Corporate Governance Risks in Fintech Listings: How Dual-Class Structures Threaten Shareholder Value

In the rapidly evolving world of fintech, innovation often takes center stage. However, beneath the surface of groundbreaking technology and disruptive business models lies a quieter, yet equally critical, battleground: corporate governance. Dual-class share structures, once a niche tool for preserving founder control, have become a default in the sector, reshaping the dynamics of power and accountability. For investors, the implications are profound. These structures, while offering short-term strategic flexibility, increasingly expose long-term risks that could erode shareholder value and destabilize market confidence.

The Rise of Dual-Class Structures in Fintech

Dual-class share structures (DCSS) allow founders and insiders to retain disproportionate voting power despite owning a minority of shares. This model has gained traction in fintech, where venture capital-backed companies prioritize innovation over immediate profitability. Since 2010, 57% of fintech IPOs have been VC-funded, with 19% adopting dual-class structures between 2017 and 2019. By 2024, the trend had evolved further: a Hong Kong-listed fintech firm granted its founder 70% of voting power with just 20% economic ownership, a stark asymmetry justified as a shield against short-term shareholder pressures.

Yet this control comes at a cost. The same firm faced a 15% valuation discount in 2024 when a shareholder resolution on data privacy was rejected by the controlling founder, despite 60% of non-insider voters supporting it. Such conflicts underscore the tension between founder-driven governance and market expectations.

Governance Entrenchment and Long-Term Underperformance

Academic and industry studies consistently highlight the risks of governance entrenchment. A 2025 study found that dual-class fintech companies underperform traditional IPOs by a significant margin after seven years. For instance, a fintech firm with a dual-class structure saw its valuation peak in 2021 but plummet by 40% by 2024, attributed to poor board oversight and investor skepticism. Cross-border listings exacerbate these risks, as regulatory frameworks vary widely. Singapore and Hong Kong, for example, permit stealth governance mechanisms like golden shares and umbrella partnerships, which further obscure voting power.

The case of Wise, a prominent fintech firm, exemplifies these challenges. Its co-founder, Taavet Hinrikus, has publicly opposed a proposal to extend the company's dual-class structure by a decade as it seeks a U.S. listing. Hinrikus argues that bundling the extension with the listing vote is undemocratic, risking legal challenges and eroding investor trust. The dispute, set for a court hearing in Q2 2026, has drawn scrutiny from investor coalitions like the Investor Coalition for Equal Voting Rights (ICEV), which advocate for "sunset" provisions to phase out dual-class structures.

Regulatory Shifts and Investor Strategies

Regulators are beginning to respond. The Delaware Supreme Court's 2024 ruling in In re Match Group Inc. tightened fiduciary duties for controlling shareholders, requiring transactions with conflicts of interest to meet the "entire fairness" standard. Meanwhile, the UK's Financial Conduct Authority (FCA) relaxed its listing rules in 2024, allowing indefinite weighted voting rights for individuals and up to ten years for corporate entities—a move critics argue weakens investor protections.

For investors, the key lies in proactive due diligence. The 2025 studies recommend prioritizing fintech companies with time-bound dual-class structures that transition to equal voting rights. Investors should also demand transparency in side agreements, board independence, and the rationale for retaining dual-class governance. Monitoring regulatory environments is equally critical, as jurisdictions like the U.S. lack mandatory sunset clauses, while others, such as Hong Kong, offer more flexibility but less oversight.

The Path Forward

Fintech's future hinges not only on technological innovation but on governance accountability. As companies expand globally, investors must navigate a patchwork of regulations and opaque voting processes. The Governance for Growth Investor Campaign, led by UK pension scheme Railpen, underscores the need for clear sunset mechanisms and shareholder voting protections.

For long-term investors, the message is clear: dual-class structures are a double-edged sword. While they may offer short-term strategic agility, they also create risks that can undermine valuations and reputations. By prioritizing transparency, demanding sunset provisions, and scrutinizing founder track records, investors can mitigate these risks and align with fintech companies that balance innovation with accountability.

In an era where governance is as critical as code, the next generation of fintech investments will be defined not just by what they build, but by how they govern.