Companies seeking to list dual-class shares may get green light to apply for Hong Kong listing by end June

The dual-share structure had been banned in Hong Kong since the mid-1980s

PUBLISHED : Tuesday, 16 January, 2018, 1:12pm
UPDATED : Tuesday, 16 January, 2018, 1:38pm

New economy companies seeking to list dual-class shares in Hong Kong could be eligible to apply by the end of June, according to Hong Kong Exchanges and Clearing (HKEx) chief executive Charles Li Xiaojia on Tuesday.

As part of a listing reform plan announced last month, HKEx will allow biotech firms without revenue and other large new economy companies with dual-class shares to list in Hong Kong in the second half of the year.

Li said a six- to eight-week consultation on the rule change will begin in February after the Lunar New Year holiday.

“If all goes well, we hope all the rule changes would be ready in early June and we can start to accept applications for listing from new economy and biotech companies,” Li said on the sidelines of the Asian Financial Forum.

The dual-class shareholding structure had been prohibited in Hong Kong since the mid-1980s. These share structures are favoured by technology companies such as Facebook or Alphabet as they enable founders to maintain control of the company even though they only hold a minority of the listed shares.

Hong Kong’s ban on the dual-share structure is believed to be one of the main reasons why the city lost out when mainland Chinese e-commerce giant Alibaba Group Holding opted for New York in its record US$25 billion IPO in 2014.

Li declined to identify which companies have contacted the exchange since the proposed rule change, although mainland handset maker Xiaomi is rumoured to be among the candidates.

Li said he also welcomed US-listed new economy companies seeking a secondary listing in Hong Kong.

Under the HKEx proposal unveiled in December, “innovative” Chinese companies with a market capitalisation of more than HK$10 billion (US$1.27 billion) will be eligible to seek a secondary listing in Hong Kong as long as they have a primary on the New York Stock Exchange, London Stock Exchange, or Nasdaq.

“Alibaba, Baidu, and are all very large Chinese new economy companies listed in the US,” Li said. “Our reform would allow these companies to list here. I cannot say if an individual company would decide to list in Hong Kong, but we can have a regulatory framework ready for them to consider to list here.”

Alibaba executive chairman Jack Ma Yun last week said he would consider listing in Hong Kong upon a request by Chief Executive Carrie Lam Cheng Yuet-ngor.

Li also said he hoped an ETF connect and a derivate connect would launch this year, but cautioned that more progress on technical issues was needed.

Li said that the existing stock connect scheme had helped to pump up daily market turnover. In the first three weeks of the year turnover has risen to HK$130 billion, compared to HK$88.25 billion in 2017 and HK$66.92 billion in 2016.