White Collar | Third Board’s creation presents perfect opportunity for rethink on Growth Enterprise Market
Eighteen years on from its creation, the figures show what a disappointment the GEM has been: just 288 companies listed compared with 1,739 on the main board
The stock exchange will next week kick-start the consultation process for its much-hyped new Third Board, which is being created with the principal aim of attracting more technology and start-up firms to list in Hong Kong.
This would seem to be the perfect time, therefore, to look closely at what’s next for the Growth Enterprise Market (GEM), and what role that should play in what now becomes a multiple-market trading structure in Hong Kong.
Let’s not forget, that the proposed Third Board is being created for essentially the same reason the GEM was, way back in 1999: of attracting more technology firms to list in the city.
So we can safely conclude, that if the GEM had been a success, we simply wouldn’t need this new market at all.
When the stock exchange launched the GEM as its second board, the major difference with the main board was companies were not required to be profitable, while main board listing candidates needed to have a combined profit of HK$50 million (US$6.42 million) in the three years before listing and one of at least HK$20 million in the year before the IPO.
The GEM still requires listing candidates to have annual HK$20 million income, which is generally considered too high for many start-ups, with the more profitable ones now just preferring to list on the main board.