Hong Kong launches biggest stock listing reform in three decades
December 19, 2017 Category China News Round-up, Weekly
Hong Kong’s stock exchange has unveiled the biggest overhaul in its listing rules and procedures in three decades, in an overture to technology companies seeking to raise capital, as the city tries to catch up with New York and Shanghai in the race to be the world’s largest market for initial public offers (IPOs).
The bourse will abandon an earlier plan for a so-called Third Board for start-ups, but instead create two additional chapters in its listing regulations for biotechnology firms and companies with multiple classes of shares to raise capital, according to the Hong Kong Exchanges and Clearing, the market operator. “The market has changed substantially in 30 years, it’s time to make a change,” said Chief Executive Charles Li. “If we don’t change our listing rules, we will miss the boat.”
The overhaul closes a chapter in the debate raging since late 2014 when Alibaba Group Holding chose New York instead of Hong Kong for its USD25 billion stock offer, then the world’s largest. At issue was whether the listing regulations and procedures of Hong Kong’s stock market – dominated by financial companies, industrial firms and developers – are flexible or competitive enough for the legions of start-ups, fintech companies and tech firms to raise capital. The founders of Alibaba have special rights to appoint directors to the company’s board. That privilege contravened Hong Kong’s “one share, one vote” principle, resulting in a deadlock on the company’s listing application that ultimately drove Alibaba to take its stock offer to New York.
“We may have missed some big players, but it is not too late,” Li said in Hong Kong. “After the change in the rules, many of the Chinese companies that are seeking to list in the U.S. may also consider listing in Hong Kong.” Under the HKSE’s new rules effective in mid-2018, biotech firms need at least HKD1.5 billion in valuation at the time of their listing, but they need not have any revenue track record to raise funds in the city. Companies with multiple classes of shares must be engaged in businesses classified as new economy, with at least HKD10 billion in valuation and annual revenue of at least HKD1 billion. Businesses with valuations exceeding HKD40 billion can raise funds in Hong Kong with a lower revenue threshold, according to the new rules, the South China Morning Post reports.
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