SEBI Eyeing 'SnapChat Model' To Attract Startup Listing on the Stock Exchanges

SEBI has formed a committee with stakeholders to review the ITP framework

You're reading Entrepreneur India, an international franchise of Entrepreneur Media.

With stakeholders looking to attract startups to list at the stock exchanges, Securities and Exchange Board of India (SEBI) is now betting on the ‘Snapchat Model’ to facilitate the process.

dennizn | Shutterstock

According to a Business Standard report, Sebi-appointed committee is discussing a proposal which allows startups to sell shares with differential voting rights. The move is mulled as the ‘Snapchat Model’ as last year during its IPO the social media platform followed a process which allowed its founders to access capital market without losing their freedom of decision making.

Commenting on the idea, Apurva Damani, Managing Director Artha India Ventures feels removing subscribers’ voting rights is not a great move.

“Completely removing voting rights of the subscriber is not advisable since you will not gain the investors trust in doing so. Therefore, you can have restrictions based on the class or quantum of shares the investor has subscribed for,” she added.

The Back-Story

The National Stock Exchange (NSE) in 2013, launched Emerge- Institutional Trading Platform (ITP) for startups to list on the stock exchange with or without an IPO, however, the project failed to take off.

Followed by NSE’s move, in 2015, SEBI had put in place the ITP framework to make startup listing an easy and attractive option, however, it failed to get any traction.

With the motive to attract new age companies to list on the exchanges, earlier this year SEBI formed a group with stakeholders like Indian Software Product Industry Round Table (iSPIRT), The Indus Entrepreneurs (TIE), the Indian Private Equity and Venture Capital Association (IVCA), law firms, merchant bankers, and stock exchanges to review its ITP framework.

In fact, as per industry whispers, the regulator along with various other government stakeholders, are taking calculative measures to improve the startup ecosystem in the country. In March, giving a push to seed stage investments, the market watchdog doubled the investment bracket to INR 10 crore for the angel investors.

Meanwhile on the other side, in order to incentivise startups, BSE Ltd was planning to launch a startup platform under its SME segment on July 9.  The platform largely focused on tech firms like IT, ITES, Biotechnology and Life Science, 3D Printing, Space technology, E-Commerce, Hi-Tech Defense, Drones, Nano Technologies, Artificial Intelligence, Big data, Enhance/Virtual Reality, E-gaming, Robotics, and any other company dealing with modern technology. 

However, on the due date, the stock exchange postponed the launch of the startup platform without giving any specific reason.

In a circular, the exchange said, “BSE has decided to postpone the split of the BSE startup sub-segment from BSE SME segment. Startups will continue to list on BSE SME segment as usual. These startups will have the option to migrate to BSE startup segment once BSE startup segment is launched.”