The Hong Kong stock exchange plans to create a new market to attract pre-profit new-economy firms and permit dual-class shares, according to a consultation paper by Hong Kong Exchanges and Clearing released on Friday.
The proposed new board will have two markets — New Board Premium and New Board Pro.
New Board Pro is designed for start-up companies. Neither profit nor turnover records will be required and the regulation will also be a light touch.
Companies should have a minimum market cap of HK$200 million and at least 100 investors. This market will only be open to professional investors.
By contrast, New Board Premium will have the same financial requirements as the main board for admission. Retail investors will also be able to trade in the Premium market.
Companies with non-standard equity governance structures or US-listed companies with standards different from those of Hong Kong can seek secondary listings on the New Board Premium. Candidates also need to have at least 300 investors.
It is believed the New Board is partly intended to lure mainland technology giants like Alibaba to Hong Kong.
The exchange also released a slew of reform measures to address some problems faced by its Growth Enterprise Market (GEM) section, such as concerns over the quality of GEM-listed firms, extreme price volatility and the issue of shell companies.
The new measures proposed include raising the bar on minimum market capitalization and cash flow requirements, and the extension of the post-IPO lock up period imposed on controlling shareholders.
Nevertheless, the New Board probably won’t be up and running until after 2019 at earliest.
As Hong Kong is gradually losing its position as China’s only global financial hub, and problematic companies are compromising our reputation, reforms and innovations as such are crucial in reestablishing our competitive edge.
This article appeared in the Hong Kong Economic Journal on June 19
Translation by Julie Zhu
[Chinese version 中文版]
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