It is no secret that the Hong Kong Stock Exchange (HKEX) offers businesses a gateway to substantial capital and global visibility. As of September 2024, the HKEX features 2,298 companies on its Main Board and 323 on Growth Enterprise Market (GEM). This impressive roster highlights Hong Kong’s appeal as a prime destination for companies aiming to raise capital and broaden their investor base.
This article will provide a full, step-by-step guide to launching an Initial Public Offering (IPO) in Hong Kong, covering listing criteria, key stages, and critical participants in bringing a company to market.
The HKEX operates as the city’s primary securities market. It offers two distinct platforms for companies seeking to go public: the Main Board and GEM.
The Main Board caters to well-established companies with substantial track records and meets stringent financial criteria. It attracts larger corporations and provides access to a wide pool of institutional and retail investors.
In contrast, GEM serves as an alternative for small and mid-sized, growth-oriented companies. It features less stringent listing requirements, allowing emerging businesses to access public capital markets earlier in their development.
Compared to other major exchanges, the HKEX’s unique value proposition is its strategic position as a bridge between the Chinese Mainland and international markets. This unique role allows listed companies to tap into both Chinese and global investor bases, potentially leading to higher valuations and increased liquidity.
The HKEX’s regulatory framework tightly aligns with international standards, fostering investor confidence and maintaining market integrity.
Before being considered to list on the HKEX Main Board, companies must meet specific financial and operational requirements. These criteria ensure that only qualified businesses gain access to this premier platform.
Applicants must satisfy one of the following three financial tests:
Minimum aggregate profit of HKD 80 million over the past three years
At least HKD 35 million profit in the most recent year
At least in aggregate HKD 45 million profit for the two preceding years
Minimum market capitalisation of HKD 4 billion at listing
Revenue of at least HKD 500 million for the most recent audited financial year
Trading record of a minimum of three financial years
Management continuity for at least the three preceding financial years
Ownership continuity and control for at least the most recent audited financial year
Minimum of 300 shareholders at the time of listing
At least 25% of total issued share capital must be held by the public (or down to 15% with market capitalisation at the time of listing of not less than HKD 125,000,000 and approval of the HKEX)
As with any leading exchange, these criteria aim to maintain the quality and stability of Main Board listings, protecting investor interests and market integrity.
GEM offers a more accessible route for small and mid-sized companies to go public. Its requirements are less stringent than those of the Main Board, supporting emerging businesses in their growth journey.
Key GEM listing criteria include:
Applicants must satisfy one of two following financial tests:
Positive cash flow from operating activities of at least HKD 30 million in total for the two preceding financial years
a market capitalisation of at least HKD 250 million at the time of listing
revenue of at least HKD 100 million in total for the two preceding financial years, with a year-on-year growth of revenue over the two financial years
expenditure on research and development of at least HKD 30 million in total for the two preceding financial years
Management continuity for at least the two preceding financial years
Ownership continuity and control for at least the most recent audited financial year
Public float between 15% – 25% if the market capitalisation of the issue at the time of listing exceeds HKD 10 billion
GEM’s more flexible criteria allow small and mid-sized companies to access public capital earlier in their development, fostering innovation and growth in the Hong Kong market.
A successful IPO involves several key players, each contributing unique expertise to the listing process. As part of your listing initiative, it is widely advised to assemble a team comprised of expert advisors.
You may choose to source these experts yourself, but it is generally recommended that you partner with a trusted, local service provider such as Ascentium that can provide and/or source these experts on your behalf. Ideally, you should appoint these advisors 6 to 12 months ahead of your proposed listing. These advisors are including, but not limited to:
Appointed at least two months before application submission
Represents the company to communicate with the HKEX
Conducts due diligence on the company, shareholders, and management
Ensures prospectus accuracy and completeness
Coordinates all parties involved in the IPO
Multiple sponsors can be appointed, with at least one independent to the company
Each of these roles plays a crucial part in guiding a company through the complex IPO journey, ensuring compliance with regulations and maximising the chances of a successful listing.
The process of launching an IPO on the HKEX comprises three distinct stages. Each stage is essential in preparing your company for public listing, ensuring regulatory compliance, and positioning your offering for success in the market. Let’s examine these stages in detail:
Companies must evaluate whether they:
Following the assessment, companies often:
A meeting with all key figures sets the IPO process in motion:
Sponsors, the issuer, and legal teams conduct an extensive review of:
Key figures collaborate to prepare the listing prospectus:
This stage represents the final phase of the IPO process, culminating in the company’s shares being offered to the public on the HKEX.
Preparing for an HKEX listing involves multiple challenges that can test even well-prepared companies. The process requires extensive data compilation, staff resources, technology upgrades, and strict regulatory adherence. These demands often strain a company’s time, skills, and finances.
However, these obstacles shouldn’t discourage companies from pursuing an HKEX listing. Collaborating with an experienced local service provider can significantly improve the IPO preparation process and reduce potential hurdles and risks.
A proficient partner like Ascentium offers valuable support across various aspects of listing preparation:
By working with a local service provider like Ascentium, companies can maintain their operational momentum while ensuring thorough IPO preparation. This collaborative method increases the chances of a successful listing and sets the foundation for sustained success as a public entity.
A successful HKEX listing is within reach, even with the complexities involved. Whether you’re aiming for the Main Board or GEM, Ascentium can guide you through the process, offering local expertise and comprehensive support. We’ll help ensure a seamless transition to a public entity, setting the stage for future growth.