Hong Kong Exchanges and Clearing Limited (HKEX) recently started a public consultation on launching a new board, which may lure more mainland Chinese companies to Hong Kong for listings.
The purpose of setting up the new board is to cater to start-up and tech companies currently not eligible for listing on HKEX’s main board and GEM. “The introduction of a new regulatory regime is the first step by the HKEX to attract new economy companies to come to Hong Kong for listings,” said Billy Au, a partner of Mayer Brown JSM in Hong Kong.
Au added that a new economy company’s selection of listing venue would take into account various factors including investor interest, fund-raising capability, analyst coverage, secondary market liquidity, and other factors that help establish an investor ecosystem for new economy companies.
“HKEX and market participants have lots to do in the future to build an investor ecosystem for new economy companies in Hong Kong in order to attract Chinese companies to come to Hong Kong for listings,” said Au.
The HKEX proposal for a new board includes two segments: (1) New Board Pro, targeted at earlier-stage companies that do not meet the financial or track record criteria for GEM or the main board; and (2) New Board PREMIUM, targeted at companies that meet the existing financial and track record requirements of the Main Board, but that are currently ineligible to list in Hong Kong because they have non-standard governance structures.
“For New Board PREMIUM, it is likely that the ‘titans’ of mainland China’s internet sector and other Chinese hi-tech companies already listed on the New York Stock Exchange or NASDAQ may have interest to come to Hong Kong for secondary listing in order to provide an additional trading venue to mainland Chinese investors in the same time zone,” said Au.
He said it was likely that some of the candidates of the New Third Board in mainland China might turn to Hong Kong and list on the New Board Pro, especially if there were regional or international elements in the businesses of such new economy companies.
New Board PRO will only be open to professional investors, while New Board PREMIUM will be open to both retail and professional investors.