Fund Managers Oppose Dual-Class Shares Plan in Singapore

[cyclone]

Fund Managers Oppose Dual-Class Shares Plan in Singapore

by Andrea Tan  and Benjamin Robertson
April 13, 2017, 12:54 PM GMT+8 Updated on April 13, 2017, 2:39 PM GMT+8

International investors including BlackRock Inc. and the Ontario Teachers Pension Plan have voiced their concerns about moves to allow dual-class share listings in Singapore, saying they risk damaging the city’s stock market and harming the region.

Dual-class shares will almost certainly prove to be counterproductive for Singapore and “likely trigger a race to the bottom regionally,” the Asian Corporate Governance Association, an industry group whose members also include listed companies, as well as insurance and accounting firms, said in a response to Singapore Exchange Ltd.’s consultation on the plan.

The fight for global capital has pushed exchanges to seek new ways to attract initial share sales. Hong Kong Exchanges & Clearing Ltd. in January said it would look again at dual-class shares more than a year after its regulator turned down the idea. Such shares comprise a class of stock, often distributed to founding shareholders, that carries more voting rights than the ordinary shares sold to the public. Companies including Snap Inc. have drawn criticism for using the structure because of corporate governance concerns.

“Should SGX proceed with dual-class shares, we believe that any benefits will likely prove short-lived and largely enjoyed by a small group of issuers and intermediaries,” the group, two-thirds of whose members are institutional investors that manage more than $25 trillion, said in a letter dated April 11.

More details in https://www.bloomberg.com/news/articles/...-singapore

[zz...]

already so many family controlled listed companies that are not opmi friendly, dual-class shares will make them even happier, but sgx wants to increase its own earnings too so you will be happier with dual-class shares if you are sgx shareholders

[yeokiwi]

Google and Facebook have multiple-class share structure. Not that they will come to list in SGX, but, will you reject the listing of these kind of companies?

I think both Ontario Teachers Pension Plan and BlackRock's mutual funds have both Google and Facebook.

Kind of contradictory?

[weijian]

already so many family controlled listed companies that are not opmi friendly, dual-class shares will make them even happier, but sgx wants to increase its own earnings too so you will be happier with dual-class shares if you are sgx shareholders

Dual Class share option will only be available for newly listed companies as per recommended by the committee, and most probably that should be the final form if DCS framework is approved. All existing companies will not be able to switch to the new DCS framework. Recently, there was some publicity of a listed firm trying to do so, and as expected, generated some "publicity":

http://www.businesstimes.com.sg/companie...ass-shares

On the issue of DCS, it is interesting. SGX could have snagged a ManU IPO some time back but eventually its US owners went to NYSE to list. Moving on, let's say Singapore-based Grab (Taxi) is finally ready for a listing (aka "cash out" by its owners) - although i dont think they will ever list since they seems to have never-ending private funding, but that's out of the scope over here - and most probably Mr Anthony Tan wants to continue to have majority control....From where Grab's market is located now, he most probably has 2 choices - SG and Jakarta and so far, SG is the obvious choice. If SG does not have the DCS and HKEX eventually goes ahead with it. will SGX still be enticing enough?

(disclosure: vested in SGX)

[Duskerdawn]

https://www.bloomberg.com/news/articles/...-singapore

by Andrea Tan and Benjamin Robertson
April 13, 2017, 12:54 PM GMT+8 Updated On April 13, 2017, 2:39 PM GMT+8


[International investors including BlackRock Inc. and the Ontario Teachers Pension Plan have voiced their concerns about moves to allow dual-class share listings in Singapore, saying they risk damaging the city’s stock market and harming the region.

Dual-class shares will almost certainly prove to be counterproductive for Singapore and “likely trigger a race to the bottom regionally,” the Asian Corporate Governance Association, an industry group whose members also include listed companies, as well as insurance and accounting firms, said in a response to Singapore Exchange Ltd.’s consultation on the plan.]

[Singapore Prime Minister Lee Hsien Loong in February gave his approval to dual-class shares and other measures proposed by a panel to drive economic growth. The plan was given the green light by the exchange’s independent listing advisory committee, which said safeguards needed to be in place, and that the traditional one-share-one-vote structure would be the default for new listings.]

Being Singaporeans, we all know that when PM Lee says something, it will be done, its just a matter of time. I do want to hear your thoughts on dual-class shares especially on the issue of dual class shares like Snapchat which has zero rights. 

My personal belief of zero-right shares are that they are "Preference Shares" without the "Preference". Essentially placing it in a horrible position when in comparison to the other equity instruments. [ranked in terms of risk: Debt - Secured, then unsecured; Equity - Preference, common stocks, zero-voting rights shares] I would personally avoid all zero-right shares as it is my personal believe that as an partial owner of the company you should have a fair voting right which would help with governance of the company and prevent bad management of the companies. I understand that you have residual value in the share of profits of the company. However, such a structure gives unilateral powers to the controlling party and creates a boundless opportunities for mismanagement. A major shareholder that intends to manage the company properly would not mind shareholders to have voting rights if they were doing things in the best interest of the company. Additionally, this also causes a going-concern issue of a company. Isn't the corporate structure of a company created for the purpose of solving the going concern issue?

Having said so, I would like to know what kind of discount you would place on voting rights of a share. This would be a good discussion to take place before the foreseeable new issuance of dual-class shares in Singapore. Having a prepared mindset would definitely assist you in your investment decision.

[weijian]

My personal opinion is that "voting right" shares and "non-voting" right shares are just different forms of capital, no different from bonds, secured/unsecured debt, senior (preferred) shares and junior (common) shares.

Both "voting right" and "non voting right" have equal claims to the company assets of a legal basis and are entitled to the same dividend (Most probably this will be the form of DCS to be finalized), and the only difference would be voting rights wrt to approving resolutions at an AGM/EGM. "non voting right" share holders have essentially delegated their "voting rights" to the owner of the "voting right" shares and this is the key here. When the OPMI evaluates an investment in a stake in a company via "non voting right" shares, then the assessment of the integrity/capability should be the first and major consideration in the decision making process (not valuation, not growth prospects etc...all these dim in comparison). So i would think that if the OPMI does not have an informational edge over others with regards to the assessment of their "proxy"'s character/capability, then the odds are stacked against the OPMI.