Date
27 May 2017
SFC chairman Carlson Tong said many high-tech firms in mainland China were attracted by the higher valuation in the United States. Photo: HKEJ
SFC chairman Carlson Tong said many high-tech firms in mainland China were attracted by the higher valuation in the United States. Photo: HKEJ

HKEx halts consultation on listing reform amid SFC opposition

Hong Kong Exchanges and Clearing Ltd. (HKEx, 00388.HK) has suspended further consultation on a plan to allow a dual-class share structure for companies listing in the city.

The bourse operator reached the decision after the Securities and Futures Commission (SFC) opposed the proposal, the Hong Kong Economic Journal reported on Tuesday.

The HKEx listing committee and listing department have concluded that it is difficult to put together a plan that can address the securities watchdog’s concerns and at the same time develop a multiple- class share regime in the city.

However, it may still be worthwhile to look into a secondary listing of companies with dual-share or weighted voting rights structure, an HKEx spokesman said, adding that no timetable has been set yet.

The HKEx has been looking into the proposal for the past two years after Alibaba Group Holding Ltd. decided to switch the venue of its listing plan to New York in 2013.

Hong Kong securities authorities had rejected the e-commerce giant’s weighted voting rights structure, which allows its founder and top executives to nominate most of the board of directors despite having minority stakes in the company. 

The SFC opposed the proposal, saying it violates the “one share, one vote” principle and could undermine the interest of other shareholders. 

SFC chairman Carlson Tong said the consultation halt will not affect Hong Kong’s financial innovative development.

He also noted that many high-tech companies in mainland China decided to list in the United States not so much to maintain their dual-share structure as to benefit from the higher valuation.   

Edward Au, co-partner of China initial public offering business at Deloitte Touche Tohmatsu, said the HKEx decision assures market participants of a high level of corporate governance standard in the city, although it also limits the options for potential share issuers.

[Chinese version中文版]

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