Hunting unicorns, Singapore Exchange turns to dual share system

Anshuman Daga

* Singapore may become first Asian bourse with split share

system

* Boldest move in years could help make Singapore a tech hub

* New structure gives executives greater voting power

SINGAPORE, March 16 (Reuters) - Singapore's plans to become

the first Asian bourse to allow dual class share listings is

catching the attention of tech entrepreneurs and could help turn

a staid market into a buzzing tech hub, as the city-state looks

to rebrand its image.

Singapore Exchange's boldest move in years is

designed to make it the go-to-place for potential IPOs for

Southeast Asian start-ups, such as ride-hailing services Grab

and GO-JEK, and online retailers Tokopedia and India's Flipkart.

Such a change, if approved, would support the Southeast

Asian financial hub, which is battling the impact of cooling

global trade, a downturn in its key offshore support services

sector, and a spate of delistings.

Singapore could by the end of this year implement a split

share system that allows entrepreneurs to retain control even

with minority stakes, by giving some shares more weight.

"It's a game changer," said Vinnie Lauria, a founding

partner at Golden Gate Ventures, a Southeast Asian venture

capital firm which has invested in over 30 companies across more

than seven Asian countries.

"These companies want to have the voting power and the

controlling shares within a small group of people who have been

really involved since the beginning."

Dual class share listings (DCS), which are allowed on the

New York Stock Exchange and Nasdaq, give extra voting power to

protect executives from shareholders obsessed with short-term

gains. The structure has been embraced by companies such as

Facebook, LinkedIn, and high-valued tech startups known

as unicorns.

Bankers and lawyers say the changes would put Singapore on

the Asian tech industry's short-list, especially given that

local exchanges typically offer richer valuations to regional

firms when compared to U.S. exchanges.

Patrick Grove, co-founder and CEO of Southeast Asian

internet firm Catcha Group, has been favouring a U.S. IPO but

said he would "strongly consider" SGX if it launched the dual

share system.

"We've been impressed with what SGX has done to become a

more favourable financial tech hub in the region," said Grove,

who has taken five companies from start-up to IPO in Australia

and Malaysia. He declined to give details of the planned IPO.

The share structure got attention in Singapore in 2012 when

Manchester United jilted the city state over efforts by the

Glazer family to retain control through an IPO using this

system.

TRAIL BLAZERS

In Asia, such share structures are almost unheard of,

although technically possible in particular cases in Tokyo and

Sydney.

The Hong Kong bourse proposed weighted voting rights in 2015

but failed to get regulatory support.

SGX, a global centre for business trusts and real estate

investment trusts, is seeing an opportunity to fill the void and

broaden its appeal to tech and other new economy companies.

This chimes in with the city-state's moves to provide

funding and light-touch regulation, as it seeks to reinvent

itself as a fintech and disruption hub.

A key Singapore advisory panel last month recommended the

new share system with appropriate safeguards to widen public

financing options.

SGX is closing in on a public consultation that is open till

mid-April. Based on feedback, it will then launch a second

consultation.

If regulators give this a green light, the new rules could

be in place as early as end-2017.

Chew Sutat, SGX's head of equities and fixed income, said

that any actual implementation will depend on responses received

in the consultations.

The new system could inject some much-needed vitality to an

exchange that has seen a decline in turnover, and fewer company

listings due to low valuations and insufficient liquidity.

Fund raising via IPOs at SGX, where about 40 percent of its

over 700 listed companies originate outside the country, slumped

to its lowest in 17 years to just $335 million in 2015 before

rebounding last year.

"It's a step in the right direction. But it still boils down

to liquidity and valuation," said Chua Kee Lock, CEO of

Temasek's Vertex Venture Holdings, adding that the next step

would be to attract tech investors who trade in public stocks to

Singapore.

One of the main challenges SGX faces is opposition from

corporate governance campaigners such as Aberdeen Asset

Management, who say weighted voting rights sideline ordinary

shareholders.

"Whether these companies ultimately list here will come down

to a multitude of factors," said Stefanie Yuen Thio, joint

managing director at law firm TSMP. "But not allowing DCS

effectively closes the door to such listings, which would be a

disaster for the SGX."

(Additional reporting by Clara Ferreira Marques, Marius Zaharia

and Aradhana Aravindan; Editing by Randy Fabi)