ASX to face investor push back on dual-class listing plans
Summary
Companies
ASX seeking means to reinvigorate ailing market for new listings
Floated dual-class plan in 2007; shelved after criticism
Investors worry dual-class shares give founders too much power
SYDNEY, April 4 (Reuters) - Australia's plan to introduce dual-class share trading to help revive its weak listing market faces resistance from investors concerned the structure would give too much power to some shareholders, including founders.
The Australian Securities Exchange told Reuters in March it was considering allowing dual-class listings to bring it in line with most major rivals including New York and London.
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Dual-class structures typically have two or more types of shares with differing voting rights. Companies might favour such a listing to reward founders or executives however some argue the structure can diminish the rights of other shareholders.
Such criticism contributed to the ASX shelving dual-class shares the last time it floated the idea in 2007. However, a two-decade low in new listings and regulatory calls for action have prompted the exchange operator to reconsider.
ASX faces an uphill battle as fund managers now, as in 2007, remain unconvinced. Dual-class shares would need to be sold at a discount in an IPO to attract local investors, they said.
"Most fund managers would be pretty hostile to dual-class shares," said Hugh Dive, chief investment officer of Atlas Funds Management which has A$200 million ($126.28 million) of funds under management.
"There are different voting interests and we have had enough founder-led problems in the past year. Dual-class shares would give a disproportionate say based on economic interests - you could see a case where founders would get, say, 10 times the amount of say. That creates a lot of governance issues."
Dual-class shares can give founders more power which fund managers said could be a deterrent to invest, especially in light of recent scandals involving founders at WiseTech and Mineral Resources.
"Retail and institutional shareholders could be disadvantaged to founders and that is not ideal to those investors and we would not be supportive of that happening," said Wilson Asset Management's lead portfolio manager Catriona Burns.
REINVIGORATE
ASX's group executive of listings, Blair Beaton, said listing candidates had told the exchange that dual-class shares were one factor taken into account when deciding where to list.
Technology companies typically have dual-class shares which has led to a lack of major listings in Australia from that sector.
"We know there are a range of perspectives and ideas on dual-class shares, however we think it is important to continue to seek feedback and input on measures that will help to continue supporting a dynamic and globally competitive listings market," Beaton said.
Australia has recorded the slowest start to the year in two decades for new listings, LSEG data showed.
Virgin Australia, the nation's second-largest airline after Qantas Airways (QAN.AX), opens new tab, has begun preparations to list on the ASX by meeting investors, Reuters reported on Monday citing sources. The size of the deal and timing have yet to be finalised.
The Australian Securities and Investment Commission, the corporate regulator, in late February urged ASX to speed up its listing approval process to reinvigorate the listings market.
"We are pleased to see that ASX is actively considering what changes can be made to ensure that ASX is an attractive listing venue, and hope that this (dual-class shares) is one of many other points being considered within ASX," said Patricia Paton, a partner at law firm Ashurst that advises on listings.
"With tough market conditions for new listings and a range of options now available to companies to access capital, this is critical."
($1 = 1.5838 Australian dollars)
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