Chinese mainland's first dual-class share firm to list on STAR market

A Shanghai-based cloud service provider is set to become the first company with a dual-class share structure listed on domestic stock markets.

UCloud started online subscription on Wednesday for a listing on the Shanghai Stock Exchange's STAR market, with a price of 33.23 yuan (US$4.75) per share. The company is expected to start trading on January 20.

The dual-class, or special voting rights, structure allows company founders to keep out-sized voting rights relative to other investors.

CEO Ji Xinhua, Chief Technology Officer Mo Xianfeng and Chief Operating Officer Hua Kun hold 19.40 percent of UCloud's shares, but will have 54.61 percent of voting rights.

Many top tech firms including Alibaba, Baidu, Facebook, JD.com and Xiaomi have adopted the dual-class share structure. In 2018, the Hong Kong Stock Exchange changed its policies to allow the first dual-class IPO from Xiaomi Corp.

“UCloud is not the only one. It’s widely needed in the domestic Internet industry,” said Ji during an exclusive interview.

The structure is meant to help founders and senior managers control long-term strategy and company development. This type of share structure, however, was only allowed with the launch of the STAR market.

The STAR market also contained innovations for listing standards, share registration, IPO pricing, trading and delisting.

The STAR market is seen as a foundation for deepened reforms in China's A-share market, as well as an attractive market for high-profile Chinese tech companies to list at home.

For UCloud’s IPO, the special voting rights structure is supported by shareholders, regulators and updated laws. According to Ji, this means that the STAR market is in line with international standards.

Along with its dual-class share structure, UCloud is also the first domestically-listed firm focused on the cloud industry, including the public cloud sector.

In the first half of 2019, UCloud revenue reached 699 million yuan, up 32.13 percent year on year. The growth came from both Internet and traditional firms, with many of the latter now upgrading their information infrastructure.

The cloud computing market is expected to generate US$266 billion in revenue in 2020, and will continue growing by 30 percent annually through 2023, according to researchers at Gartner.

In 2020, UCloud's opportunities will mainly come from 5G, which is pushing upgrades across the Internet industry, and an increasing number of traditional firms adopting cloud service and overseas expansion, Ji told Shanghai Daily.

As a delegate of the Shanghai People's Congress, Ji will put forward legislative proposals during the coming "Two Sessions." They will cover strategies to help the city establish itself as a technology and innovation center and promote integration in the Yangtze River Delta.

But UCloud is also facing fierce competition in its home market. Baidu, Alibaba and Tencent all have their own cloud businesses. Meanwhile, global cloud giants Amazon and Microsoft also operate in China.