Response to HKEX Consultation Paper | Proposals to Optimise IPO Price Discovery and Open Market Requirements
Release Date: 2025-02-22
Question 1.1
Do you agree with our proposal to exclude securities that do not contribute to an open market in trading in Hong Kong from the calculation of the public float by:
(a) requiring the public float percentage of securities new to listing be calculated normally by reference to the total number of securities of that class only (as set out in paragraph 44 of the Consultation Paper)?
(b) in the case of a PRC issuer with no other listed shares, requiring the numerator of its public float percentage to be calculated by reference to its H shares only, such that any shares it has in issue that are in the class to which H shares belong would only be included in the denominator (as set out in paragraph 45 of the Consultation Paper)?
(c) in the case of a PRC issuer with other listed shares (e.g. A shares listed on a PRC stock exchange), requiring the numerator of its public float percentage to be calculated by reference to its H shares only, such that any other listed shares it has in issue would only be included in the denominator (as set out in paragraph 45 of the Consultation Paper)?
(d) in the case of an issuer with other share class(es) listed overseas, requiring the numerator of its public float percentage at listing to be calculated by reference to only the shares of the class for which listing is sought in Hong Kong, such that any shares of other classes it has in issue would only be included in the denominator (as set out in paragraph 46 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Answer
Agreed. Our association believes that several major international stock exchanges (such as the Australian Stock Exchange, London Stock Exchange, etc.) typically use a "class-based approach" when calculating public float, which only considers the class of shares listed on their exchange. The proposed adjustment to the calculation method by the Hong Kong Stock Exchange aligns with international practices. The committee believes this will help enhance the competitiveness and attractiveness of the Hong Kong market in international capital markets, enabling international investors to more intuitively understand and compare public float situations across different markets, thereby promoting the international development of the Hong Kong market.
Question 1.2
Do you agree with our proposal to modify the requirement of MB Rule 8.09(1) (GEM Rule 11.23(2)(a)) to clarify that the minimum market value in public hands requirement applies to the securities for which listing is sought (as set out in paragraph 47 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Answer
Agreed
Question 2.1
Do you agree that we should exclude from the definition of “the public” any person whose acquisition of securities has been financed by the issuer and any person who is accustomed to take instructions from the issuer (as set out in paragraph 64 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Answer
Agreed. Our association believes that the current definition already excludes individuals who are financed or instructed by the issuer's core connected persons to purchase securities, but it does not cover situations where individuals are financed or instructed by the issuer itself. This may lead to some investors, who are financed or controlled by the issuer, being incorrectly included in the public float, thereby distorting the true situation of public float or creating an unfair representation.
Question 2.2
If your answer to Question 2.1 is “yes”, do you agree with our proposal to regard shares held by an independent trustee which are granted to independent scheme participants and unvested as shares held in public hands (as set out in paragraph 65 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Answer
Agreed. Our association believes that share schemes are typically long-term incentive mechanisms established by companies to motivate employees or key personnel. These shares may require a certain vesting period before they can be actually held by the plan participants. Before vesting, although these shares are held by an independent trustee, they essentially represent the interests of the plan participants. Excluding these shares from the public float could lead to discrepancies in the calculation of public float at the initial stage of a company's listing, affecting market fairness and transparency. Including the granted but not yet vested shares held by an independent trustee in the public float can more accurately reflect the company's true equity structure and public float situation.
Question 3.1
Do you agree that we should replace the current minimum initial public float thresholds with tiered initial public float thresholds according to the expected market value of the class of securities for which listing is sought on the Exchange at the time of listing?
Please give reasons for your views and any alternative suggestions.
Generally agree. Our association believes that adopting a tiered initial public float threshold can better accommodate the needs of issuers of different sizes and types, especially for large and ultra-large market cap issuers. This will make the Hong Kong market more attractive and competitive with other major international stock exchanges, drawing more high-quality companies to list in Hong Kong. For instance, the existing 25% initial public float threshold might be too high for ultra-large issuers with a market cap exceeding HKD 70 billion, increasing their costs and risks of listing in Hong Kong. By implementing tiered thresholds, the public float requirement for these large issuers can be reduced, making them more inclined to choose Hong Kong for their listing.
Question 3.2
If your answer to question 3.1 is “yes”, do you agree with the proposed tiered initial public float thresholds (as set out in in Table 5 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Answer
Partially agree, but disagree with the recommendation for Tier D.
- For ultra-large market cap issuers, a 5% initial public float threshold is too low and may not ensure sufficient market distribution and liquidity of their shares. Ultra-large market cap issuers typically have significant influence and attention in the market. A lower public float could result in insufficient trading activity post-listing, affecting overall market performance and investor confidence. Additionally, a 5% public float might not sufficiently attract the interest of "major" investors, reducing the appeal of listing in Hong Kong.
- Recommendation to adjust the Tier D threshold: It is suggested to maintain the initial public float threshold for Tier D at 10% (i.e., keeping the market cap requirement at HKD 70 billion). This ensures that ultra-large market cap issuers have adequate market distribution and liquidity, while not placing excessive pressure on their financing plans. For instance, a 10% public float better balances the interests of the issuers and the market, ensuring that their shares have good trading activity and market performance post-listing.
Question 3.3
If your answer to question 3.2 is “yes”, do you agree that the proposed tiered initial public float thresholds should be applied to any class of equity securities new to listing on the Exchange, except for (a) the initial listing of A+H issuers (and other prescribed types of issuers); and (b) a bonus issue of a new class of securities (as set out in paragraph 79 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Answer
Agree
Question 3.4
If your answer to question 3.1 is yes, do you agree that all issuers disclose, in their listing documents, the initial public float threshold that is applicable to the class of securities they seek to list on the Exchange?
Please give reasons for your views and any alternative suggestions.
Answer
Agree
Question 3.5
If your answer to question 3.2 is yes, do you agree that the same tiered initial public float thresholds (as set out in Table 5 of the Consultation Paper) should be applied to GEM issuers?
Please give reasons for your views and any alternative suggestions.
