Xiaomi, Meituan Among Dual-Class Stocks to Join MSCI Indexes - EcoFinBiz Blog

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Xiaomi, Meituan Among Dual-Class Stocks to Join MSCI Indexes

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(Bloomberg) -- Xiaomi Corp. and Meituan Dianping will be among the companies with unequal voting structures added to some of the world’s largest equity benchmarks later this month.

MSCI Inc. said it will add nine stocks with dual-class shares to its global benchmark MSCI All-Country World Index. Seven of the companies are based in China, while the others are in the U.S., according to a quarterly review dated Feb. 11. The Chinese firms, which also include Tencent Music Entertainment Group, will also be added to the MSCI China All Shares Index.

View the complete list of dual-share stocks that will be included in the MSCI index

The inclusions came after MSCI temporarily blocked firms with dual-share class from entering its indexes while it conducted a consultation in 2017 and 2018. In October, the index compiler decided to allow companies with multiple share classes to stay in its benchmarks.

Index compilers like MSCI have been grappling with dual-class shares since photo-sharing app Snap Inc. took the notion to the extreme by giving zero voting rights to investors in its $3.4 billion initial public offering in 2017. S&P Dow Jones Indices and FTSE Russell decided to exclude some dual-class shares going forward. MSCI took a different tack, creating substitute benchmarks for investors who didn’t want to touch the share class.

Corporate governance advocates argue that shares with weighted voting rights give undue authority to founders at the expense of ordinary shareholders, making it harder for investors to influence the board. The structure’s supporters say such shares enable executives to focus on the long term and resist expectations by major investors that each quarter’s earnings will be better than the last.

The issue took on added prominence last year when exchange operators in Hong Kong and Singapore amended listing rules to let companies with the share structure apply for an initial public offering.

The changes by MSCI are part of 17 additions and one deletion to the MSCI All-Country World Index. KKR & Co. and Altice USA Inc. were the two U.S. dual-class stocks added, and Adyen N.V. will also join the measure. Foxconn Industrial Internet Co. will be included in the MSCI Emerging Markets Index. The changes take effect at the close of trading on Feb. 28.

Read a QuickTake on dual-class shares here

Xiaomi rose 0.4 percent as of 1:34 p.m. in Hong Kong, heading for its highest close in a month. The stock saw a wave of sales after the end of its lockup period, when key investors were banned from selling. Meituan Dianping was down 3.9 percent after surging 32 percent during a seven-session win streak.

Foxconn Industrial Internet rose 2.8 percent in Shanghai, while parent company Hon Hai Precision Industry Co. closed 3 percent higher in Taipei.

--With assistance from Yu-Huay Sun.

To contact the reporters on this story: Jeanny Yu in Hong Kong at jyu107@bloomberg.net;Benjamin Robertson in Hong Kong at brobertson29@bloomberg.net

To contact the editors responsible for this story: Richard Frost at rfrost4@bloomberg.net, Philip Glamann

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