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SGX's first DCS listing is a letdown

Jeffrey Tan
Jeffrey Tan4/17/2020 7:0 AM GMT+08  • 7 min read
SGX's first DCS listing is a letdown
SINGAPORE (April 17): When the dual-class shares (DCS) structure for Singapore-listed companies was first mooted in 2016, the proposal generated quite a buzz. This came at a time when the Singapore Exchange (SGX), itself suffering from a dearth of major I
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SINGAPORE (April 17): When the dual-class shares (DCS) structure for Singapore-listed companies was first mooted in 2016, the proposal generated quite a buzz. This came at a time when the Singapore Exchange (SGX), itself suffering from a dearth of major IPOs, was salivating at the prospects of clinching a blockbuster IPO similar to that of Alibaba Group Holding’s listing on the New York Stock Exchange in 2014.

The usual criticism of DCS revolves around the risks of entrenchment and expropriation by the founder, which could be detrimental to the interest of minority shareholders. This is because the founder, who is also usually part of management, would be accorded greater voting power. That would be unfair to ordinary shareholders, who have only one vote a share.

On the other hand, proponents of DCS argue that this structure was crucial to attracting exciting growth companies to list here. This is especially true for those that operate in the technology and New Economy sectors. The founder of such companies would have greater control to realise his growth vision for the company, unencumbered by opposition from other shareholders. For example, the company can easily acquire or dispose of an asset without the need to obtain significant approval from minority shareholders.

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