Answer
Disagree. Considering that GEM issuers typically have smaller issuance sizes and initial market capitalizations, it is recommended that the initial public float threshold remain at 25%, with no changes needed.
Question 4.1
If our proposed initial public float thresholds (see proposals in Section I.B.1 and Section I.D.1 of Chapter 1 of the Consultation Paper) are supported by the market, we seek views on the appropriate ongoing public float requirements for:
(a) Issuers, subject to the initial public float tiers proposed (see Table 5 in Section I.B.1 of Chapter 1 of the Consultation Paper); and
(b) A+H issuers and other prescribed types of issuers (see Section I.D.1 of Chapter 1 of the Consultation Paper).
Please give reasons for your views and any alternative suggestions.
Answer
Agree
Question 4.2
Should issuers be allowed the flexibility to maintain a lower public float level, after listing, than that required at listing, in view of the issues we have described in the Consultation Paper (see paragraphs 102 to 109 of the Consultation Paper)?
Please give reasons for your views.
Answer
Disagree. The committee's disagreement is based on the following grounds:
- Market Stability: Maintaining a continuous public float is a key factor in ensuring market stability and liquidity. Allowing issuers to significantly reduce the public float after listing could lead to decreased trading activity, affecting overall market performance and investor confidence. For example, when the public float is too low, trading in shares may be restricted, leading to increased price volatility and even the risk of market manipulation. Therefore, a certain level of public float should be maintained to ensure stable market operation.
- Protection of Investor Interests: A lower public float may increase the control of a few major shareholders over the company, potentially affecting the interests of minority investors. For instance, a lower public float might weaken the voice of minority investors in corporate governance. Hence, a certain level of public float should be maintained to protect the interests of minority investors.
- Long-term Healthy Market Development: In the long term, maintaining a certain level of public float contributes to the healthy development of the market. A higher public float can attract more investors to participate in market trading, increasing market depth and breadth, thereby enhancing overall market competitiveness. For example, some major international stock markets have attracted a large number of international investors by maintaining a high level of public float, thereby increasing their level of internationalization and competitiveness. The Hong Kong market should also learn from this experience and promote long-term healthy development by maintaining a certain level of public float.
Question 4.3
Should the existing regulatory approach of suspending trading of issuers with public float below a prescribed level (see paragraph 92(c) of the Consultation Paper) be maintained, in view of the issues we have described in the Consultation Paper (see paragraphs 110 to 111 of the Consultation Paper)?
Please give reasons for your views.
Answer
Agree
Question 4.4
Do you agree that ongoing public float requirements should be applied to shares only (as set out in paragraph 118 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Answer
Agree
Question 4.5
Do you agree that an OTC market should be established in Hong Kong (as set out in paragraph 119 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Answer
Disagree. The committee's disagreement is based on the following grounds:
- Regulatory Complexity: Establishing an over-the-counter (OTC) market may increase regulatory complexity and costs. The trading rules and regulatory requirements of an OTC market differ from those of the main board market, necessitating the creation of a separate regulatory framework to ensure market fairness and transparency. For example, OTC market transactions may lack transparency, making them prone to market manipulation and insider trading, requiring more regulatory resources for oversight and management. This could increase the burden on regulatory bodies and potentially impose higher compliance costs on issuers and investors.
- Market Segmentation Risk: The establishment of an OTC market could lead to market segmentation, affecting overall market efficiency and liquidity. For instance, if some shares are traded on the OTC market while others are traded on the main board market, it could lead to information asymmetry, impacting investor decisions. Additionally, the trading activity in the OTC market may be lower, potentially providing insufficient liquidity and affecting overall market performance.
- Investor Protection Issues: Investors in the OTC market typically face higher risks due to relatively relaxed trading rules and regulatory requirements. For example, OTC market investors may not receive the same level of information disclosure and protection measures as those in the main board market, making them more susceptible to market manipulation and fraudulent activities. Therefore, establishing an OTC market could pose challenges to investor protection, requiring careful consideration of associated risks and protective measures.
Question 4.6 (a)
What are your views on:
(a) the potential benefits and risks of establishing an OTC market;
Answer
No comments.
Question 4.6 (b)
(b) functions that an OTC market should serve; and
Answer
No comments.
Question 4.6 (c)
(c) whether such OTC market should be open to retail investors?
Please give reasons for your views.
Answer
Disagree. Our association believes that the over-the-counter (OTC) markets should not be open to public investors. The reason is that, given the higher risks associated with OTC markets, we recommend that participation be limited to professional investors. Professional investors typically possess a stronger risk tolerance and investment experience, enabling them to better navigate the risks of the OTC markets. For example, professional investors can conduct more thorough due diligence to assess investment risks, allowing them to make more informed investment decisions. In contrast, public investors may lack the necessary investment knowledge and experience. Therefore, it is advised that OTC markets be restricted to professional investors to protect the interests of public investors.
Question 5.1
Do you agree with our proposal to mandate disclosure of actual public float in listed issuers’ annual reports?
Please give reasons for your views and any alternative suggestions.
Answer
Agree
Question 5.2
If your answer to Question 5.1 is “yes”, do you agree with the details proposed to be disclosed (as set out in paragraph 126 of the Consultation Paper), including that only persons connected at the issuer level would be required to be identified on an individually named basis in the disclosure of shareholding composition (as set out in paragraph 126(b)(i)(1) and (2) of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Answer
Agree
Question 5.3
If your answer to Question 5.1 is “yes”, do you agree that issuers should be required to disclose the relevant information based on information that is publicly available to the issuer and within the knowledge of its directors (as set out in paragraph 127 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Answer
Agree
Question 6.1
Do you agree that the Exchange should require a minimum free float in public hands at the time of listing for all new applicants (as set out in paragraph 139 of the Consultation Paper)?
Please give reasons for your views.
