Zussete S.
Canete
I – BSBA – Marketing
1. Briefly discuss dual class shares and how such a structure is similar to or differs
from Alibaba's 28-man partnership system. Does Alibaba's partnership system
increase stakeholder value?
Dual class ownership is when more than one class of shares are issued
by a corporation, each reflecting ownership, but one class has more voting
rights than the others. In the case of Alibaba’s partnership structure, it was
designed to allow a group of 28 people to stay in control by giving them
the right to nominate the majority of Alibaba’s candidates for the board of
directors and the company will decide the strategic direction. It means
both structures gives some shareholders more voting rights than others
and allows the company’s founder to maintain control and power within
the organization. So, this voting premium does not imply that the minority
shareholders are losing money. It does imply that minority shareholder will
have less control and power within the organization.
2. Why might the major shareholders, Yahoo! and Softbank, be willing to approve
the 28-man partnership structure?
I think the reason why Yahoo! And Softbank are willing to the 28-man
partnership structure because they believe that in this structure have a
long term strategies that makes more profitable for longer – term instead
of only short term profit. Moreover, they allow to attract more growing
companies that need more capital but do not want to lose their control
power. Furthermore, it is more transparency which is good to the
stakeholders.
3. Are there some companies that are more suited for a dual class share structure
and other companies that are less suited for it? List some examples of
companies that have run into trouble as a result of such models and some
examples of companies that have been highly successful at implementing dual
class shares.
Many companies are choosing dual class share structure and most of
them are tech company such as GoPro, Google, Yelp, Alibaba, Snap,
Dropbox, and Linkin. This structure is suitable to the tech company
because it allows tech startups to access public capital without sacrificing
control. Also, the system make it possible for investors to develop side by
side with innovators and high-growth businesses, enjoying the advantages
of the financial benefits of the growth of these businesses in a long term.
One of the most well-known instances of a dual share structure is that of
Google a subsidiary of Alphabet Inc. As the global search engine released
its initial public offering (IPO) in 2004, it claimed market capitalization
positions within the top 30 in the world.
4. Did HKEx do the right thing in rejecting Alibaba? Do you think it is advisable for
HKEx to re-look at revising its rules on dual class share structures?
In my opinion, HKEx should not reject Alibaba’s proposal because the
Alibaba Company have great performance in the several previous period,
they already have a good image and services. Additionally, their
technology sector was still growing and they are both the same culture
and already known well by Hong Kong investors which can attract more
investor. I think HKEx should reconsider the Alibaba’s proposal and they
can adjust policy with some requirements that they want.
5. Singapore is amending its Companies Act to allow public companies to issue
dual class shares. This may open the door for companies with dual class shares
to list on the SGX. Discuss whether it is advisable to permit the listing of dual
class share companies in Singapore. If so, what safeguards, if any, would you
propose?
Based on my perspective, it is advisable to permit listing of dual class
share companies in Singapore as a dual-class share structure. In order to
expand the range of public funding opportunities and to promote the SGX
as a location for businesses in the high-tech, bio-pharmaceutical and life
sciences sectors. I think the appropriate safeguard in this case are they
must set a maximum voting gap of 10:1 between shares with multiple
voting rights and ordinary shares, and the existing companies would not
be able to convert to a dual class share arrangement, as their owners did
not invest with understanding of the risks involved with those structure.
