Can Democracy Stage A Comeback At Stock Exchanges?
Bloomberg Markets|October/November 2017

Scan stock markets around the world, and you’d be forgiven for thinking democracy was under attack.

Andrea Tan And Benjamin Robertson
Can Democracy Stage A Comeback At Stock Exchanges?

The principle of one share, one vote has been around since companies started selling shares to the public in the early 17th century. Today its recurring nemesis—dual-class shares, which grant different classes of owners different voting rights—is back, big time. And exchanges that have shunned dual-class share listings are wrestling with an age-old dilemma: Should we or shouldn’t we?

For exchanges, the appeal of such listings is plain enough. Competitive pressures among stock markets are intense. Plus, there are some big technology listings on the horizon, including Dropbox and Mobvoi, an Alphabet-backed Chinese artificial intelligence startup. So Hong Kong, London, and Singapore are weighing whether, like some of their competitors in New York and elsewhere, they should list dual-class shares. “There is an air of inevitability around it,” says David Smith, Asia head of corporate governance at Aberdeen Standard Investments. “We are mindful of the risk of contagion. Once one regime allows it, others will surely follow.”

The lessons for exchanges that have steered clear of dual-class share listings are equally obvious. Take Hong Kong. Over the past decade, Hong Kong Exchanges & Clearing Ltd., a natural listing venue for Mainland Chinese companies, lost out to the U.S. on $34 billion in initial public offerings featuring weighted voting rights, including Alibaba Group Holding Ltd., the world’s largest IPO. “A big concern for HKEX is that there will be more really significant companies like Alibaba, and Hong Kong will lose them if it doesn’t do something to accommodate the special governance arrangements they have,” says Robert Cleaver, a corporate lawyer in Hong Kong for global law firm Linklaters. “There is a strong feeling in the market that they have got to do something.”

This story is from the October/November 2017 edition of Bloomberg Markets.

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