Question 6.2
If your answer to Question 6.1 is “yes”, do you agree with our proposed initial free float thresholds (as set out in paragraph 140 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Question 6.3
If your answer to Question 6.1 is “yes”, do you agree with our proposed modification of the initial free float thresholds to PRC issuers (as set out in paragraphs 142 to 143 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Question 6.4
If your answer to Question 6.1 is “yes”, do you agree with our proposal to apply the proposed initial free float requirement to shares only (as set out in paragraph 144 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Question 6.5
If your answer to Question 6.1 is “yes”, do you agree that shares considered to be in public hands that are held by an independent trustee under a share scheme should not be counted towards the proposed initial free float requirement (as set out in paragraph 145 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Question 6.6
If your answer to Question 6.1 is “yes”, do you agree that existing free float related requirements for Biotech Companies and Specialist Technology Companies should be replaced with the proposed initial free float requirement so that the same requirement applies to all issuers (as set out in paragraph 146 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Answer
Agree. Our association believes that requiring new applicants to ensure a certain percentage of shares are free from any lock-up restrictions at the time of listing, known as the free float, is essential to maintaining sufficient shares available for trading post-listing, thereby sustaining market liquidity. This is crucial for attracting investors and promoting market activity. For instance, if new applicants do not have adequate free float at the time of listing, it may lead to insufficient trading activity, which could negatively impact investor confidence and the overall performance of the market. The proposed initial free float thresholds (10% of shares or a market capitalization of at least HKD 50 million, or a market capitalization of at least HKD 600 million) strike a balance between the financing needs of issuers and market liquidity. For smaller market capitalization applicants, the 10% free float requirement can ensure adequate market distribution and liquidity of their shares without imposing excessive pressure on the issuer's financing plans.
Question 7.1
Do you agree with our proposed revised minimum thresholds on shares to be listed on the Exchange for A+H issuers and other prescribed types of issuers (as set out in paragraph 162 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Question 7.2
Do you agree that the minimum initial public float thresholds for A+H issuers and other prescribed types of issuers should be the same as the minimum thresholds on shares to be listed on the Exchange (as set out in paragraph 164 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Question 7.3
Do you agree with our proposal to remove the minimum market value requirement for the class sought to be listed by issuers with other share class(es) listed overseas and H shares of PRC issuers (as set out in paragraph 166 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Answer
Agree. For A+H issuers and other designated types of issuers, particularly those with very large total market capitalizations, the existing minimum threshold of 15% is too high and may hinder their willingness to list in Hong Kong. For instance, for large enterprises with a market capitalization exceeding HKD 100 billion, a 15% H-share issuance scale could mean needing to raise tens of billions or even over a hundred billion HKD, which may far exceed their actual financing needs. Lowering the minimum threshold to 10% or a market capitalization of HKD 3 billion can better accommodate the business requirements of these large issuers while ensuring their attractiveness in the Hong Kong market.
Question 8
In respect of the lock-up requirement on IPO securities placed to cornerstone investors, would you prefer to:
(a) retain the existing six-month lock-up (as set out in Option A in paragraph 205 of the Consultation Paper); or
(b) allow a staggered release of the six-month lock-up (as set out in Option B in paragraph 205 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Answer
Our association believes that the existing six-month lock-up period (as described in Paragraph 205, Option A of the consultation document) should be retained. The reason is that cornerstone investors are typically those who have significant confidence in the long-term value and development of the company, and their participation can convey a positive signal to the market, attracting other investors. The involvement of cornerstone investors is often viewed as a vote of confidence and support for the company's long-term growth.
The six-month lock-up period encourages cornerstone investors to adopt a long-term investment strategy rather than engaging in short-term speculative behavior. This not only helps the company better achieve its long-term strategic goals but also provides a stable investor base for the market. For example, some cornerstone investors may continue to hold their shares or even increase their investment after the lock-up period ends, thus contributing to the company's further development and expansion.
Moreover, the six-month lock-up period ensures that cornerstone investors do not sell their shares for short-term gains during the initial period post-listing, stabilizing the stock price and maintaining market stability and investor confidence. For instance, during periods of significant market volatility or when the company's performance has not fully manifested, the long-term holding by cornerstone investors can provide essential support to the market, preventing drastic price drops due to large sell-offs.
Additionally, our association believes that retaining the six-month lock-up period can protect the interests of retail investors. Cornerstone investors typically hold a significant proportion of shares, and allowing them to phase out the lock-up in a shorter timeframe could lead to a sudden increase in share supply in the market, putting substantial downward pressure on the stock price.
Question 9.1
Do you agree that at least 50% of the total number of shares initially offered in an IPO should be allocated to investors in the bookbuilding placing tranche (as set out in paragraphs 227 and 228 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Answer
Disagree. Our association believes that if the demand for the public offering portion during the entire IPO process significantly exceeds the regulatory requirements (such as being oversubscribed by 100 times), it demonstrates a strong interest from the general investment market in the issuer and the upper pricing range of the offering. The market pricing process is essentially determined by the preliminary range established at the beginning of the public offering. Furthermore, we understand that the book-building process for most issuers typically occurs simultaneously with the public offering. Therefore, we believe that a smaller allocation for the book-building portion (as a percentage of the offering size) does not increase the chances of adversely affecting the market pricing process.
Question 9.2
If your answer to Question 9.1 is “yes”, do you agree that the proposed requirement should not be applied to the initial listing of Specialist Technology Companies (as set out in paragraphs 229 of the Consultation Paper)?
Please give reasons for your views.
Question 10.1
Do you agree with the proposed removal of the guideline on minimum spread of placees, being not less than three holders for each HK$1 million of the placing, with a minimum of 100 holders in an IPO placing tranche (as set out in paragraph 230 of the Consultation Paper)?
Please give reasons for your views.
Question 10.2
Do you consider that other safeguarding measures should be implemented to ensure an adequate spread of holders in the placing tranche, in light of the proposal (as set out in paragraph 230 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Answer
Disagree. This association believes that the existing allocation distribution requirements help ensure that shares in an initial public offering (IPO) are widely distributed among a large number of investors, thereby enhancing the breadth and liquidity of the market. For example, requiring that securities allocated in amounts of HKD 1 million or more be held by at least three individuals, and that each allocation involves at least 100 individuals, helps prevent excessive concentration of shares in the hands of a few investors. This ensures there are enough market participants, which in turn increases market activity and stability.
