The Stock Exchange of Hong Kong’s Growth Enterprise Market Listing Reforms
On 26 September 2023, The Stock Exchange of Hong Kong Limited (HKEx) published a consultation paper on the proposed changes to the Listing Rules of the Growth Enterprise Market (GEM), having seen a decline of new GEM listings since 2019 and considering the recent success of the Beijing Stock Exchange in attracting listings of small and medium-sized enterprises.
The main proposals comprise:
- introduction of a “market capitalisation/ revenue/ R&D test”, as a new financial eligibility test, to attract high growth potential and research-driven companies to Hong Kong and the Greater Bay Area;
- removal of the mandatory quarterly reporting requirement, to align GEM’s requirements with those for Main Board issuers, and hence addressing concerns regarding the ongoing compliance cost of a GEM listing;
- new streamlined mechanism for transfer to the Main Board, such that the transfer applicant will no longer be required to appoint a sponsor to conduct due diligence or issue a prospectus for its transfer, but will only be required to submit certain application documents, subject to certain new criteria such as having:
(i) complied with HKEx’s requirement regarding financial results for three full financial years as a GEM-listed issuer prior to its transfer, with ownership continuity and control, and no fundamental change in principal business throughout;
(ii) reached the Minimum Daily Turnover Threshold on at least 50% of the trading days over the reference period (i.e. 250 trading days preceding the transfer application to the day of commencement of dealings in issuer’s securities on the Main Board) (Reference Period); and
(iii) had a volume-weighted average market capitalisation over the Reference Period that could meet the minimum market capitalisation requirement for listing on the Main Board.
This is a welcome step towards revamping the platform for emerging companies’ fundraising and growth in Hong Kong.
