Going public on HKEx

We assist entrepreneur raise capital, conduct mergers and acquisitions, and expand investor base in Hong Kong.

Entrepreneurship floats his company for reasons: from shareholders realizing their investment, to lack of capital to expand its business.

Why a company go public?

In general,  being listed on the Hong Kong stock markets could bring a company the following edges:

  • Capital raising for growth at the time of initial listing and afterward
  • Solid investor base leading to a deep liquid market in the trading
  • Grant of share options to key employees for their commitment
  • Transparency for listed companies leading to competitive credit lines
  • Rigorous disclosure standard leading to improved management in operation and development

Why get listed in Hong Kong?

Hong Kong is a suitable listing venue to list a company shares, here is some of Hong Kong’s advantages as follows:

  • HK Dollar is linked with US Dollar under currency peg set exchange rate of HKD1 to USD7.8
  • US Dollar Clearing System allowing Hong Kong financial institutions (FI) to settle USD transactions “real time” against the delivery fo HKD (instead of 12 hours in New York time zone)
  • As offshore centre for Renminbi equity find raising
  • International recognized financial centre suited in gateway to high growth economy in Mainland China and others Asian countries
  • Zero capital flow restrictions, worldwide currency convertibility, and uncensored information flow
  • Well-established legal system based on strong English common law, wide adaptation of international accounting standards, sound regulatory framework
  • Stock market with high degree of liquidity and efficiency
  • Attractive listing destination for international and Mainland Chinese companies:
    • Reaching Mainland Chinese investors for international companies in Hong Kong
    • Reaching international investors for Mainland Chinese companies in Hong Kong
    • From 2009 to 11, over US$120b from IPO were rasied in Hong Kong, leading worldwide IPO market to London Stock Exchange (LSE) and New York Stock Exchange (NYSE)
      • International firms dominating near 50% of the issuance
    • Launch of listing in form of Hong Kong Depositary Receipts (HDRs) promoting international companies which are restricted from overseas issuance of shares to list in Hong Kong

Hong Kong Stock Markets

HKEx operates two markets for companies to choose for listing.

Main Board

  • A market for companies that meet HKEx stringent profit and other financial standards requirement.
  • Effective from 1 July 2008, listing on the Main Board in the form of depositary receipt (HDR) has been launched as an alternative facility for issuers to list on HKEx.

Growth Enterprise Market (GEM)

  • Positioned as a second board of Main Board:
    • Admission requirements of GEM are less stringent than than of Main Board
  • Positioned as a stepping stone towards Main Board:
    • Transferring process from GEM to the Main Board is available
Fact

By 31 Aug 2015, total 1,810 companies list on HKEx, 1,600 of them list on Main Board in which 847 are Mainland Chinese companies.

Road to Initial Public Admission (IPO)

What are the listing considerations, requirements, process, fee and ongoing obligations for a company to go public on Main Board and GEM?

Considerations

Although listing status offer an abundance of opportunities to the listed issuer including enhanced public profile and increased recognition and reputation, how to tell the shareholders of a company are ready for a listing on Main Board or GEM?

  • Their Awareness of the time and cost involved in a listing exercise, on-going obligations, directors’ fiduciary duties and restrictions, fluctuation of the company’s share price, communication with the public and maintenance of shareholders’ confidence after listing
  • Rationale for listing the company and balance between the company’s long term strategy and shot term performance
  • Managing the level of loss of controlling power after listing
Fact

Hiring listing advisers is strongly recommended for discussion of the issues and challenges to list your company.

Requirements

Business Record and Operating History

Main Board
  • At least 3 financial years of trading record period with management continuity; and
  • The latest 1 financial year record of operation under substantially the same ownership and control

Remark:
if the company meet certain market capitalisation/revenue test, the period of record can be shorter than 3 financial years.

GEM
  • At least 2 financial years of trading and management record;
  • Management continuity throughout the two preceding financial years; and
  • Ownership continuity and control throughout the preceding full financial year.

Financial Requirements

Main Board

The company must meet either one of the three criteria in the following:

Profits Test:

  • Record of at least HK$50 million of after tax profits in the recent 3 audited financial years (in which at least HK$20 million profit in the latest year); and
  • At least HK$200 million of market capitalisation at the time of listing

Market Capitalization/Revenue Test:

  • At least HK$4 billion of Market Capitalization at the time of listing; and
  • At least HK$500 million of Revenue for the most recent audited financial year

Market Capitalization/Revenue/Cashflow Test:

  • At least HK$2 billion of Market Capitalization at the time of listing;
  • At least HK$500 million of Revenue for the most recent audited financial year; and
  • Positive cashflow from operating activities of at least HK$100 million in aggregate for the three preceding financial years
GEM
  • At least HK$20 million of positive cashflow generated from operating activities in the ordinary and usual course of business in recent 2 audited financial years; and
  • Market Captialization of at least HK$100 million at the time of listing

Expected Market Capitalisation and Shareholders base

Main Board

The expected Market Capitalisation at the time of listing must be:

  •  at least HK$200 million

in which, at least HK$50 million is the company’s public float (shares capital held by public) which are held among at least 300 public shareholders.

