The world’s biggest index companies have taken sides in one of the most controversial issues in today’s markets, setting up a clash with stock exchanges pushing to loosen rules on multiple share classes.
The decisions by FTSE Russell and S&P Dow Jones Indices to ban companies that use the structures has already had an effect, with photo-sharing app Snap. now unable to qualify for S&P’s US indexes.
But a bigger battle is likely to play out in the months ahead, as bourses from New York to Hong Kong step up efforts to woo such companies while index compilers and fund companies that track their offerings keep the stocks out of benchmarks and investor portfolios.
Firms such as Facebook and Alibaba like dual or even triple-class structures because they ensure founders and leaders keep control over their companies even with minority ownership. But investors have become increasingly vocal in questioning whether it’s in their best interests. Those concerns have led to the index companies taking a stand, one that could deter firms from issuing multiple classes in future, according to a corporate governance specialist.
“Companies do listen to their bankers, their sponsors,” said Jamie Allen, secretary general of the Asian Corporate Governance Association in Hong Kong. “So if they come down and say, ‘This is going to devalue your company, your exposure, and the marketing benefit you get from being in an index,’ then yes, that would have some effect.”
On Monday S&P blocked multi-class shares from joining US indexes including the S&P 500, though a grandfather clause spared giants such as Google parent Alphabet and Berkshire Hathaway . Last week London Stock Exchange Group unit FTSE Russell announced a list of more than 30 companies it would bar from its indexes unless they raised the percentage of voting rights accorded to public investors.
MSCI’s Henry Fernandez, told Bloomberg Television in July that exchanges relaxing their rules to allow multi-class shares “is not the right direction” and that MSCI is consulting with clients about the best way to handle such stocks.
At least one of the firms on FTSE Russell’s list -- market maker Virtu Financial -- is in talks with the index compiler to make the case it shouldn’t be blocked, according to people familiar with the matter. Virtu is working with FTSE Russell on the definitions for its thresholds, said the people, who asked not to be named.
While Virtu wouldn’t be booted from FTSE Russell’s gauges for five years even if its talks fail, Snap’s situation is more immediate: its class of zero voting right shares means it’s barred from FTSE Russell’s benchmarks and S&P’s US indexes. The firm’s shares have lost a quarter of their value since Snap’s IPO in March.
Officials at Virtu and Snap declined to comment while FTSE Russell didn’t immediately reply.
S&P’s decision affects only its US indexes and its global gauges will continue to include companies with multiple share classes and zero shareholder voting rights, said spokeswoman Soogyung Jordan.
The indexers’ decisions won’t help Snap as it tries to recover its share price, Monness Crespi Hardt & Co analyst James Cakmak said. “The broader takeaway is that up-and-coming companies need to do a serious gut-check on pursuing multi-class share structures,” he said.
Chinese companies with multi-class shares raised US$34bn in the U.S. over the past decade, Hong Kong Exchanges & Clearing said in June, as it unveiled plans to allow the structures.
“Our present listing regime isn’t agile enough to cope with the demands of this new age,” Charles Li, chief executive officer of HKEX, wrote in a related blog post Tuesday. “This global relay race is in the first leg, and we are lagging behind.”
In Singapore, the government supported a proposal to allow dual-class shares as part of a package to drive economic growth. The UK regulator suggested loosening its restrictions in a February discussion paper on the effectiveness of its markets.
“We are still evaluating the feedback received and target to update the market before the year-end,” said Tan Boon Gin, head of Singapore Exchange’s regulatory unit, said in response to a request for comment.
“The resistance of some exchanges to non-voting shares is admirable, but competition might force them to allow it. The index guys have an economic motivation to please the funds that use the indexes,” said Paul De Vierno, a strategist at UOB Kay Hian Holdings in Singapore. “Both sides are going in different directions.”
Index exclusion may be the price that founders pay to stay in charge. HKEX said that any dual-class stocks that listed in the city would be ineligible for inclusion in the benchmark Hang Seng indexes.
“It’s hard to say who’s winning or losing at this moment,” said Chow Kar Tzen, a Kuala Lumpur-based senior portfolio manager at Affin Hwang Asset Management Bhd. “It’s a balance between profits and governance.”
