How can companies, especially present and future unicorns in the technology sector, be encouraged to list on a given stock exchange? What are the criteria for the attractiveness and competitiveness of a stock exchange? With regard to this last question, the standard answers are the size of the local financial sector, its degree of internationalisation and its transaction volumes.

But more than that, the regulatory aspect is also a very important factor. And in this area, the relaxation of listing rules allowing dual class share structures for a certain type of shares has become a key criterion. For example, the Paris stock exchange is considering introducing such rules to prevent high-potential French companies from listing abroad, particularly in the US and UK, where dual class share structures are in force in certain market segments.

Indeed, dual class share structures are becoming increasingly favoured by company founders, especially in the tech sector. The reason for this is that such share structures allow them to raise capital while retaining control over their company, as exemplified by the heads of US companies such as Facebook and Amazon. In short, with these financial
instruments, a founder can have controlling voting rights (or veto rights) without holding a majority of the company’s capital.

Nevertheless, these dual class share structures give rise to a number of questions. How can a founder with majority voting rights be prevented from prioritising his or her own interests? How can the rights of minority shareholders be guaranteed? What kind of safeguards can be put in place?

In this new issue of Opinions & Débats, written by Edith Ginglinger and François Belot, you will find answers to these governance issues.

Finally, the Institut Louis Bachelier (ILB), through its Data Lab, is about to propose a new algorithm for ranking the objective attractiveness of financial centers by theme, based on audited public data, all in “open source” mode. This tool will allow each user to build the ranking that interests him/her in an explicable way. To be found soon on the ILB website.

Enjoy your reading!

Jean-Michel Beacco
Delegate General of the Institut Louis Bachelier