HKEX: New Specialist Technology Company Listing Rules

Strong market support for new Specialist Technology Company listing route to market
New Rules to take effect on 31 March, welcoming applications from issuers operating in five frontier industries

The Stock Exchange of Hong Kong Limited (the Exchange), a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEX), announced today (Friday) the expansion of Hong Kong’s listing framework for the listings of Specialist Technology Companies1. A new chapter will be added to the Main Board Listing Rules (Listing Rules or Rules) on 31 March 2023, at which time companies seeking to list under the new chapter may submit a formal application.

HKEX Chief Executive Officer, Nicolas Aguzin, said: “This is an exciting new development for Hong Kong’s equity markets. The new economy sector is rapidly changing the way in which we live and work, and this new route to market will support some of the most innovative and progressive companies of the future. At HKEX, we are committed to continuously supporting the needs of issuers and investors and this further builds on our 2018 listing reforms, which amongst other things, swiftly established Hong Kong as Asia’s premier biotechnology fundraising market. This new Specialist Technology chapter will support even more companies as they access capital to fund innovative ideas and growth.”

“We would like to thank all those that provided feedback as this new route to market was drawn up, providing critical support as we take another step forward in shaping Hong Kong as the marketplace of the future.” Mr Aguzin added.

The Exchange received 90 non-duplicate responses to the consultation on the new chapter from a broad range of respondents, including investment firms, professional bodies, prospective listing applicants, corporate finance firms and individuals.

“Although we received majority support for most of our proposals, we have made some adjustments to the new Rules, reflecting market feedback, whilst continuing to ensure that our regulatory intentions remain undiminished,” said HKEX Head of Listing, Katherine Ng.

A summary of the key differences between the consultation proposals and the requirements to be implemented is set out below:

No.	CONSULTATION PROPOSAL	REQUIREMENTS TO BE IMPLEMENTED
1.	Market capitalisation
1.	Commercial Companies2: ≥ HK$8 billion Pre-Commercial Companies3: ≥ HK$15 billion	Commercial Companies: ≥ HK$6 billion Pre-Commercial Companies: ≥ HK$10 billion
2.	Research and development (R&D) expenditure ratio4
	Minimum R&D expenditure ratio threshold Commercial Companies: ≥ 15% Pre-Commercial Companies: ≥ 50%	Minimum R&D expenditure ratio threshold Threshold lowered to ≥ 30% for Pre-Commercial Companies with revenue ≥ HK$150 million but <HK$250 million
	Period of application Each of the three financial years prior to listing	Period of application Require the ratio to be met: (a) on a yearly basis for at least two of the three financial years prior to listing; and (b) on an aggregate basis over all three financial years prior to listing
3.	Meaningful investment from sophisticated independent investors (SIIs)5
3.	Indicative benchmark for the investment from Pathfinder SIIs6 At least two Pathfinder SIIs, each holding ≥ 5% of an applicant’s issued share capital as at the date of listing application and throughout the pre-application 12 month period	Indicative benchmark for the investment from Pathfinder SII Two to five Pathfinder SIIs that: in aggregate hold ≥ 10% of an applicant’s issued share capital as at the date of listing application and throughout the pre-application 12-month period; or otherwise have invested an aggregate sum of ≥ HK$1.5 billion in the applicant at least 12 months prior to the date of listing application (excluding any subsequent divestments made on or before the date of the listing application); Provided that at least two such Pathfinder SIIs: each hold ≥ 3% of an applicant’s issued share capital as at the date of listing application and throughout the pre-application 12-month period; or otherwise each have invested ≥ HK$450 million in the applicant at least 12 months prior to the date of listing application (excluding any subsequent divestments made on or before the date of the listing application).
4.	Optimised price discovery process
4.	Require ≥ 50% of offer shares to be taken up by “Independent Institutional Investors” Define “Independent Institutional Investors” as Institutional Professional Investors7 that satisfy the independence requirement8	Require ≥ 50% of offer shares to be taken up by “Independent Price Setting Investors” Define “Independent Price Setting Investors” to comprise (i) Institutional Professional Investors; and (ii) other types of investors with AUM, fund size or investment portfolio size of at least HK$1 billion that satisfy the same independence requirement

The Consultation Conclusions and copies of the respondents’ submissions are available to view on the HKEX website.

Notes:

A Specialist Technology Company is a company primarily engaged in the research and development of, and the commercialisation and/or sales of, products and/or services that apply science and/or technology within an acceptable sector of a Specialist Technology Industry (Specialist Technology Products). The list of Specialist Technology Industries and the respective acceptable sectors are set out in a guidance letter (see Appendix V of the Consultation Conclusions) which will take effect on the same date as the new Rules, and will be updated from time to time.

A Commercial Company means a Specialist Technology Company that has revenue of at least HK$250 million for its most recent audited financial year (Commercialisation Revenue Threshold).

A Pre-Commercial Company means a Specialist Technology Company which has not yet met the Commercialisation Revenue Threshold at the time of listing.

The R&D expenditure ratio is calculated as the total amount of an applicant’s expenditure on the R&D of its Specialist Technology Product(s) incurred for the relevant period, divided by its total operating expenditure for the same period.

The independence requirement and indicative size thresholds or qualification requirements for a SII are set out in the guidance letter (see Appendix V of the Consultation Conclusions).

Pathfinder SIIs mean SIIs that have invested at least 12 months before the date of the listing application of a Specialist Technology Company.

Institutional Professional Investors are persons falling under paragraphs (a) to (i) of the definition of “professional investor” in section 1 of Part 1 of Schedule 1 to the Securities and Futures Ordinance (Chapter 571 of the laws of Hong Kong).

A person will not be considered independent, for the purpose of this requirement, if it is (a) an existing shareholder of the applicant, or a close associate of an existing shareholder; or (b) a core connected person of the applicant.