In an effort to elevate Hong Kong’s position as the listing venue of choice for innovative companies from around the world, the Hong Kong Stock Exchange (HKEx) published a consultation paper proposing a new listing regime for companies belonging to one of five Specialist Technology Industriesi, namely: (a) next-generation information technology; (b) advanced hardware; (c) advanced materials; (d) new energy and environmental protection; and (e) new food and agriculture technologies.
The consultation paper was released soon after Hong Kong Chief Executive delivered his 2022 policy address vowing to enhance Hong Kong's competitiveness in financial services by facilitating large-scale advanced technology enterprises to list on the Main Board of the HKEx and to attract talents.
As stated in the consultation paper, Hong Kong lags behind the US and Mainland China in terms of the number and market capitalisation of companies belonging to the Specialist Technology Industries – the number of Specialist Technology issuers (and their combined market capitalisation) in the US, Mainland China and Hong Kong markets as of 9 September 2022 are 738 (HK$85.4 trillion), 451 (HK$15.3 trillion) and 99 (HK$3 trillion), respectively.
Under the new proposed regime, no minimum profits requirement is imposed for listing of Specialist Technology Companies on the Main Board but other eligibility requirements may differ depending on their degree of commercialisation.
The eligibility requirements for "Commercial Companies" (those with at least HK$250 million in revenue arising from their Specialist Technology business segment for the most recent audited financial year) and for "Pre-Commercial Companies" (those that have not yet met the threshold) are set out below:
| Eligibility Requirements | Commercial Companies | Pre-Commercial Companies | Main Board Alternative Test |
| Trading Record | ≥ 3 financial years | ≥ 3 financial years | ≥ 3 financial years |
| Market Capitalisation | ≥ HK$8 billion at listing | ≥ HK$15 billion at listing | ≥ HK$4 billion at listing |
| Revenue | ≥ HK$250 million for the most recent audited financial year | no requirement, but must demonstrate a credible path to achieving the HK$250 million threshold | ≥HK500 million for the most recent audited financial year |
| Working Capital | no requirement | working capital (including IPO proceeds) able to cover at least 125% of its group’s costs for at least the next 12 months | no requirement |
| R&D Investment | ≥ 15% of total operating expenditure for each of the three financial years prior to listing | ≥ 50% of total operating expenditure for each of the three financial years prior to listing | no requirement |
Subject to the above, both Commercial Companies and Pre-Commercial Companies must satisfy the following requirements to qualify for listing:
- Management and Ownership Continuity - applicant should be under substantially the same management for at least three financial years of operation prior to listing; and there should be ownership continuity and control in the 12 months prior to the date of the listing application; and
- Meaningful Investment from Sophisticated Independent Investors (SIIs) - SII investment should in aggregate reach the prescribed minimum percentageii of applicant's issued share capital at listing; and at least two of them are Pathfinder SIIs (i.e., holding shares or securities convertible into five percent or more of the issued share capital of the applicant as at the date of the listing application and throughout the 12-month period before the application).
In addition, during or after the initial public offering (IPO), the following applies for both Commercial Companies and Pre-Commercial Companies:
- At least 50 percent of the total number of shares offered in the IPO must be allocated to Independent Institutional Investors;
- A new prescribed initial retail allocation and clawback mechanismiii to help ensure a robust price discovery process;
- A minimum free float (being shares not subject to any disposal restrictions) of at least HK$600 million upon listing;
- Existing shareholders (including controlling shareholders) of a Specialist Technology Company are allowed to participate in its IPO as placees or cornerstone investors;
- Enhanced disclosure in the listing document to facilitate determination of valuation including, for instance, the implied valuation for each pre-IPO investment round, burn rate and cash operating costs, products and commercialisation status and prospects, etc.;
- Post-IPO lock-up on the following persons:
- Controlling shareholders of the listing applicant - 12 months for a Commercial Company and 24 months for a Pre-Commercial Company;
- Key persons (including founders, beneficiaries of weighted voting rights, executive directors and senior management, and key personnel responsible for the technical operations and/or R&D) - 12 months for a Commercial Company and 24 months for a Pre-Commercial Company;
- Pathfinder SIIs - six months for a Commercial Company and 12 months for a Pre-Commercial Company; and
- Cornerstone investors - generally for at least six months;
- Additional continuing obligations for Pre-Commercial Companies, including additional disclosures in interim and annual reports on the progress made towards achieving the HK$250 million revenue threshold, and updates on any business and financial estimates provided in the Listing Document.
It is expected that new listing regime for Specialist Technology Companies will be implemented early next year. The public comment period ends on 18 December 2022.
i HKEx intends to publish a guidance letter on the acceptable industries and sectors that would fall within that definition, which will be updated from time to time to incorporate newly emerging industries and the latest technology trends into the scope of the Specialist Technology Regime.
ii The prescribed minimum percentage holding by SIIs varies depending on applicant's expected market capitalisation at listing:
| Commercial Companies |
Pre-Commercial Companies | ||
| Market capitalisation | SIIs minimum % | Market capitalisation | SIIs minimum % |
| ≥8bn to < 20bn |
20% |
≥15bn to < 20bn | 25% |
| ≥20bn to < 40bn | 15% | ≥20bn to < 40bn | 20% |
| ≥40bn | 10% | ≥40bn | 15% |
iii The proposed new initial allocation and clawback mechanism specific to Specialist Technology Companies:
| Initial |
No. of times (x) of over-subscription in the public subscription tranche | ||
| 10x to less than 50x | 50x or more | ||
| Minimum retail allocation as a percentage of total offer shares |
5% |
10% | 20% |
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Hong Kong's New Listing Regime for Specialist Technology Companies Takes Effect on 31 March 2023