* Bloomberg
Company%20profile
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The National's picks
4.35pm: Tilal Al Khalediah
5.10pm: Continous
5.45pm: Raging Torrent
6.20pm: West Acre
7pm: Flood Zone
7.40pm: Straight No Chaser
8.15pm: Romantic Warrior
8.50pm: Calandogan
9.30pm: Forever Young
In numbers: PKK’s money network in Europe
Germany: PKK collectors typically bring in $18 million in cash a year – amount has trebled since 2010
Revolutionary tax: Investigators say about $2 million a year raised from ‘tax collection’ around Marseille
Extortion: Gunman convicted in 2023 of demanding $10,000 from Kurdish businessman in Stockholm
Drug trade: PKK income claimed by Turkish anti-drugs force in 2024 to be as high as $500 million a year
Denmark: PKK one of two terrorist groups along with Iranian separatists ASMLA to raise “two-digit million amounts”
Contributions: Hundreds of euros expected from typical Kurdish families and thousands from business owners
TV channel: Kurdish Roj TV accounts frozen and went bankrupt after Denmark fined it more than $1 million over PKK links in 2013
COMPANY%20PROFILE
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THE SPECS
Engine: 6.75-litre twin-turbocharged V12 petrol engine
Power: 420kW
Torque: 780Nm
Transmission: 8-speed automatic
Price: From Dh1,350,000
On sale: Available for preorder now
SHADOWS%20AND%20LIGHT%3A%20THE%20EXTRAORDINARY%20LIFE%20OF%20JAMES%20MCBEY
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Anghami
Started: December 2011
Co-founders: Elie Habib, Eddy Maroun
Based: Beirut and Dubai
Sector: Entertainment
Size: 85 employees
Stage: Series C
Investors: MEVP, du, Mobily, MBC, Samena Capital
NO OTHER LAND
Director: Basel Adra, Yuval Abraham, Rachel Szor, Hamdan Ballal
Stars: Basel Adra, Yuval Abraham
Rating: 3.5/5
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UEFA CHAMPIONS LEAGUE FIXTURES
All kick-off times 10.45pm UAE ( 4 GMT) unless stated
Tuesday
Sevilla v Maribor
Spartak Moscow v Liverpool
Manchester City v Shakhtar Donetsk
Napoli v Feyenoord
Besiktas v RB Leipzig
Monaco v Porto
Apoel Nicosia v Tottenham Hotspur
Borussia Dortmund v Real Madrid
Wednesday
Basel v Benfica
CSKA Moscow Manchester United
Paris Saint-Germain v Bayern Munich
Anderlecht v Celtic
Qarabag v Roma (8pm)
Atletico Madrid v Chelsea
Juventus v Olympiakos
Sporting Lisbon v Barcelona
Fixtures
%3Cp%3E%3Cstrong%3EWednesday%2C%20April%203%3C%2Fstrong%3E%3C%2Fp%3E%0A%3Cp%3EArsenal%20v%20Luton%20Town%2C%2010.30pm%20(UAE)%3C%2Fp%3E%0A%3Cp%3EManchester%20City%20v%20Aston%20Villa%2C%2011.15pm%20(UAE)%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EThursday%2C%20April%204%3C%2Fstrong%3E%3C%2Fp%3E%0A%3Cp%3ELiverpool%20v%20Sheffield%20United%2C%2010.30pm%20(UAE)%3C%2Fp%3E%0A
FFP EXPLAINED
What is Financial Fair Play?
Introduced in 2011 by Uefa, European football’s governing body, it demands that clubs live within their means. Chiefly, spend within their income and not make substantial losses.
What the rules dictate?
The second phase of its implementation limits losses to €30 million (Dh136m) over three seasons. Extra expenditure is permitted for investment in sustainable areas (youth academies, stadium development, etc). Money provided by owners is not viewed as income. Revenue from “related parties” to those owners is assessed by Uefa's “financial control body” to be sure it is a fair value, or in line with market prices.
What are the penalties?
There are a number of punishments, including fines, a loss of prize money or having to reduce squad size for European competition – as happened to PSG in 2014. There is even the threat of a competition ban, which could in theory lead to PSG’s suspension from the Uefa Champions League.
