scholarly journals Permitting dual class shares in the UK premium listing regime – a path to enhance rather than compromise investor protection

Legal Studies ◽  
2021 ◽  
pp. 1-23
Author(s):  
Min Yan
Keyword(s):  
Stock Exchange ◽  
Investor Protection ◽  
Market Mechanism ◽  
High Tech ◽  
Shareholder Protection ◽  
Shareholder Engagement ◽  
The One ◽  
Dual Class Shares ◽  
The Uk ◽  
Dual Class

Abstract Unequal voting rights arrangements under dual class share structures are increasingly favoured by entrepreneurs and founders of technology companies, in order to retain a degree of control over the company that is disproportionate to their equity shareholdings. The rise of such share structures around the world has put competitive pressure on the UK Government and the country's financial regulator to relax the one share, one vote principle in the premium listing regime of the London Stock Exchange, to ensure the UK equities market remains world-leading and fit for the future development of the economy. There is, however, a long tradition of institutional investors’ distaste for dual class share structures. In fact, the near extinction of dual class listings in the UK capital markets can be largely attributed to the opposition of large British institutions. Therefore, this paper will critically discuss the conflict between the demands to attract listings from high-tech and innovative companies and concerns of a race to the bottom in the UK context. It rebuts criticisms based on investor protection and argues that if dual class companies were permitted to list in the Premium Segment, the higher level of regulatory protection provided in the premium listing regime would help enhance minority shareholder protection and shareholder engagement. The additional safeguarding measures, as we have seen from other global financial centres, would also help to restrain the potential abuse of controllers’ weighted voting power. Together with the market mechanism, permitting dual class listings in the Premium Segment should be welcomed.

Founders without Limits

2021 ◽  
Author(s):  
Bobby V. Reddy
Keyword(s):  
Stock Exchange ◽  
High Growth ◽  
Global History ◽  
Public Markets ◽  
The Us ◽  
History Of ◽  
The Uk ◽  
Dual Class ◽  
Blue Chip

Big Tech has flourished on the US public markets in recent years with numerous blue-chip IPOs, from Google and Facebook, to new kids on the block such as Snap, Zoom, and Airbnb. A key trend is the burgeoning use of dual-class stock. Dual-class stock enables founders to divest of equity and generate finance for growth through an IPO, without losing the control they desire to pursue their long-term, market-disrupting visions. Bobby Reddy scrutinises the global history of dual-class stock, evaluates the conceptual and empirical evidence on dual-class stock, and assesses the approach of the London Stock Exchange and ongoing UK regulatory reforms to dual-class stock. A policy roadmap is presented that optimally supports the adoption of dual-class stock while still protecting against its potential abuses, which will more effectively attract high-growth, innovative companies to the UK equity markets, boost the economy, and unleash the true potential of 'founders without limits'.

Revisiting the viability to allow dual-class share structure companies to list in the financial market of Hong Kong

2018 ◽  
Vol 47 (3) ◽  
pp. 167-195 ◽  
Author(s):  
John Kong Shan Ho
Keyword(s):  
New York ◽  
Hong Kong ◽  
Initial Public Offering ◽  
Financial Market ◽  
Stock Exchange ◽  
The One ◽  
Public Offering ◽  
The Right ◽  
Dual Class ◽  
Share Structure

The request of Alibaba, China’s largest e-commerce company, to allow a self-selected group of its past and present management known as the ‘partners’ the right to nominate a majority of the directors in its negotiation with the Hong Kong Stock Exchange (HKEx) for an initial public offering (IPO) in 2013 reignited a new round of debate over the one share, one vote policy, which has survived for three decades in Hong Kong. Alibaba’s IPO application to list on the HKEx was eventually rejected which ultimately led to the company’s decision to list on the New York Stock Exchange. In late 2017, the debate on whether companies with dual-class share (DCS) structure should be allowed to list in Hong Kong re-emerged as the HKEx has announced that it would amend its listing rules to enable companies with DCS structure to list on its exchange, subject to certain safeguards and restrictions. This article examines what measures Hong Kong could adopt to allow companies with DCS structure to list on its exchange despite legal and institutional shortcomings of its financial market. In doing so, it will also make reference to other major financial markets in the world and examine how other jurisdictions have handled the issue of DCS structure companies.

scholarly journals Pyramidal Ownership and Company Value: Evidence from Polish Listed Companies

