Hong Kong gets support for new board for start-ups but it’s still thumbs down for dual shares structure listings

PUBLISHED : Thursday, 01 September, 2016, 10:29pm
UPDATED : Thursday, 01 September, 2016, 10:56pm

Hong Kong brokers and accountants are giving their support to Hong Kong Exchanges and Clearing in exploring a new market with lower listing criteria for start-ups but many are not in favour of the controversial dual shares structure.

Jeffrey Chan Lap-tak, from Oriental Patron Financial Group, said Hong Kong either needed a new market or it should revamp the second board – the Growth Enterprise Market – to lower the entry requirements to allow start-ups to raise money.

“The Hong Kong government wants to use taxpayers’ money to help youngsters set up their companies which is a mistake as many new start-ups fail. The government should not use taxpayers’ money for risky business. Instead, it should encourage the HKEX to introduce a platform for them to raise funds,” Chan said.

Chan is backing HKEX chief executive Charles Li Xiaojia who said on Thursday that he was considering all methods – including a new board with low listing thresholds for technology firms and start-ups.

At present, the main board requires companies to have made HK$50 million over three years before seeking a listing.

The GEM, launched in 1999, was intended to be Hong Kong’s solution to the Nasdaq board in the United States, but it was a failure. Although companies were not required to be profitable, they had to have been in operation for two years with at least HK$20 million cash flow, which Chan said is too high for start-ups.

“Many Hong Kong start-ups chose to list in Beijing’s new third board which has no cash or operational requirements. If HKEX want to attract these companies to list here, it should only require that they disclose their information to investors and allow market forces to decide if they should raise funds in the market,” Chan said.

If it can’t even sort out how to reboot the second board, the GEM, can it really do it with a third board?
Philip Tsai, chairman, Deloitte China

He is also opposed to HKEX following the US or Singapore by introducing the dual share structure for companies.

“The dual share structure is not fair to all investors. It allows founders, even if they do not perform well, to still control the company. This is not fair to majority shareholders,” Chan said.

Philip Tsai, chairman of Deloitte China, said the HKEX should first review the GEM before launching the third board.

“If it can’t even sort out how to reboot the second board, the GEM, can it really do it with a third board?

“I think the HKEX should first review how to improve and position the GEM. It could revamp the GEM for new tech listings, or it can also set up a new market to do so,” Tsai said.

Roger Chen, vice-president of Asia for domain name and web hosting firm GoDaddy, said the company chose to launch its Flare app – which allows aspiring entrepreneurs to post their ideas and receive feedback from the community – in Hong Kong as its position as an international city with a growing number of start-ups makes it a good test market.

“We’re trying to put Flare into markets where there’s already a plentiful start-up ecosystem, and there’s a whole bunch of crowd sourcing, accelerators and incubators in Hong Kong.”