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SYDNEY: Hong Kong regulators introduced new rules to try to revive its sluggish capital markets, but the city struggled to attract more specialist technology companies for initial public offerings (IPOs), with just two listings in more than a year.
Why it matters
Hong Kong’s fate depends on a buoyant capital market, especially initial public offerings (IPOs), and while deal activity remains subdued, Hong Kong’s status as a regional financial hub remains lackluster.
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The Hong Kong Stock Exchange announced the 18C regime in March 2023, which will allow smaller companies specializing in next-generation information technology (such as cloud-based services, artificial intelligence, and advanced hardware and services) to list more easily.
Regulators hoped the changes would spark a wave of listings by smaller technology companies, but only two have chosen to go public in the past 12 months.
QuantumPharm, an AI drug research company, raised $127 million in June.
Chinese driving chip designer Black Sesame International will begin trading on Thursday.
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Under 18C, commercial companies need to have a market capitalization of HK$6 billion (US$769.99 million) and revenue of at least HK$250 million in the most recent fiscal year. Early-stage companies need to have a market capitalization of HK$10 billion, and while there is no minimum revenue requirement, companies need to have a clear revenue plan.
But experts say these requirements are too stringent.
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“Many potential 18C applicants are not yet profitable or have little revenue, and if they want to go public now, the valuation may not be ideal compared to when they raised funds before,” said Richard Wang, a partner at Freshfields. “As a result, the founders of these companies may choose to do more pre-IPO financing before considering going public.”
(US$1 = HK$7.7923)
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