Question 11.1
Do you agree with the proposal to require issuers to adopt either Mechanism A or Mechanism B with respect to a minimum allocation of offer shares to the public subscription tranche (as set out in paragraphs 248 to 250 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Question 11.2
If your answer to Question 11.1 is “yes”, do you agree with the proposal to require Specialist Technology Companies to only adopt the existing initial allocation and clawback mechanism designed for them, i.e. Mechanism A (as set out in paragraph 251 of the Consultation Paper)?
Please give reasons for your views.
Answer
Disagree. Our association recommends maintaining the original buyback mechanism. We understand that the original buyback mechanism is designed to ensure that retail investors receive a fair allocation of shares in the issuer's initial public offering (IPO). Forcing issuers to adopt Mechanism A or Mechanism B as outlined in the consultation document may undermine the interests of retail investors, making it difficult for them to obtain sufficient shares in popular IPOs.
We strongly advocate for the retention of the original buyback mechanism to ensure the participation and rights of retail investors in the market. For instance, the original buyback mechanism effectively allocates more shares to retail investors when there is oversubscription in the public offering portion, preventing excessive concentration of shares in the hands of institutional investors. The participation of Hong Kong retail investors in IPOs supports the demand for the shares being offered.
Additionally, we believe that the original buyback mechanism helps prevent market manipulation, ensuring fairness and transparency in the IPO process. If the buyback mechanism is removed or weakened, it could lead to excessive concentration of shares among a few institutional investors, increasing the risk of market manipulation. Therefore, we strongly recommend maintaining the original buyback mechanism to ensure fairness and transparency in the market and to protect the interests of small and medium investors.
While we agree that independent institutional investors contribute significantly to effective market pricing, enforcing a buyback mechanism could proportionately reduce the allocation of IPO shares to the sale portion. However, we believe this could mean that independent institutional investors, due to not receiving their initially desired allocation, may continue to purchase related shares in the secondary market after the issuer completes the IPO in Hong Kong, thereby further supporting the issuer's post-listing stock performance and activity.
Question 12.1
Do you agree that we should retain the Allocation Cap?
Please give reasons for your views.
Question 12.2
If your answer to Question 12.1 is “yes” and subject to the proposals on minimum allocation of offer shares to the public subscription tranche (as set out in paragraph 248 of the Consultation Paper) being adopted, do you agree with the proposed consequential amendments to the triggering conditions of the restrictions on Reallocation and PO Over-allocation (as set out in paragraph 262 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Question 12.3
If your answer to Question 12.1 is “yes” and subject to the proposals on minimum allocation of offer shares to the public subscription tranche (as set out in paragraph 248 of the Consultation Paper) being adopted, do you agree with the proposed consequential amendments to lower the proposed Maximum Allocation Cap Percentage Threshold from 30% to 15% (as set out in paragraph 263 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Answer
Agree. This association also believes that the allocation cap should be retained to minimize the risk of unfair distribution of IPO shares to participants in the public offering portion, particularly those who are unable to secure allocations. Maintaining this cap helps ensure a more equitable process for all investors involved in the IPO, promoting fairness and integrity in the allocation of shares.
Question 13.1
Do you agree that the Existing Pricing Flexibility Mechanism should be amended to include upward pricing flexibility?
Please give reasons for your views and any alternative suggestions.
Answer
Agree. Our association believes that modifications to the current flexible pricing mechanism should include the introduction of upward pricing flexibility. The existing flexible pricing mechanism only allows for downward price adjustments, which somewhat limits the issuer's ability to price reasonably based on actual market conditions. In scenarios where market demand is strong and the company's fundamentals are robust, issuers are unable to fully capitalize on the high valuation opportunities presented by the market. This situation is detrimental not only to the issuer's capital-raising efforts but also to investors seeking reasonable returns on their investments.
Introducing upward pricing flexibility would enable issuers to more accurately reflect the market's expectations of their stock value, enhancing the pricing efficiency and market adaptability of IPOs. This change would further strengthen the competitiveness of Hong Kong's capital markets.
Question 13.2
If your answer to Question 13.1 is “yes”, do you agree with our proposals to adopt an offer price adjustment limit of 10% in both directions (as set out in paragraph 281 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Answer
Agree.
Question 13.3
If your answer to Question 13.1 is “yes”, in respect of the initial offer price range, would you prefer adjustment to be made:
(a) up to 30% of the bottom of that range (as set out in Option A of paragraph 282 of the Consultation Paper); or
(b) up to 20% of the bottom of that range (as set out in Option B of paragraph 282 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Answer
Tends to support Option 13.3(a).
Question 13.4
If your answer to Question 13.1 is “yes”, do you agree with the Proposed Opt-in Arrangement (as set out in paragraphs 283 to 284 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Answer
Agree. Our organization supports the proposed optional participation arrangement. This arrangement grants public offering investors greater autonomy, allowing them to decide whether to participate in the share subscription after the upward pricing based on their own risk preferences and market judgment.
Question 13.5
If your answer to Question 13.1 is “yes”, do you agree with our proposal to extend the current disclosure requirements (as set out in paragraph 285 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Answer
Agree.
Question14
Do you agree with our proposals to make consequential and housekeeping amendments to the Placing Guidelines (as set out in paragraphs 302 and 303 of the Consultation Paper and Appendices I and II to the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Answer
Agree.
Question 15
Do you agree with our proposal to disapply the proposed initial public float requirement in the case of a bonus issue of a new class of securities involving options, warrants or similar rights to subscribe for or purchase shares (as set out in paragraph 306 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Answer
Agree.
Question 16
Do you agree with our proposal to add new provisions under Appendices D1A and D1B to the Main Board Listing Rules to require disclosure of the minimum prescribed percentage of public float in listing documents (as set out in paragraph 311 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Answer
Agree.
Question 17
Do you agree with our proposal to waive the initial free float requirement for overseas issuers that have, or are seeking, a secondary listing on the Exchange (as set out in paragraph 315 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Answer
Agree.