2021 ◽  
Vol 15 (4) ◽  
pp. 479-498
Author(s):  
Maria Aluchna ◽  
Tomasz Kuszewski
Keyword(s):  
Firm Value ◽  
Stock Exchange ◽  
Listed Companies ◽  
Ownership Concentration ◽  
Company Value ◽  
Warsaw Stock Exchange ◽  
Pyramidal Ownership ◽  
Dual Class Shares ◽  
Dual Class ◽  
Majority Shareholder

This paper examines the effects of pyramidal ownership. Using the sample of 162 non-financial companies listed on the Warsaw Stock Exchange during the period 2010-2014, we verify the relation between the adoption of a pyramidal structure and company value. Specifically, we show that the link between pyramidal ownership and company value is more complex than previously thought addressing the aspect of ownership concentration and dual class shares. Our results indicate that the use of pyramids is associated with a higher value measured by Tobin’s Q, supporting the efficient monitoring hypothesis. Contrary to our expectations the combination of pyramidal ownership and dual class shares is correlated with lower Q. Finally, while the adoption of a pyramid by a majority shareholder does not impact firm value, the combination of a pyramid, ownership concentration and dual class shares is associated with higher Q. This finding suggests that the blockholder ownership outweighs the possible cost of excessive disproportionate ownership and that pyramids and dual class shares have different effects on company value.

Minority Shareholder Protections and the Private Benefits of Control for Swedish Mergers

2004 ◽  
Vol 39 (1) ◽  
pp. 167-191 ◽  
Author(s):  
Martin Holmén ◽  
John D. Knopf
Keyword(s):  
Tax Compliance ◽  
Limited Evidence ◽  
Private Benefits ◽  
Private Benefits Of Control ◽  
Shareholder Protection ◽  
Degree Of Separation ◽  
Using Data ◽  
Dual Class Shares ◽  
Dual Class ◽  
High Degree

AbstractSweden has a high degree of separation of ownership from control through pyramids, dual-class shares, and cross-holdings. This increases the potential for private benefits of control. However, Sweden's extralegal institutions—tax compliance and newspaper circulation—are consistent with greater shareholder protection. Using data on Swedish mergers we find limited evidence of shareholder expropriation. Apparently, Sweden's extralegal institutions offset the drawback of weak corporate governance.

scholarly journals Dual-Class System of Capital Company Formation in the BRICS Countries

2021 ◽  
Vol 12 (3) ◽  
pp. 274-287
Author(s):  
R. O. Voskanian
Keyword(s):  
Stock Exchange ◽  
Voting Rights ◽  
Business Environment ◽  
High Tech ◽  
Synthesis Methods ◽  
High Tech Sector ◽  
Class System ◽  
Brics Countries ◽  
The Moment ◽  
Dual Class

Purpose: this paper determinates the current level of penetration of the dual-class system of capital company formation in the BRICS group.Methods: are based on the use of methods of analysis, systematization, generalization. A comparative and synthesis methods have been also used to identify trends and patterns in the introduction of multi-voting shares in the BRICS group.Results: the dual-class system of capital company formation in Russia is practically not studied. The article reveals that in Brazil and Russia, despite the discussion of the possibility of distributing multi-voting shares, the legislation does not imply the possibility of using the dual-class system. This issue has not yet been discussed in South Africa.It has been identified that the main reason for the legislative permission for using multi-voting shares is the need to develop companies in the high-tech sector. Another reason is the massive listing of foreign high-tech companies on American stock exchanges, due to the possibility of using the dual-class system. This predetermined the introduction of amendments to the legislation of India and China, according to which companies in the high-tech sector that have not yet passed an IPO can use differential voting rights.It has been receiving that the Indian market is the only one where shares with differentiated voting rights are placed on the stock exchange. At the moment, three companies that passed the IPO before the amendments to the legislation use differentiated voting rights, but not upwards, but on the contrary – downwards: “four shares – three votes”. This characteristic determines the trading of such stocks at a discount.Conclusions and Relevance: harmonization of opportunities for the use of financial instruments in the BRICS market can strengthen the economic potential of states. Allowing the usage of multi-voting shares improves the business environment for high-tech companies and reduces the need for company founders to look for IPO opportunities in jurisdictions where a dual-class capital formation system is allowed.