Dirham Stretcher tips for having a baby in the UAE
Selma Abdelhamid, the group's moderator, offers her guide to guide the cost of having a young family:
• Buy second hand stuff
They grow so fast. Don't get a second hand car seat though, unless you 100 per cent know it's not expired and hasn't been in an accident.
• Get a health card and vaccinate your child for free at government health centres
Ms Ma says she discovered this after spending thousands on vaccinations at private clinics.
• Join mum and baby coffee mornings provided by clinics, babysitting companies or nurseries.
Before joining baby classes ask for a free trial session. This way you will know if it's for you or not. You'll be surprised how great some classes are and how bad others are.
• Once baby is ready for solids, cook at home
Take the food with you in reusable pouches or jars. You'll save a fortune and you'll know exactly what you're feeding your child.
Abu Dhabi traffic facts
Drivers in Abu Dhabi spend 10 per cent longer in congested conditions than they would on a free-flowing road
The highest volume of traffic on the roads is found between 7am and 8am on a Sunday.
Travelling before 7am on a Sunday could save up to four hours per year on a 30-minute commute.
The day was the least congestion in Abu Dhabi in 2019 was Tuesday, August 13.
The highest levels of traffic were found on Sunday, November 10.
Drivers in Abu Dhabi lost 41 hours spent in traffic jams in rush hour during 2019
The biog
Name: Mariam Ketait
Emirate: Dubai
Hobbies: I enjoy travelling, experiencing new things, painting, reading, flying, and the French language
Favourite quote: "Be the change you wish to see" - unknown
Favourite activity: Connecting with different cultures
COMPANY PROFILE
Name: Mamo Year it started: 2019 Founders: Imad Gharazeddine, Asim Janjua Based: Dubai, UAE Number of employees: 28 Sector: Financial services Investment: $9.5m Funding stage: Pre-Series A Investors: Global Ventures, GFC, 4DX Ventures, AlRajhi Partners, Olive Tree Capital, and prominent Silicon Valley investors. THE SPECS
Engine: 3.5-litre V6
Transmission: six-speed manual
Power: 325bhp
Torque: 370Nm
Speed: 0-100km/h 3.9 seconds
Price: Dh230,000
On sale: now
Our legal consultant
Name: Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
ABU%20DHABI%20CARD
%3Cp%3E%3Cstrong%3E5pm%3A%20%3C%2Fstrong%3EWathba%20Stallions%20Cup%20%E2%80%93%20Handicap%20(PA)%20Dh70%2C000%20(Turf)%202%2C200m%0D%3Cbr%3E%3Cstrong%3E5.30pm%3C%2Fstrong%3E%3A%20Rub%20Al%20Khali%20%E2%80%93%20Maiden%20(PA)%20Dh80%2C000%20(T)%201%2C400m%0D%3Cbr%3E%3Cstrong%3E6pm%3A%20%3C%2Fstrong%3EAl%20Marmoom%20Desert%20%E2%80%93%20Maiden%20(PA)%20Dh80%2C000%20(T)%201%2C600m%0D%3Cbr%3E%3Cstrong%3E6.30pm%3A%20%3C%2Fstrong%3ELiwa%20Oasis%20%E2%80%93%20Handicap%20(PA)%20Dh80%2C000%20(T)%201%2C400m%0D%3Cbr%3E%3Cstrong%3E7pm%3A%20%3C%2Fstrong%3EAl%20Khatim%20Desert%20%E2%80%93%20Handicap%20(PA)%20Dh80%2C000%20(T)%201%2C600m%0D%3Cbr%3E%3Cstrong%3E7.30pm%3A%3C%2Fstrong%3E%20Al%20Quadra%20Desert%20%E2%80%93%20Handicap%20(TB)%20Dh80%2C000%20(T)%201%2C600m%3C%2Fp%3E%0A
Our legal consultant
Name: Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
Emergency
Director: Kangana Ranaut
Stars: Kangana Ranaut, Anupam Kher, Shreyas Talpade, Milind Soman, Mahima Chaudhry
Rating: 2/5
The Penguin
Starring: Colin Farrell, Cristin Milioti, Rhenzy Feliz
Creator: Lauren LeFranc
Rating: 4/5