Question 18
Do you agree with our proposal to repeal the requirement that PRC issuers list H-shares that have an expected market value, at the time of listing, of HK$50 million (as set out in paragraph 319 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Answer
Agree.
Question 19
Subject to the proposals on minimum allocation of offer shares to the public subscription tranche (as set out in paragraph 248 of the Consultation Paper) being adopted, do you agree with the proposed consequential amendment to enable GEM listing applicants to choose either Mechanism A or Mechanism B (as set out in paragraph 325 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Answer
No comments.
Question 20
20.1 Do you agree with our proposals on the determination of market capitalisation for new applicants that have other classes of shares apart from the class for which listing is sought or are PRC issuers (as set out in paragraph 333 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
20.2 Do you agree with our proposal to introduce an equivalent GEM Listing Rule provision on the basis for determining the market value of other class(es) of shares for a new applicant (as set out in paragraph 335 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Answer
No comments.
Question 21
Do you agree with our proposal to amend the Listing Rules (MB Rule 12.02 (GEM Rule 16.07)) to require issuers to publish a formal notice on the date of issue of a listing document for offers or placings where any amount placed is made available directly to the general public (as set out in paragraph 339 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Answer
No comments.
Question 22
22.1 Do you agree with our proposal to amend Chapter 18B of the Main Board Listing Rules so that the open market requirements of MB Rule 8.08 do not apply to Successor Company’s warrants (as set out in paragraph 349(a) of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
22.2 Do you agree with our proposal to amend Chapter 18B of the Main Board Listing Rules so that the minimum market value requirement of MB Rule 8.09(4) does not apply to SPAC Warrants and Successor Company’s warrants (as set out in paragraph 349(b) of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Answer
No comments.
Question 23
Do you agree with our proposal to amend MB Rule 18C.08 so that the 50% minimum requirement is to be determined by reference to the total number of shares initially offered in the IPO (as set out in paragraph 352 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Answer
No comments.
Do you agree with our proposal to exclude securities that do not contribute to an open market in trading in Hong Kong from the calculation of the public float by:
(a) requiring the public float percentage of securities new to listing be calculated normally by reference to the total number of securities of that class only (as set out in paragraph 44 of the Consultation Paper)?
(b) in the case of a PRC issuer with no other listed shares, requiring the numerator of its public float percentage to be calculated by reference to its H shares only, such that any shares it has in issue that are in the class to which H shares belong would only be included in the denominator (as set out in paragraph 45 of the Consultation Paper)?
(c) in the case of a PRC issuer with other listed shares (e.g. A shares listed on a PRC stock exchange), requiring the numerator of its public float percentage to be calculated by reference to its H shares only, such that any other listed shares it has in issue would only be included in the denominator (as set out in paragraph 45 of the Consultation Paper)?
(d) in the case of an issuer with other share class(es) listed overseas, requiring the numerator of its public float percentage at listing to be calculated by reference to only the shares of the class for which listing is sought in Hong Kong, such that any shares of other classes it has in issue would only be included in the denominator (as set out in paragraph 46 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Answer
Agreed. Our association believes that several major international stock exchanges (such as the Australian Stock Exchange, London Stock Exchange, etc.) typically use a "class-based approach" when calculating public float, which only considers the class of shares listed on their exchange. The proposed adjustment to the calculation method by the Hong Kong Stock Exchange aligns with international practices. The committee believes this will help enhance the competitiveness and attractiveness of the Hong Kong market in international capital markets, enabling international investors to more intuitively understand and compare public float situations across different markets, thereby promoting the international development of the Hong Kong market.
Question 1.2
Do you agree with our proposal to modify the requirement of MB Rule 8.09(1) (GEM Rule 11.23(2)(a)) to clarify that the minimum market value in public hands requirement applies to the securities for which listing is sought (as set out in paragraph 47 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Answer
Agreed
Question 2.1
Do you agree that we should exclude from the definition of “the public” any person whose acquisition of securities has been financed by the issuer and any person who is accustomed to take instructions from the issuer (as set out in paragraph 64 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Answer
Agreed. Our association believes that the current definition already excludes individuals who are financed or instructed by the issuer's core connected persons to purchase securities, but it does not cover situations where individuals are financed or instructed by the issuer itself. This may lead to some investors, who are financed or controlled by the issuer, being incorrectly included in the public float, thereby distorting the true situation of public float or creating an unfair representation.
Question 2.2
If your answer to Question 2.1 is “yes”, do you agree with our proposal to regard shares held by an independent trustee which are granted to independent scheme participants and unvested as shares held in public hands (as set out in paragraph 65 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Answer
Agreed. Our association believes that share schemes are typically long-term incentive mechanisms established by companies to motivate employees or key personnel. These shares may require a certain vesting period before they can be actually held by the plan participants. Before vesting, although these shares are held by an independent trustee, they essentially represent the interests of the plan participants. Excluding these shares from the public float could lead to discrepancies in the calculation of public float at the initial stage of a company's listing, affecting market fairness and transparency. Including the granted but not yet vested shares held by an independent trustee in the public float can more accurately reflect the company's true equity structure and public float situation.
Question 3.1
Do you agree that we should replace the current minimum initial public float thresholds with tiered initial public float thresholds according to the expected market value of the class of securities for which listing is sought on the Exchange at the time of listing?
Please give reasons for your views and any alternative suggestions.
Generally agree. Our association believes that adopting a tiered initial public float threshold can better accommodate the needs of issuers of different sizes and types, especially for large and ultra-large market cap issuers. This will make the Hong Kong market more attractive and competitive with other major international stock exchanges, drawing more high-quality companies to list in Hong Kong. For instance, the existing 25% initial public float threshold might be too high for ultra-large issuers with a market cap exceeding HKD 70 billion, increasing their costs and risks of listing in Hong Kong. By implementing tiered thresholds, the public float requirement for these large issuers can be reduced, making them more inclined to choose Hong Kong for their listing.
