What is IPO procedure in Hong Kong?

What is IPO procedure in Hong Kong?

The Hong Kong Stock Exchange (HKEX) is the eighth largest stock exchange in the world, and it is a significant centre for IPOs. If you’re considering launching an IPO in Hong Kong, understanding the process and requirements is essential. We’ll outline the critical steps involved in a Hong Kong IPO.

What is an IPO, and what are the benefits of going public?

An IPO, or Initial Public Offering, is when a company first sells shares to the public. It can be done through a traditional stock exchange, like the HKEX (Hong Kong Stock Exchange), or through a direct listing on a digital platform like Nasdaq.

There are many benefits to going public, including:

  • Access to capital: By selling shares to the public, companies can raise significant amounts of money to fuel growth and expansion.
  • Increased visibility: An IPO can generate publicity and awareness for a company, attracting new customers and partners.
  • Enhanced credibility: Being listed on a reputable stock exchange can add credibility and legitimacy to a company. It can make it easier to attract top talent and win business contracts.

What are the critical steps involved in a Hong Kong IPO?

To begin applying for an IPO, you must select and employ a team of financial advisors: you will need to engage a professional firm to act as your financial advisor, sponsor, and underwriter. They will help you prepare your listing application and prospectus and guide you through the regulatory approval process.

  1. Appoint your legal advisors: You will also need to engage one or more law firms to assist with the legal aspects of going public, such as drafting the shareholders’ agreement and share sale agreement.
  2. Prepare your listing application and prospectus: The listing application and prospectus are vital documents that provide information about your company and the shares being offered to investors.
  3. Submit your listing application and prospectus: The listing application and prospectus must be submitted to the HKEX for review and approval.
  4. Market your shares: Once your listing is approved, you will need to engage an investment bank to help market your shares to potential investors. Many companies also host publicity events to boost their visibility and to attract potential investors that are not affiliated with banks and financial institutions.
  5. Complete the share sale: Once investor demand has been secured, the final step is to complete the share sale and begin trading on the stock exchange.

There is usually a lock-up period after the IPO and the shares are sold. During the lock-up period, which can be anywhere from six months to a year, shareholders are not allowed to sell their shares. This is to prevent them from selling too quickly and causing the share price to plummet.

What are the listing requirements for a Hong Kong IPO?

To list on the HKEX, companies must meet specific eligibility requirements, including:

  • A minimum market capitalisation of HK$500 million (approx. US$64 million)
  • A minimum of 300 shareholders with no single shareholder owning more than 5% of the company’s shares
  • A minimum share price of HK$0.20 (approx. US$0.03)
  • A minimum public float of 25%
  • A trading history of at least six months

Additionally, companies must meet HKEX’s requirements for financial disclosure and corporate governance.

How to choose an excellent listing agent and investment bank

There are many different listing agents and investment banks to choose from, so it’s essential to do your research to find the right one for your company. Consider factors such as their experience, track record, and fees. It’s also a good idea to speak with other companies that have recently gone public to get their recommendations.

The Hong Kong IPO process can be complex but working with experienced professionals can make it much more manageable. Understanding the key steps and requirements can increase your chances of being successfully listed.

The post-IPO process – ongoing obligations of the company and its directors

IPOs can be a complex and time-consuming process, so it’s essential to understand all the steps involved before deciding to go public. Engaging experienced advisers is essential to ensure a successful listing.

Going public can bring many benefits to a company but also risks. These risks can be mitigated by careful planning and preparation.

Once a company goes public, it will have ongoing obligations to shareholders and regulators. These include ongoing disclosure requirements and corporate governance standards. Failure to meet these obligations can lead to severe consequences, such as delisting from the stock exchange.

When done correctly, an IPO can be a great way to raise capital and increase visibility for your company. But it’s important to understand all the risks and responsibilities before taking the plunge.


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