Hong Kong Exchanges & Clearing has made the landmark decision to introduce a new class of share with different voting rights, in the hope that this will enable the bourse to compete against New York for leading tech companies.
Hong Kong will now allow shares subject to different voting rights to list locally starting from April 30, in a move which is considered the biggest change to its IPO rules in two decades.
HKEX CEO Charles Li hopes the move will heighten the bourse’s lustre for overseas-listed Chinese tech giants such as Alibaba, who have previous eschewed Hong Kong for New York, where dual-class shares are a long-standing convention.
“We are now at the dawn of an exciting new era for Hong Kong’s capital markets,” said Li at a press event held on Tuesday.
According to Li the number of firms planning to list in Hong Kong under the dual-class share regime is already in the double digits, with the first IPO potentially arriving as early as July.
Many of the world’s tech giants, Including Google’s parent company Alphabet and Facebook, employ different share classes with distinct voting conditions in order to maintain the influence of founders after they’ve listed.
While dual share classes help founders to retain clout within the companies they create, they are considered controversial by investors given that they diminish the influence of subsequent stakeholders.
Investment giant BlackRock, for example, was amongst many investors who expressed opposition to HKEX’s plans to launch dual share classes.
Hong Kong nonetheless hopes that the move will lure Chinese tech giants to the bourse, including smartphone maker Xiaomi Corp, Alibaba’s Ant Financial and Ping An’s Lufax, all of which have IPO’s in the work.
The move arrives just as Beijing steps up efforts to bring back overseas-listed Chinese tech giants to domestic bourses via the introduction of Chinese depository receipts.