Question 3.2
If your answer to question 3.1 is “yes”, do you agree with the proposed tiered initial public float thresholds (as set out in in Table 5 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Answer
Partially agree, but disagree with the recommendation for Tier D.
- For ultra-large market cap issuers, a 5% initial public float threshold is too low and may not ensure sufficient market distribution and liquidity of their shares. Ultra-large market cap issuers typically have significant influence and attention in the market. A lower public float could result in insufficient trading activity post-listing, affecting overall market performance and investor confidence. Additionally, a 5% public float might not sufficiently attract the interest of "major" investors, reducing the appeal of listing in Hong Kong.
- Recommendation to adjust the Tier D threshold: It is suggested to maintain the initial public float threshold for Tier D at 10% (i.e., keeping the market cap requirement at HKD 70 billion). This ensures that ultra-large market cap issuers have adequate market distribution and liquidity, while not placing excessive pressure on their financing plans. For instance, a 10% public float better balances the interests of the issuers and the market, ensuring that their shares have good trading activity and market performance post-listing.
Question 3.3
If your answer to question 3.2 is “yes”, do you agree that the proposed tiered initial public float thresholds should be applied to any class of equity securities new to listing on the Exchange, except for (a) the initial listing of A+H issuers (and other prescribed types of issuers); and (b) a bonus issue of a new class of securities (as set out in paragraph 79 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Answer
Agree
Question 3.4
If your answer to question 3.1 is yes, do you agree that all issuers disclose, in their listing documents, the initial public float threshold that is applicable to the class of securities they seek to list on the Exchange?
Please give reasons for your views and any alternative suggestions.
Answer
Agree
Question 3.5
If your answer to question 3.2 is yes, do you agree that the same tiered initial public float thresholds (as set out in Table 5 of the Consultation Paper) should be applied to GEM issuers?
Please give reasons for your views and any alternative suggestions.
Answer
Disagree. Considering that GEM issuers typically have smaller issuance sizes and initial market capitalizations, it is recommended that the initial public float threshold remain at 25%, with no changes needed.
Question 4.1
If our proposed initial public float thresholds (see proposals in Section I.B.1 and Section I.D.1 of Chapter 1 of the Consultation Paper) are supported by the market, we seek views on the appropriate ongoing public float requirements for:
(a) Issuers, subject to the initial public float tiers proposed (see Table 5 in Section I.B.1 of Chapter 1 of the Consultation Paper); and
(b) A+H issuers and other prescribed types of issuers (see Section I.D.1 of Chapter 1 of the Consultation Paper).
Please give reasons for your views and any alternative suggestions.
Answer
Agree
Question 4.2
Should issuers be allowed the flexibility to maintain a lower public float level, after listing, than that required at listing, in view of the issues we have described in the Consultation Paper (see paragraphs 102 to 109 of the Consultation Paper)?
Please give reasons for your views.
Answer
Disagree. The committee's disagreement is based on the following grounds:
- Market Stability: Maintaining a continuous public float is a key factor in ensuring market stability and liquidity. Allowing issuers to significantly reduce the public float after listing could lead to decreased trading activity, affecting overall market performance and investor confidence. For example, when the public float is too low, trading in shares may be restricted, leading to increased price volatility and even the risk of market manipulation. Therefore, a certain level of public float should be maintained to ensure stable market operation.
- Protection of Investor Interests: A lower public float may increase the control of a few major shareholders over the company, potentially affecting the interests of minority investors. For instance, a lower public float might weaken the voice of minority investors in corporate governance. Hence, a certain level of public float should be maintained to protect the interests of minority investors.
- Long-term Healthy Market Development: In the long term, maintaining a certain level of public float contributes to the healthy development of the market. A higher public float can attract more investors to participate in market trading, increasing market depth and breadth, thereby enhancing overall market competitiveness. For example, some major international stock markets have attracted a large number of international investors by maintaining a high level of public float, thereby increasing their level of internationalization and competitiveness. The Hong Kong market should also learn from this experience and promote long-term healthy development by maintaining a certain level of public float.
Question 4.3
Should the existing regulatory approach of suspending trading of issuers with public float below a prescribed level (see paragraph 92(c) of the Consultation Paper) be maintained, in view of the issues we have described in the Consultation Paper (see paragraphs 110 to 111 of the Consultation Paper)?
Please give reasons for your views.
Answer
Agree
Question 4.4
Do you agree that ongoing public float requirements should be applied to shares only (as set out in paragraph 118 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Answer
Agree
Question 4.5
Do you agree that an OTC market should be established in Hong Kong (as set out in paragraph 119 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Answer
Disagree. The committee's disagreement is based on the following grounds:
- Regulatory Complexity: Establishing an over-the-counter (OTC) market may increase regulatory complexity and costs. The trading rules and regulatory requirements of an OTC market differ from those of the main board market, necessitating the creation of a separate regulatory framework to ensure market fairness and transparency. For example, OTC market transactions may lack transparency, making them prone to market manipulation and insider trading, requiring more regulatory resources for oversight and management. This could increase the burden on regulatory bodies and potentially impose higher compliance costs on issuers and investors.
- Market Segmentation Risk: The establishment of an OTC market could lead to market segmentation, affecting overall market efficiency and liquidity. For instance, if some shares are traded on the OTC market while others are traded on the main board market, it could lead to information asymmetry, impacting investor decisions. Additionally, the trading activity in the OTC market may be lower, potentially providing insufficient liquidity and affecting overall market performance.
- Investor Protection Issues: Investors in the OTC market typically face higher risks due to relatively relaxed trading rules and regulatory requirements. For example, OTC market investors may not receive the same level of information disclosure and protection measures as those in the main board market, making them more susceptible to market manipulation and fraudulent activities. Therefore, establishing an OTC market could pose challenges to investor protection, requiring careful consideration of associated risks and protective measures.
Question 4.6 (a)
What are your views on:
(a) the potential benefits and risks of establishing an OTC market;
Answer
No comments.
Question 4.6 (b)
(b) functions that an OTC market should serve; and
Answer
No comments.
Question 4.6 (c)
(c) whether such OTC market should be open to retail investors?
