Hong Kong bourse to study measures to attract more tech start-ups to raise funds in the city
Hong Kong’s stock exchange said it will explore ways to encourage start-ups and technology companies to raise capital in the city, conceding the need to tweak existing listing rules to compete with Singapore and New York to be the hub for initial stock offers.
“We will study all possibilities and whether we should adopt a new disclosure regime for these new markets,” said Charles Li Xiaojia, chief executive of Hong Kong Exchanges & Clearing, at a luncheon with more than 100 of the city’s brokers and fund managers.
On Monday, the listing advisory committee at rival Singapore Exchange approved a plan to allow companies with dual-class shares to raise funds, in a move that makes the city more appealing to technology start-ups that often feature stocks with unequal voting rights.
Dual-class structure has been the subject of intense debate in Hong Kong since the bourse in 2014 missed out on a US$25 billion initial public offer by Alibaba Group, owner of the South China Morning Post.
Alibaba has a dual-class structure that allows founding shareholders to nominate up to half the company’s board of directors even as they own minority shares.
Hong Kong hasn’t allowed such a structure since the 1980s because the city’s Securities & Futures Commission, the market regulator, believes dual-class shares violate the “one share, one vote” principle and are unfair to other investors.
Alibaba eventually listed its shares in New York in what became the largest IPO in history.
The US stock market allows dual-class shares, favoured by technology companies including Facebook, Google and LinkedIn.
Hong Kong was the world’s largest destination for IPOs from 2009 to 2011, but lost that pole position to the New York Stock Exchange in 2014, due to Alibaba’s listing.
Of the 30 mainland Chinese companies listed in the US, 29 had dual-class structures
In addressing the annual gathering of stockbrokers, Li neither specifically addressed the subject of allowing dual-class structure in Hong Kong, nor bring up competition with Singapore.
“We have our own plan and our own strategies and we will explore all possibilities,” he said. “Other stock exchanges do their own thing and we will not respond to what another exchange is doing.”
At stake for Hong Kong could be another large stock offer by other startups including Alibaba’s online payments unit Ant Financial Services Group, which investment bankers estimate could be valued as much as US$50 billion.
Alibaba’s founder Ma told the University of Macau students in June that he “very much hopes” to list Ant Financial, which operates the Alipay electronic payments platform, in Hong Kong.
Hong Kong financial secretary John Tsang Chun-wah in his budget has unveiled a multibillion dollar plan to turn the city into a technology hub to nurture the development of companies including those involved in financial technology.
The local listing rule however are not tailored for start-ups or technology firms to raise capital in Hong Kong.