Hong Kong Stock Exchange Implements Temporary Changes to Listing Rules for Companies
In a move aimed at bolstering the listing environment for specialist technology companies (STCs) and special purpose acquisition companies (SPACs), the Stock Exchange of Hong Kong Limited (HKEx) and the Securities and Futures Commission (SFC) have announced temporary modifications to the Hong Kong Listing Rules. These adjustments, effective from September 1, 2024, will be in place for three years, until August 31, 2027.
STCs Eligibility Criteria
STCs are companies that focus on research and development, as well as the commercialization and sales, of products and services within specialized technology industries recognized by the HKEx. To qualify for the temporary adjustments, STCs must have generated at least HK$250 million in revenue for their most recent audited financial year.
Under the revised rules, the minimum initial market capitalization for STCs at the time of listing will be reduced. For STCs meeting the revenue threshold, the minimum market capitalization will decrease from HK$6 billion to HK$4 billion. For those not meeting the revenue requirement, the minimum will be lowered from HK$10 billion to HK$8 billion.
These modifications will apply to STCs expected to list on or after September 1, 2024, with listing applications submitted by August 31, 2027.
SPACs De-SPAC Transactions
SPACs, which are shell companies that raise funds through listing to acquire a business within a specified timeframe (known as a de-SPAC transaction), will also see key adjustments in their listing requirements.
One significant change concerns the minimum independent third-party investment required for de-SPAC transactions. The modification stipulates that the minimum independent third-party investment will be the lower of either the value calculated in accordance with Listing Rule 18B.41 or HK$500 million.
Additionally, the independence test for third-party investors in de-SPAC transactions will align with that of STCs. This means that the independence of third-party investors will be assessed from the signing of the definitive agreement for the investment up to the listing of the successor company. Certain individuals, such as core connected persons, controlling shareholders of the SPAC or de-SPAC target, and founders of the de-SPAC target and their close associates, will not be considered independent. The HKEx will retain discretion to determine others as not independent on a case-by-case basis.
All de-SPAC transactions anticipated during the three-year implementation period must adhere to these modified rules to receive approval from the HKEx.
Implications and Future Prospects
The temporary adjustments to the Hong Kong Listing Rules represent a strategic move by the HKEx and the SFC to attract and support specialist technology companies and SPACs looking to list in Hong Kong. By lowering the barriers to entry in terms of initial market capitalization and investment requirements, the regulatory bodies aim to create a more conducive environment for innovative companies to access the public markets.
These changes are expected to have a positive impact on the tech sector in Hong Kong, encouraging more STCs to consider listing on the HKEx. With reduced minimum market capitalization thresholds, emerging technology firms may find it easier to access capital and expand their operations.
Similarly, the modifications to de-SPAC transaction requirements aim to streamline the listing process for SPACs seeking to acquire businesses in Hong Kong. By aligning the rules with those of STCs, the regulatory bodies aim to ensure that de-SPAC transactions are conducted in a transparent and independent manner, safeguarding the interests of investors and maintaining market integrity.
Looking ahead, the temporary adjustments to the listing rules are expected to attract a diverse range of companies to the Hong Kong market, contributing to the growth and vibrancy of the local economy. As Hong Kong continues to position itself as a leading financial hub in Asia, these changes signal the city’s commitment to fostering innovation and supporting companies at various stages of growth.
In conclusion, the temporary modifications to the Hong Kong Listing Rules represent a proactive step by the regulatory bodies to enhance the competitiveness of the Hong Kong market and provide a platform for emerging technology companies and SPACs to thrive. By creating a more inclusive and accessible listing environment, Hong Kong aims to solidify its position as a premier destination for companies seeking to access the capital markets and fuel their growth aspirations.
