What Hong Kong exchange has done to attract IPOs of new economy firms
In April, bourse operator Hong Kong Exchanges and Clearing (HKEX) introduced its biggest listing reform for 25 years with the aim of turning the city’s stock exchange as a listing hub for technology and biotechnology companies which now are mainly listed in the US.
But the reforms have yet to work their magic for the exchange as only two companies have successfully listed so far. Biotech firm Ascletis Pharma made its debut on August 1 and smartphone maker Xiaomi in July.
What types of companies will be able to list under the new rules?
Three types of companies can apply. Technology giants with dual class or multiple class shareholding structure; biotech firms without profit or revenue; and innovative companies currently listed in the US or the UK seeking a secondary listing.
What are the listing requirements for companies with multiple class shareholding?
The new rules apply to only tech or new economy companies with multiple voting rights shareholding structure, usually with two different classes of shares. Each share held by the premium class of shareholders – mostly the founders and other key executives – can have up to 10 times more voting rights than the others. No corporate shareholders are allowed to hold the premium class of shares. The company must have a market value of at least HK$40 billion (US$5.1 billion) at the time of the listing, or market cap of HK$10 billion and annual revenue of at least HK$1 billion.
What are the requirements for biotech companies?
Biotech candidates need not comply with the profit requirements of the main board, which stipulates at least HK$50 million of profits in the three years leading to the listing. They also do not need to have any revenue track record. However, they must have a market valuation of at least HK$1.5 billion at the time of listing, one “sophisticated” pre-IPO investor, a product that has passed phase one clinical trial primarily aimed at showing its safety, and has regulatory approval to begin phase two to prove its efficacy.
And for secondary listings of tech giants?
The tech firms must already be listed on one of the three qualifying exchanges – New York Stock Exchange, Nasdaq or London Stock Exchange. They also must have a market cap of over HK$40 billion, or market cap of HK$10 billion and annual revenue of at least HK$1 billion.