the New listing of
social-media company Snap Inc., which offers no voting power to
shareholders at all.
Write to Gregor Stuart Hunter at gregor.hunter@wsj.com
(END) Dow Jones Newswires
February 24, 2018 02:47 ET (07:47 GMT)
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