Hong Kong rolls out welcome mat for US-listed tech stocks to raise capital via secondary listings, spurring exodus from US market
- Bourse plans to allow companies with corporate shareholders of so-called weighted voting rights to raise funds, according to an announcement by the exchange
- The proposed reform would allow Tencent Music, iQiyi and other US-listed Chinese technology companies to qualify for secondary listings in Hong Kong
Hong Kong Exchanges and Clearing Limited (HKEX), the operator of the world’s third-largest stock market, said it plans to extend its 2018 rule change to attract more listed companies to raise funds in the city via secondary listings, in a move that’s likely to spur an exodus of Chinese companies from the United States.
About 10 Chinese technology companies that are already listed on US stock markets are owned by corporate shareholders with WVR structure, where the shares have different voting rights between founder-shareholders and others.
Among them are Tencent Holdings’ music streaming unit Tencent Music Entertainment Group, and Baidu’s video streaming platform iQiyi, dubbed the “Netflix of China”. These companies can qualify for secondary listing in Hong Kong under the new rules, according to a person familiar with the situation.
Hong Kong’s exchange secured the support from two out of three respondents in a January consultation on allowing corporate WVR shareholders to raise funds via secondary listings. The HKEX plans to conduct another round of consultation to assess whether unlisted companies featuring corporate WVR shareholders should also be allowed to raise funds in initial stock offers.
“After carefully considering the feedback from respondents, we have decided to give more time for the market to develop a better understanding of Hong Kong’s regulatory approach towards regulating listed companies with WVR structures and their controllers,” said Bonnie Chan, HKEX’s head of listing.