Shattering the Fetter of Main Markets on the London Stock Exchange: Is It a Benign Start for the Dual-Class Share Structure in the UK?

Abstract

The dual-class share structure, influenced by the governance perception of government and pressure from institutional investors, was still the forbidden region most time in the UK. However, the bonus of reforms that the London Stock Exchange (LSE) enjoyed was declining swiftly reflected in the number of listed companies and market cap. To promote competition and attraction, the LSE conditionally relaxed the restrictions of dual-class shares on premium listing in 2021, but the effects were faint in practice as founders cannot genuinely achieve the value of dual-class shares. In 2023, the Financial Conduct Authority (FCA) drafted the proposal removing the classification of standard and premium listing to relieve the restrictions of dual-class shares. Although this is a positive attempt, the action is also a double-edged sword that may pass higher risks to public shareholders. This article argues the overall intrinsic value of dual-class shares outweighs its potential risks on corporate governance. Yet, the great shareholder protection cannot be ignored as the reputation of the LSE. The design of dual-class rules should focus on shareholder protection but not influence the accomplishment of value, which can keep a certain resilience to achieve a relatively flexible balance between founders and investors.