The two-tier ownership structure is very common in the United States, which enables the founders and other major shareholders of the company to retain enough voting rights to control the company after listing.
On April 24th, 218, HKEx issued new IPO regulations, and in the consultation summary of the Listing System of Companies in Emerging and Innovative Industries disclosed by HKEx in official website, it was stated that HKEx allowed companies with dual shareholding structure to go public, and the new IPO regulations allowed unprofitable biotech companies to go public in Hong Kong. The new listing rules came into effect on April 3th, and relevant listing applications were formally accepted.
Explanation of terms:
Two-tier ownership structure is very common in the United States, which enables the founders and other major shareholders of the company to retain enough voting rights to control the company after listing. Both New York Stock Exchange and Nasdaq Stock Market allow listed companies to adopt such ownership structure. Large American technology companies such as Facebook Inc. (FB) and GOOGle Inc (Goog) all adopt a two-tier shareholding structure. Under this ownership structure, enterprises can issue two types of shares with different degrees of voting rights, so founders and management can get more voting rights than under this ownership structure. Hedge funds and activist shareholders are more difficult to control the company's decision-making power.
For example:
Enterprises invested by venture capitalists often sell their shares for cash soon after listing. But the founder didn't want to sell the enterprise he had worked so hard to build, so he designed a two-tier equity system. Divide stocks into a and b categories. Class A shares that are publicly issued to external investors have only one vote per share, while Class B shares held by management can cast 1 votes. If the company is sold, these two types of shares enjoy the same dividend distribution and the right to distribute the proceeds from the sale. Class B shares are not publicly traded, but they can be converted into Class A shares at a ratio of 1: 1. This ownership structure allows management to attack boldly without fear of being fired or facing hostile takeover. Because, even the founders who hold about one-third of Class B shares and important insiders can continue to control the fate of the company even if they lose their majority shares. This kind of structure is quite rare in publicly listed companies, and it is also blamed by those who advocate good corporate governance. They believe that it is undemocratic to concentrate a lot of power in the hands of a few people.