IPOs: Hong Kong’s GEM reforms likely to end second board’s 3-year drought, but will not be game-changers, analysts say
- New rules effective January 1 remove a quarterly reporting requirement and streamline transfers to the bourse’s main board
- Analysts say the bar is still too high for many small companies despite the changes by Hong Kong Exchanges and Clearing
The reforms aim to end a three-year drought of initial public offerings (IPOs) on the GEM board, which has seen no new listings since Grand Power Logistics Group raised HK$55.5 million (US$7.1 million) in January 2021.
“The HKEX listing reforms on GEM are a good gesture to draw attention to the second board, which will help attract some smaller players to consider listing,” said Tom Chan Pak-lam, permanent honourable president of the Institute of Securities Dealers, an industry body for stockbrokers in the city.
“However, they are unlikely to be a game-changer. Even after the reforms, the bar is still too high for many small companies to list on GEM, while few existing GEM companies are qualified to transfer their listing to the main board.”
The new reforms remove mandatory quarterly reporting requirements for GEM companies, so they only need to report results twice a year, which aligns with requirements on the main board. HKEX, which runs the third-largest stock market in Asia, also reduced the lock-up period for major shareholders disposing of their controlling stakes from 24 months to 12 months. GEM does not have a profit requirement, while the main board requires a company to make at least HK$80 million in the three years leading to its listing.