SGX introducing dual-class shares

SGX's net profit was flat year-on-year at $88.4 million, while revenue was up just 2.7 per cent to $205 million. Earnings per share were flat at 8.2 cents.
SGX's net profit was flat year-on-year at $88.4 million, while revenue was up just 2.7 per cent to $205 million. Earnings per share were flat at 8.2 cents.ST PHOTO: DESMOND WEE
SGX's net profit was flat year-on-year at $88.4 million, while revenue was up just 2.7 per cent to $205 million. Earnings per share were flat at 8.2 cents. SGX CEO Loh Boon Chye says Singapore is making huge efforts to transition into the "new econom
SGX CEO Loh Boon Chye says Singapore is making huge efforts to transition into the "new economy".ST FILE PHOTO

Aim is to lure tech stocks; first such listing could come after June

The Singapore Exchange (SGX) is allowing companies with controversial dual-class share structures to have their first, primary listing here - a move to attract hot tech listings.

SGX chief executive Loh Boon Chye told a briefing yesterday that the first listing of a company with a dual-class share structure could come soon after June. "Singapore is making huge efforts to transition into the 'new economy' and we are already recognised as the landing hub for start-ups," he said.

"Some companies might need a capital structure that supports the rapid scaling up of their business. Dual-class shares are one way to do so, but not the only way."

Mr Loh was speaking after the SGX's results for the three months to Dec 31.

Net profit was flat year-on-year at $88.4 million, while revenue was up just 2.7 per cent to $205 million.

Earnings per share were flat at 8.2 cents, while a dividend of five cents a share was maintained.

Higher revenue came from the derivatives segment, where volumes were up but average fees per contract declined. The securities trading and clearing business was flat.

More initial public offerings could be in the pipeline around consumer, healthcare and tech-related companies, said SGX executive vice-president Chew Sutat.

Mr Tan Boon Gin, chief executive of SGX RegCo, the bourse's regulatory unit, said the SGX will publish a response to a consultation on the dual-class shares, with the key features on the framework the exchange will adopt.

It will then consult the market.

"The majority of respondents to our consultation supported implementing a dual-class share structure, and that the final shape of our framework will be driven by market feedback," he said. He added that measures are being explored to protect minority investors, including efforts to enhance the independence of independent directors.

The dual-class share structure is favoured by technology stocks such as Google and Facebook as it allows founders and certain shareholders to have higher voting rights or dividends than others.

But the structure has met with fierce criticism from fund managers and corporate governance activists here and abroad. Critics say it breaches the "one share, one vote" principle and leaves minority shareholders vulnerable.

A Monetary Authority of Singapore spokesman said: "MAS will review the safeguards that SGX will be proposing to mitigate these risks, as well as SGX's education initiatives, to help investors better understand the unique risks of (the) structures."

The SGX's move to allow primary listings of dual-class shares comes just weeks after the Hong Kong Stock Exchange proposed revamping its listing rules to accommodate dual-class shareholding companies and biotech firms without strong records of profitability. The proposal came three years after Alibaba listed in New York after Hong Kong refused to accept its governance structure.

Ms Stefanie Yuen Thio, joint managing partner of TSMP Law Corporation, welcomed the SGX's latest proposal as well as an earlier one to relax quarterly reporting.

"The message is clear: Singapore is open for business, and the authorities will strike a good balance between business-friendliness and robust regulation," she said.

A version of this article appeared in the print edition of The Straits Times on January 20, 2018, with the headline 'SGX introducing dual-class shares'. Print Edition | Subscribe