The Hong Kong stock market has decided to take a big step forward to broaden its listing regime, in a bid to embrace new economy.
The Hong Kong Exchanges and Clearing Limited (HKEX) proposed to reform the Main Board Listing Rules on Friday to attract blockbuster listings.
The decision was made based on feedback from market stakeholders and subsequent regulatory discussions with Hong Kong's Securities and Futures Commission.
The HKEX proposes changes to the listing rules of the Main Board to accommodate new economy companies that use weighed voting rights (WVR), as well as pre-revenue companies, to broaden the issuer base and diversify the capital market.
Companies with WVR structures would be required to have a minimum expected market capitalization of 10 billion HK dollars (1.28 billion U.S. dollars) and, if below 40 billion HK dollars of market capitalization, would need to meet a higher revenue test of 1 billion HK dollars in the full financial year before listing.
"Whatever views we may have with respect to WVR, the competitive reality is Hong Kong can't afford to rule out these companies solely on the basis of their use of WVR," HKEX chief executive Charles Li said.
Reforms to welcome pre-revenue firms would initially apply only to the bio-tech firms, which make up a majority of pre-revenue listings globally.
"Think back to just four years ago, in 2013, the thought of welcoming pre-revenue companies or those with WVR would have been almost unthinkable," Li said.
But as the years have passed, and more exciting new Internet and e-commerce stars have emerged on the Chinese mainland alongside the further growth of U.S. tech giants, Hong Kong needs to do more to compete, he said.
The HKEX also proposes reforms in relation to overseas companies to create a new concessionary secondary listing route to attract issuers from emerging and innovative sectors that are listed on the New York Stock Exchange, Nasdaq or the "premium listing" segment of the London Stock Exchange's Main Market.
The HKEX is in the process of finalizing the proposals and intends to further refine the proposals through discussions with stakeholders, following which a formal consultation on the detailed proposals and proposed amendments to the Listing Rules will be conducted.