Hong Kong adds dual-class shares

Technology firms that have shares with different voting rights now allowed to go public in Hong Kong

HONG KONG • Hong Kong Exchanges & Clearing Ltd (HKEX) approved the biggest change to its initial public offering (IPO) rules in two decades, putting it in a position to battle New York for some of the world’s hottest companies.

Technology firms that have shares with different voting rights will now be allowed to go public in Hong Kong, over- turning rules that barred the likes of Alibaba Group Holding Ltd from considering the former British colony. Businesses will be able to apply under the new regime starting April 30, HKEX said yesterday.

The new framework is a victory for the exchange and its CEO Charles Li, who championed the changes after losing Alibaba and other tech titans to venues in New York, where dual-class shares and similar structures have long been permitted. The step could be a landmark for Hong Kong’s efforts to be the leading home for international Chinese listings and builds on Li’s vision for a trading hub that rivals the US.

“We are now at the dawn of an exciting new era for Hong Kong’s capital markets,” Li said at a media event yesterday. A “double-digit” number of firms are planning to list under the new regime and the first IPO will “hopefully” happen by July, he said.

Some of the world’s largest and most influential technology companies, from Facebook Inc to Google parent Alphabet Inc, have share classes with different voting rights to protect their founders’ influence after going public.

The structures are contentious because they reduce the rights of other shareholders, and investors including BlackRock Inc opposed HKEX’s plan.

Hong Kong lost to New York and Shanghai in the global IPO rankings last year, with funds raised down 33% compared to previous year to US$16.9 billion (RM65.97 billion), the lowest level since 2012, according to data compiled by Bloomberg.

Biotech firms with no record of profit or revenue can also list. Other changes include lifting restrictions on secondary listings by mainland Chinese companies — HKEX has held talks with mainland firms that went public in the US about coming to Hong Kong — “their natural home”, Li said.

The payoff for HKEX could come very soon. Xiaomi Corp, Ant Financial Services Group and Lufax, the peer-to-peer lending unit of Ping An Insurance (Group) Co, are among a number of Chinese technology giants preparing to go public. Smartphone maker Xiaomi is considering listing in both Hong Kong and Shanghai and targeting a valuation of about US$100 billion. — Bloomberg