Hong Kong’s stock exchange operator has issued new rules to lower the listing threshold for specialist technology companies and special-purpose acquisition companies (SPACs).
Hong Kong Exchanges and Clearing (HKEX) plans to lower the market capitalisation bar to make it easier for yet-to-be-profitable tech companies to pursue an initial public offering (IPO) in the city. Separately, the bourse operator will also lower the transaction threshold for listings through SPACs, according to its joint statement with the Securities and Futures Commission (SFC).
These modifications will apply temporarily for a fixed period of three years from September 1, 2024, to August 31, 2027, according to the statement.
“Drawing on insights from listing applicants and related transactions, we have identified opportunities to boost the inclusivity and dynamism of our listing environment within the established framework,” said Katherine Ng, HKEX’s head of listing. “These modifications will provide greater flexibility and clarity for both issuers and investors, whilst upholding our robust regulatory standards.”
The move is expected to help Hong Kong attract more tech companies to go public under its Chapter 18C regime, which was introduced in March 2023 to welcome listings of tech companies even before they make any money.
Tencent-backed artificial intelligence (AI) drug developer QuantumPharm and Chinese chip maker Black Sesame have been listed on the city’s main board under this regime.
For companies in the 20 or so sectors considered “specialist technology”, the new rules will reduce the minimum market-cap bar for pre-revenue tech firms to HK$8 billion (US$1.02 billion) from HK$10 billion. For their revenue-making but pre-profit counterparts, the market-cap entrance will be HK$4 billion ($512.8 million), versus the current HK$6 billion.
HKEX is also easing the rules for listings through SPACs, a regime that has logged just five such listings since its introduction in the city in 2021. The new rules stipulate that the independent third-party investment threshold will be the currently prescribed percentage of the negotiated value, or HK$500 million ($64.1 million) in value, whichever is lower.
SPACs are publicly traded companies formed with the sole purpose of effecting a merger with an existing privately held business to enable it to go public.
