Up the Hill and Down Again: Dual-Class Stock and the UK Listing Review

Abstract

The final recommendations of Jonathan Hill’s UK Listing Review were published on 3 March 2021. The headline recommendation was that dual-class stock should be permitted on the premium-tier of the London Stock Exchange. The aspiration is to encourage more high-quality UK equity listings, particularly of high-growth tech-companies, for which dual-class stock is especially beneficial. Dual-class stock allows founders to list their firms, and retain majority-control, while holding significantly less of the cash-flow rights in the company. However, in an attempt to protect and placate institutional shareholders, who are generally sceptical of dual-class stock, various conditions have been recommended. This article finds that those conditions comprise a curious mix, some of which are too relaxed and do not substantially protect public shareholders, and some of which are too severe and could deter the very firms the proposals are intended to attract, resulting in dual-class stock in name but not in substance.