New Listing Rules for SPACs and Dual Class?

Date

14 Apr 2021 - 15 Apr 2021

Location

Online Policy Workshop

The videos of each session are available under the presentation tab on this page and also on the ECGI YouTube channel

The following articles were published in response to the workshop:

SPACs in the middle: IPO shell vehicles are expensive but seem to fill a market niche

The Strongest 10%: How Dual-Class Shares Caught on and Why Investors Let Them

Supported by

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Wednesday, 14 April 2021 | 17:00 - 19:30 CEST

Thursday, 15 April 2021 | 14:00 – 16:30 CEST

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Organised by

Marco Becht (Université libre de Bruxelles and ECGI)

Anete Pajuste (Stockholm School of Economics (Riga) and ECGI)

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Download the programme

ABOUT THIS WORKSHOP

Primary markets in the United States are witnessing a boom that is driven by Special Purpose Acquisition Companies (SPACs) that are also starting to reach Europe. How are SPACs different from traditional initial public offerings? Are SPACs a useful innovation or the latest financial tool for selling poorly performing securities to public market investors? Do disclosure or listing rules need to be reformed to take into account of the SPAC phenomenon?

At the same time dual class share IPOs continue to increase in popularity, while also remaining controversial. The U.S. markets continue to be a preferred venue for dual class IPOs, also for foreign issuers. There are also SPACS that go public with a dual class structure.

Responding to these developments, the United Kingdom is currently revising its listing rules to make the London markets more competitive globally. The EU has published a capital market union action plan that aims to make its primary markets more attractive, especially for small and medium sized enterprises (SMEs). Several EU countries have also started to offer alternative control enhancing mechanisms (CEMs) like non-voting shares or tenure voting (“loyalty shares”).

This workshop provided a briefing on SPACs, dual class shares and other CEMs in a comparative perspective. In the United States, for example, there is an active debate whether dual class issuers might have to introduce a sunset clause. In the EU, listing rules are generally more permissive and companies can freely choose the place of listing within the single market, but some countries allow only minor deviations from one share-one vote. Hence the debate about listing rules is closely tied to the freedom of establishment and the ability of SMEs to adopt the company law of their choice. In the United Kingdom, the listing rules exclude CEMs and force families to demonstrate that their companies are run independently once they are traded on the stock exchange.

Reading List:

A Sober Look at SPACs (Michael Klausner, Michael Ohlrogge, Emily Ruan) 2021

London allowing dual class Premium listings: A Swedish commentary (Erik Lidman, Rolf Skog) 2021

The Rise of Dual-Class Stock IPOs (Aggarwal, D. and Eldar, O. and Hochberg, Y. V. and Litov, L. P.) 2021

Theory, Evidence, and Policy on Dual-Class Shares: A Country-Specific Response to a Global Debate (Aurelio Gurrea-Martínez) 2021

UK Listing Review, March 3rd 2021 (Oxford Business Law Blog article) (Paul Davies) 2021

UK Listing Review (2021)

Primary and secondary equity markets in the EU - prepared for the European Commission - Oxera (2020)

What Drives the Use of Dual-Class Structures in Technology IPOs? (Adi Grinapell) 2020

Bucking the Trend: Why do IPOs Choose Controversial Governance Structures and Why Do Investors Let Them (Laura Casares Field and Michelle B. Lowry) 2020

The rise of dual-class shares: Regulation and implications (Committee on Capital Markets Regulation) 2020

The Problem of Sunsets (Jill Fisch, Steven Davidoff Solomon) 2019