STAPLED securities are not like dual-class shares, in that all holders of stapled securities have equal voting rights, Singapore Exchange (SGX) said yesterday.
In its regulator's column, which features SGX's comments based on issues of current debate, the market regulator called for a distinction between stapled securities and shares with two types of voting rights after critics drew parallels between the two structures.
The criticisms followed news that Formula One (F1) is set to list its glitzy motorsport business in Singapore to raise as much as US$3 billion by using this structure, which entails tying of the shares with a loan note. The fund raising will help F1 pare down its external debt of about US$2.2 billion.
A stapled restructure essentially means investors having to buy both the shares and the long-term loan note.
In return, shareholders are to be paid a reported 10 per cent of the value of the loan note each year. The loan note and the shares cannot be sold separately.
Mak Yuen Teen, NUS associate professor, noted last month that such stapled offerings allow the company to raise more money while minimising the dilution in voting rights of existing shareholders.
But SGX said: "Unlike dual-class share structures where different classes of ordinary shares carry different voting rights even though they have the same economic benefits and rights in event of liquidation, all holders of stapled securities have equal voting rights."
While SGX will administer its listing rules and call for disclosure of material information, investors must decide on the merits of such deals, SGX noted.
"The market will determine the commercial merits and attractiveness of an offer and market discipline will dictate the success of an offer," it said.
The F1 IPO has been structured in such a manner so that F1 can save on tax payments, earlier reports said.
The loan note, which works similar to a bond, is deemed as a form of financing from shareholders, since shareholders are forced to also hold the loan.
As a result, F1 qualifies for tax exemptions in the UK, since interest paid on shareholder loans can apply for "tax shield benefits".
The stapling of a loan note and shares will be the first in Singapore. But units of CDL Hospitality Trust are already traded as stapled securities, with one unit of a real estate investment trust (Reit) stapled with a business trust.
Ascendas is also listing its hospitality arm in an IPO worth up to $823 million in this manner. Each security will comprise one unit of Ascendas Hospitality Trust and one unit of Ascendas Hospitality Business Trust, with the latter operating and managing the assets held by itself and the trust.
At the end of 2011, 28 out of 49 listed Australian Reits have stapled security structures, noted the Australian Centre for Financial Studies in a June report.