New York displaces Hong Kong as world’s top IPO destination in Q1

Hong Kong lost its crown as the world’s top destination for initial public offerings (IPOs) during the first quarter, as an absence of blockbuster listings allowed the city to be overtaken by New York, Shanghai and Shenzhen, according to Thomson Reuters’ data.

Sixteen companies chose to list their shares in Hong Kong in the first quarter, raising US$1.4 billion of capital, far behind the 14 IPOs in New York with US$9.6 billion raised. New York’s haul was bolstered by Snap Inc’s US$3.9 billion IPO in March.

Shanghai ranked second, with US$4.8 billion, while Shenzhen’s ChiNext exchange ranked third with US$2.2 billion raised from technology companies and startups.

“There wasn’t any big IPOs in the first quarter, while the HKEX and the Securities & Futures Commission tightened their approval procedures of new listings in both the Growth Enterprise Market and the main board,” said Joseph Tong Tang, chairman of Morton Securities.

The drop in ranking, as well as the reduced fee income that follows, puts pressure on HKEX chief executive Charles Li Xiaojia to quicken the process for establishing a third board in Hong Kong, with a more relaxed set of rules including the possibility of dual-class shares, to attract technology companies to raise capital here.

The HKEX and the Hong Kong securities watchdog had been conducting a process of public consultations since last year, obtaining public feedback on the best way to change the city’s listing rules.

Many technology companies including Google Inc, Facebook Inc and Snap adopt dual-class share structures, banned in Hong Kong, but allowed in other markets.

Alibaba Group Holdings chose New York for its US$25 billion IPO in 2014, catapulting America’s financial centre to the top of Thomson Reuters’ global ranking that year. Alibaba is owner of the South China Morning Post.

Hong Kong’s capital-raising rules are outdated, more suitable for traditional companies like property developers instead of technology and fintech companies, Alibaba’s chairman Jack Ma said last year.

Hong Kong’s first-quarter total equity funds raised, including IPOs, share placements and rights issues, dropped 26.6 per cent to an 11-year low of US$5.3 billion.

“The HKEX should study how to relax its listing rules to attract more firms to raise their capital here,” Tong said. “Otherwise the local IPO market will wither.”