Please give reasons for your views.
Answer
Disagree. Our association believes that the over-the-counter (OTC) markets should not be open to public investors. The reason is that, given the higher risks associated with OTC markets, we recommend that participation be limited to professional investors. Professional investors typically possess a stronger risk tolerance and investment experience, enabling them to better navigate the risks of the OTC markets. For example, professional investors can conduct more thorough due diligence to assess investment risks, allowing them to make more informed investment decisions. In contrast, public investors may lack the necessary investment knowledge and experience. Therefore, it is advised that OTC markets be restricted to professional investors to protect the interests of public investors.
Question 5.1
Do you agree with our proposal to mandate disclosure of actual public float in listed issuers’ annual reports?
Please give reasons for your views and any alternative suggestions.
Answer
Agree
Question 5.2
If your answer to Question 5.1 is “yes”, do you agree with the details proposed to be disclosed (as set out in paragraph 126 of the Consultation Paper), including that only persons connected at the issuer level would be required to be identified on an individually named basis in the disclosure of shareholding composition (as set out in paragraph 126(b)(i)(1) and (2) of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Answer
Agree
Question 5.3
If your answer to Question 5.1 is “yes”, do you agree that issuers should be required to disclose the relevant information based on information that is publicly available to the issuer and within the knowledge of its directors (as set out in paragraph 127 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Answer
Agree
Question 6.1
Do you agree that the Exchange should require a minimum free float in public hands at the time of listing for all new applicants (as set out in paragraph 139 of the Consultation Paper)?
Please give reasons for your views.
Question 6.2
If your answer to Question 6.1 is “yes”, do you agree with our proposed initial free float thresholds (as set out in paragraph 140 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Question 6.3
If your answer to Question 6.1 is “yes”, do you agree with our proposed modification of the initial free float thresholds to PRC issuers (as set out in paragraphs 142 to 143 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Question 6.4
If your answer to Question 6.1 is “yes”, do you agree with our proposal to apply the proposed initial free float requirement to shares only (as set out in paragraph 144 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Question 6.5
If your answer to Question 6.1 is “yes”, do you agree that shares considered to be in public hands that are held by an independent trustee under a share scheme should not be counted towards the proposed initial free float requirement (as set out in paragraph 145 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Question 6.6
If your answer to Question 6.1 is “yes”, do you agree that existing free float related requirements for Biotech Companies and Specialist Technology Companies should be replaced with the proposed initial free float requirement so that the same requirement applies to all issuers (as set out in paragraph 146 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Answer
Agree. Our association believes that requiring new applicants to ensure a certain percentage of shares are free from any lock-up restrictions at the time of listing, known as the free float, is essential to maintaining sufficient shares available for trading post-listing, thereby sustaining market liquidity. This is crucial for attracting investors and promoting market activity. For instance, if new applicants do not have adequate free float at the time of listing, it may lead to insufficient trading activity, which could negatively impact investor confidence and the overall performance of the market. The proposed initial free float thresholds (10% of shares or a market capitalization of at least HKD 50 million, or a market capitalization of at least HKD 600 million) strike a balance between the financing needs of issuers and market liquidity. For smaller market capitalization applicants, the 10% free float requirement can ensure adequate market distribution and liquidity of their shares without imposing excessive pressure on the issuer's financing plans.
Question 7.1
Do you agree with our proposed revised minimum thresholds on shares to be listed on the Exchange for A+H issuers and other prescribed types of issuers (as set out in paragraph 162 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Question 7.2
Do you agree that the minimum initial public float thresholds for A+H issuers and other prescribed types of issuers should be the same as the minimum thresholds on shares to be listed on the Exchange (as set out in paragraph 164 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Question 7.3
Do you agree with our proposal to remove the minimum market value requirement for the class sought to be listed by issuers with other share class(es) listed overseas and H shares of PRC issuers (as set out in paragraph 166 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Answer
Agree. For A+H issuers and other designated types of issuers, particularly those with very large total market capitalizations, the existing minimum threshold of 15% is too high and may hinder their willingness to list in Hong Kong. For instance, for large enterprises with a market capitalization exceeding HKD 100 billion, a 15% H-share issuance scale could mean needing to raise tens of billions or even over a hundred billion HKD, which may far exceed their actual financing needs. Lowering the minimum threshold to 10% or a market capitalization of HKD 3 billion can better accommodate the business requirements of these large issuers while ensuring their attractiveness in the Hong Kong market.
Question 8
In respect of the lock-up requirement on IPO securities placed to cornerstone investors, would you prefer to:
(a) retain the existing six-month lock-up (as set out in Option A in paragraph 205 of the Consultation Paper); or
(b) allow a staggered release of the six-month lock-up (as set out in Option B in paragraph 205 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Answer
Our association believes that the existing six-month lock-up period (as described in Paragraph 205, Option A of the consultation document) should be retained. The reason is that cornerstone investors are typically those who have significant confidence in the long-term value and development of the company, and their participation can convey a positive signal to the market, attracting other investors. The involvement of cornerstone investors is often viewed as a vote of confidence and support for the company's long-term growth.
The six-month lock-up period encourages cornerstone investors to adopt a long-term investment strategy rather than engaging in short-term speculative behavior. This not only helps the company better achieve its long-term strategic goals but also provides a stable investor base for the market. For example, some cornerstone investors may continue to hold their shares or even increase their investment after the lock-up period ends, thus contributing to the company's further development and expansion.
Moreover, the six-month lock-up period ensures that cornerstone investors do not sell their shares for short-term gains during the initial period post-listing, stabilizing the stock price and maintaining market stability and investor confidence. For instance, during periods of significant market volatility or when the company's performance has not fully manifested, the long-term holding by cornerstone investors can provide essential support to the market, preventing drastic price drops due to large sell-offs.
Additionally, our association believes that retaining the six-month lock-up period can protect the interests of retail investors. Cornerstone investors typically hold a significant proportion of shares, and allowing them to phase out the lock-up in a shorter timeframe could lead to a sudden increase in share supply in the market, putting substantial downward pressure on the stock price.