GEM

The expected Market Capitalisation at the time of listing must be:

  •  at least HK$100million

in which, at least HK$30 million is the company’s public float (shares capital held by public) which are held among at least 100 public shareholders.

Offering Mechanism and New Issue Price

Main Board
  • Listing by way of “placing only” may not be allowed if public demand for its securities is likely to be strong.
  • New shares issued at a price below their nominal value is prohibited.
GEM
  • Listing by way of “placing only” and other offering mechanism are allowed.
  • New shares issued at a price below their nominal value is prohibited.

Process

3rd parties intermediaries involved in a listing application

Sponsors

An applicant must appoint one sponsor for its listing application who must either be a corporation or an authorised financial institution by SFC. The duty of a sponsor is heavy as he provides assurance to HKEx and the public that the listing application comply with all regulatory requirements about listing.

Reporting Accountants

An applicant must appoint independent qualified accountants as auditors of the applicant to prepare for the financial reports.

Legal Advisers

An applicant must appoint legal advisers to provide assurance that the application is in compliance with the laws of each of the relevant jurisdictions.

Underwriters / Placing Agents

They, typically securities firms, are responsible for distributing the securities of the applicant during shares offering. Underwriters has to underwrite any shares of the applicant not taken up by investors.

Valuers

Valuers are responsible for attributing value to a the applicant’s properties prior to a listing.

Depositary

(only for issuance of HDR)

The HDR issuer must appoint a depositary, an HKEx authorized financial institution, as an agent of the HDR issuer to  issue or cancel HDR.

Major schedule of IPO

  1. Preparation

    1. Appointing intermediaries.
    2. Carrying out investigation of the company’s financial situation, risk factors, and legal considerations according to the requirement of Main Board and GEM.
    3. Restructure of the company’s conditions in comply with IPO rules and enhancing attractiveness to investors.
    4. Making public document
    5. Submission of HKEx application form (Form A1 for Main Board; Form 5A for GEM), Application Proof (AP) and relevant document.
  2. Vetting

    1. HKEx and SFC perform Qualitative Assessment on the application of the following:
      • Eligibility
      • Suitability
      • Sustainability
      • Compliance of Listing Rules, Companies Ordinance, Companies (Winding up and Miscellaneous Provisions) Ordinance and Securities and Futures Ordinance
      • Material disclosure deficiencies
    2. Comments from HKEx and SFC are handled by applicant’s sponsor
  3. Hearing

  4. Publication of post-hearing information of HKEx website

  5. Dealing of Shares Commences / IPO

Ongoing Undertaking

Management members

  • Company’s member consist of at least three independent non-executive directors
  • Establishment of an audit committee comprising at least three members

Shareholders Undertaking

  • Not to sell their interests in the company within 6 months after IPO.

Directors Undertaking

  • Keeping at least 30% of their interest in the company within 12 months after IPO.

Listing your shares on HKEx

You need assistance from AsiaBC.

As “listing your company’s shares” is a complex business, an enterprise who decided to go public in Hong Kong has to observe the Listing Rules and IPO procedures of HKEx.

Based in Hong Kong, AsiaBC is experienced in assisting enterprises to handle their Hong Kong IPO matters

Seeking help from AsiaBC can streamline the listing processes since we are familiar with the Hong Kong financial market and we are able to lineup the required professionals to plan, prepare for and complete the listing procedures.

We serve and guide enterprises through the entire Hong Kong IPO process:

 Planning: Formulate the feasible conditions of an enterprise for successful listing

  • Introduction of the required financial, accounting and legal professionals/agents who involve in the listing application
  • Eligibility assessment
  • Development and restructuring plan for improvement on the enterprise’s accounting systems, financial records, member’s structure, and business structure

Listing Application Submission: Coordinate various parties for the best route to approval

  • Assessment of the most favorable timing to submit the application
  • Carefully handling inquiries from regulatory regime
  • Promoting market awareness on the company in stage of pre-public admission (IPO)

Follow-up support: Realize sustainable development

  • Assisting in the matters of bonds, convertible bonds, new shares and top-up issue.

Seeking to listing in Hong Kong? Leave us your contact.

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