In this picture taken on Nov 17, 2016, the Hong Kong Exchanges and Clearing Limited (HKEx) flag is seen hoisted outside Exchange Square in Hong Kong. (ANTHONY WALLACE / AFP)
Stock-exchange operator Hong Kong Exchanges and Clearing may abandon a proposed third board but supported introducing dual-class shares to encourage initial public offerings of technology and new-economy companies, market sources said.
Secretary for Financial Services and the Treasury James Lau Yee-cheung declined to comment on whether HKEx had already scrapped the third board proposal but said the government supported dual-class shares.
If HKEx establishes the third board with different share-class structures from the main board, the market then needs to examine the relationship and focus of these two different listing markets
James Lau Yee-cheung, Secretary, Financial Services and the Treasury
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In a dual-class structure a single company offers shares to the general public with limited voting rights while the class available to founders and executives has more voting power and often provides majority control. Many analysts say this share-holding structure cannot protect the rights and interests of minority shareholders.
“If HKEx establishes the third board with different share-class structures from the main board, the market then needs to examine the relationship and focus of these two different listing markets. For the proposed third board, we also need to explore how to lure startups with no profitability performance to pursue listings on the Hong Kong bourse,” Lau said on Monday.
“The HKEx and Securities and Futures Commission will conduct a detailed analysis of the recommendations collected from the consultation, and will release the summary report in due course once consensus are garnered,” Lau said.
Hong Kong has been reviewing listing requirements after the city missed out on mainland internet behemoth Alibaba Group’s IPO in 2014. The public consultation on the proposed third board –providing a listing venue for technology and new-economy companies - ended on August 18.
On Monday, Hong Kong Economic Times quoted market sources as saying the financial market thinks it would be too lax to permit dual-class share structures and simultaneously listings of companies which show no profits.
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The proposed solution is that profitable companies or those which fulfill main-board listing requirements could seek dual-share class structure listings, the report added.
Financial Secretary Paul Chan Mo-po said in his personal blog last month that the Hong Kong government is proactively studying market trends as more bourses around the world allow dual-class listings.
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