scholarly journals UP THE HILL AND DOWN AGAIN: CONSTRAINING DUAL-CLASS SHARES

2021 ◽  
Vol 80 (3) ◽  
pp. 515-551
Author(s):  
Bobby V. Reddy
Keyword(s):  
Cash Flow ◽  
High Growth ◽  
High Quality ◽  
Majority Control ◽  
Dual Class Shares ◽  
The Uk ◽  
Cash Flow Rights ◽  
Dual Class ◽  
Institutional Shareholders ◽  
The Hill

AbstractThe headline recommendation of Jonathan Hill's 2021 UK Listing Review was that dual-class shares structures be permitted on the London Stock Exchange's premium tier. The aspiration was to encourage more high-quality UK equity listings, particularly of high-growth tech-companies, for which dual-class shares are especially beneficial. Dual-class shares allow founders to list their companies, and retain majority-control, while holding significantly less of the cash-flow rights in the company. However, in the UK, dual-class shares are usually discussed in qualified terms, in an attempt to placate sceptical institutional shareholders. Using the UK Listing Review as a platform, this article explores the constraints commonly proposed to be attached to dual-class shares, and argues that, although it is important to protect public shareholders, constraints must not be too severe. A balance must be respected, otherwise UK initiatives to relax rules on dual-class shares could deter the very companies they are intended to attract.

scholarly journals FINDING THE BRITISH GOOGLE: RELAXING THE PROHIBITION OF DUAL-CLASS STOCK FROM THE PREMIUM-TIER OF THE LONDON STOCK EXCHANGE

2020 ◽  
Vol 79 (2) ◽  
pp. 315-348
Author(s):  
Bobby V. Reddy
Keyword(s):  
Cash Flow ◽  
Stock Exchange ◽  
High Growth ◽  
London Stock Exchange ◽  
Majority Control ◽  
Uk Government ◽  
Policy Priority ◽  
The Uk ◽  
Cash Flow Rights ◽  
Dual Class

AbstractThere is a dearth of British tech-companies listing on the London Stock Exchange (LSE), and the LSE lacks a large, innovative tech-company such as Google. The UK Government, concerned as to the loss of UK tech-companies to foreign acquirors, views the encouragement of UK tech-firm listings as a policy priority. Dual-class stock, currently prohibited from the LSE Main Market's premium-tier, allows founders to list their firms, and retain majority-control, while holding significantly less of the cash-flow rights in the company. This article will broach the potential for dual-class stock to attract UK tech-company listings, and explore the benefits that dual-class stock can engender for UK tech-companies and their public shareholders. The risks of dual-class structures will also be discussed, but it will be shown that in a UK regulatory context, in relation to high-growth tech-companies, the risks may not be as severe as presumed, and easily moderated through judicious controls.

Researching (with) Major Food Retailers

2015 ◽  
Vol 15 (3) ◽  
pp. 33-39 ◽  
Author(s):  
David Evans
Keyword(s):  
Food Systems ◽  
Academic Research ◽  
Social Scientists ◽  
Major Food ◽  
Food Retailers ◽  
Food Retailer ◽  
The One ◽  
The Uk ◽  
The Relationship ◽  
Opening Up

This paper considers the relationship between social science and the food industry, and it suggests that collaboration can be intellectually productive and morally rewarding. It explores the middle ground that exists between paid consultancy models of collaboration on the one hand and a principled stance of nonengagement on the other. Drawing on recent experiences of researching with a major food retailer in the UK, I discuss the ways in which collaborating with retailers can open up opportunities for accessing data that might not otherwise be available to social scientists. Additionally, I put forward the argument that researchers with an interest in the sustainability—ecological or otherwise—of food systems, especially those of a critical persuasion, ought to be empirically engaging with food businesses. I suggest that this is important in terms of generating better understandings of the objectionable arrangements that they seek to critique, and in terms of opening up conduits through which to affect positive changes. Cutting across these points is the claim that while resistance to commercial engagement might be misguided, it is nevertheless important to acknowledge the power-geometries of collaboration and to find ways of leveling and/or leveraging them. To conclude, I suggest that universities have an important institutional role to play in defining the terms of engagement as well as maintaining the boundaries between scholarship and consultancy—a line that can otherwise become quite fuzzy when the worlds of commerce and academic research collide.

Price Effects of Dual-Class Shares

1986 ◽  
Vol 42 (1) ◽  
pp. 58-67 ◽  
Author(s):  
Vijay M. Jog ◽  
Allan L. Riding
Keyword(s):  
Price Effects ◽  
Dual Class Shares ◽  
Dual Class
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