Goldman calls for Hong Kong to rethink dual-class founder share limits

From Reuters - March 14, 2018

HONG KONG (Reuters) - Goldman Sachs Group Inc (GS.N) has called on Hong Kong to reconsider planned limits on how much equity company founders can hold when the city introduces dual-class shares, warning they could dent the citys competitiveness versus major centers like New York.

The new rules, due to take effect by mid-year, are designed to give greater voting rights to founding shareholders as part of efforts to attract Chinese tech and other new economy firms as Hong Kong seeks to counter New Yorks success in attracting headline-grabbing Chinese companies.

But under the proposals company founders seeking a dual-class listing cannot hold more than 50 percent of the firm when it floats.

Ken Hitchner, chairman and chief executive of Goldman Sachs Asia-Pacific operations told a regulatory conference that not limiting the amount of equity that founders can hold at the time of an IPO could help attract more Chinese companies to the Hong Kong market.

There will likely be innovative companies looking to go public where the founder owns 80% or 90%. If that founder wanted to do a dual-class listing in Hong Kong, he or she would have to sell down to 50 per cent, Hitchner told Reuters separately.

That doesnt seem in line with what Hong Kong is trying to do here and it could hurt competitiveness versus New York.

Notwithstanding Hong Kongs role as the worlds biggest equity capital-raising center for four of the last 10 years, it has fallen well behind New York, its arch-rival, in the battle for hot tech stocks and other growth sectors.Just 3 percent of Hong Kong listings in the past decade, by market value, have been so-called new economy companies, compared with 47 percent for the New York Stock Exchange, according to a discussion paper published by the HKEX in June.



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