Question 9.1
Do you agree that at least 50% of the total number of shares initially offered in an IPO should be allocated to investors in the bookbuilding placing tranche (as set out in paragraphs 227 and 228 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Answer
Disagree. Our association believes that if the demand for the public offering portion during the entire IPO process significantly exceeds the regulatory requirements (such as being oversubscribed by 100 times), it demonstrates a strong interest from the general investment market in the issuer and the upper pricing range of the offering. The market pricing process is essentially determined by the preliminary range established at the beginning of the public offering. Furthermore, we understand that the book-building process for most issuers typically occurs simultaneously with the public offering. Therefore, we believe that a smaller allocation for the book-building portion (as a percentage of the offering size) does not increase the chances of adversely affecting the market pricing process.
Question 9.2
If your answer to Question 9.1 is “yes”, do you agree that the proposed requirement should not be applied to the initial listing of Specialist Technology Companies (as set out in paragraphs 229 of the Consultation Paper)?
Please give reasons for your views.
Question 10.1
Do you agree with the proposed removal of the guideline on minimum spread of placees, being not less than three holders for each HK$1 million of the placing, with a minimum of 100 holders in an IPO placing tranche (as set out in paragraph 230 of the Consultation Paper)?
Please give reasons for your views.
Question 10.2
Do you consider that other safeguarding measures should be implemented to ensure an adequate spread of holders in the placing tranche, in light of the proposal (as set out in paragraph 230 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Answer
Disagree. This association believes that the existing allocation distribution requirements help ensure that shares in an initial public offering (IPO) are widely distributed among a large number of investors, thereby enhancing the breadth and liquidity of the market. For example, requiring that securities allocated in amounts of HKD 1 million or more be held by at least three individuals, and that each allocation involves at least 100 individuals, helps prevent excessive concentration of shares in the hands of a few investors. This ensures there are enough market participants, which in turn increases market activity and stability.
Question 11.1
Do you agree with the proposal to require issuers to adopt either Mechanism A or Mechanism B with respect to a minimum allocation of offer shares to the public subscription tranche (as set out in paragraphs 248 to 250 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Question 11.2
If your answer to Question 11.1 is “yes”, do you agree with the proposal to require Specialist Technology Companies to only adopt the existing initial allocation and clawback mechanism designed for them, i.e. Mechanism A (as set out in paragraph 251 of the Consultation Paper)?
Please give reasons for your views.
Answer
Disagree. Our association recommends maintaining the original buyback mechanism. We understand that the original buyback mechanism is designed to ensure that retail investors receive a fair allocation of shares in the issuer's initial public offering (IPO). Forcing issuers to adopt Mechanism A or Mechanism B as outlined in the consultation document may undermine the interests of retail investors, making it difficult for them to obtain sufficient shares in popular IPOs.
We strongly advocate for the retention of the original buyback mechanism to ensure the participation and rights of retail investors in the market. For instance, the original buyback mechanism effectively allocates more shares to retail investors when there is oversubscription in the public offering portion, preventing excessive concentration of shares in the hands of institutional investors. The participation of Hong Kong retail investors in IPOs supports the demand for the shares being offered.
Additionally, we believe that the original buyback mechanism helps prevent market manipulation, ensuring fairness and transparency in the IPO process. If the buyback mechanism is removed or weakened, it could lead to excessive concentration of shares among a few institutional investors, increasing the risk of market manipulation. Therefore, we strongly recommend maintaining the original buyback mechanism to ensure fairness and transparency in the market and to protect the interests of small and medium investors.
While we agree that independent institutional investors contribute significantly to effective market pricing, enforcing a buyback mechanism could proportionately reduce the allocation of IPO shares to the sale portion. However, we believe this could mean that independent institutional investors, due to not receiving their initially desired allocation, may continue to purchase related shares in the secondary market after the issuer completes the IPO in Hong Kong, thereby further supporting the issuer's post-listing stock performance and activity.
Question 12.1
Do you agree that we should retain the Allocation Cap?
Please give reasons for your views.
Question 12.2
If your answer to Question 12.1 is “yes” and subject to the proposals on minimum allocation of offer shares to the public subscription tranche (as set out in paragraph 248 of the Consultation Paper) being adopted, do you agree with the proposed consequential amendments to the triggering conditions of the restrictions on Reallocation and PO Over-allocation (as set out in paragraph 262 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Question 12.3
If your answer to Question 12.1 is “yes” and subject to the proposals on minimum allocation of offer shares to the public subscription tranche (as set out in paragraph 248 of the Consultation Paper) being adopted, do you agree with the proposed consequential amendments to lower the proposed Maximum Allocation Cap Percentage Threshold from 30% to 15% (as set out in paragraph 263 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Answer
Agree. This association also believes that the allocation cap should be retained to minimize the risk of unfair distribution of IPO shares to participants in the public offering portion, particularly those who are unable to secure allocations. Maintaining this cap helps ensure a more equitable process for all investors involved in the IPO, promoting fairness and integrity in the allocation of shares.
Question 13.1
Do you agree that the Existing Pricing Flexibility Mechanism should be amended to include upward pricing flexibility?
Please give reasons for your views and any alternative suggestions.
Answer
Agree. Our association believes that modifications to the current flexible pricing mechanism should include the introduction of upward pricing flexibility. The existing flexible pricing mechanism only allows for downward price adjustments, which somewhat limits the issuer's ability to price reasonably based on actual market conditions. In scenarios where market demand is strong and the company's fundamentals are robust, issuers are unable to fully capitalize on the high valuation opportunities presented by the market. This situation is detrimental not only to the issuer's capital-raising efforts but also to investors seeking reasonable returns on their investments.
Introducing upward pricing flexibility would enable issuers to more accurately reflect the market's expectations of their stock value, enhancing the pricing efficiency and market adaptability of IPOs. This change would further strengthen the competitiveness of Hong Kong's capital markets.
Question 13.2
If your answer to Question 13.1 is “yes”, do you agree with our proposals to adopt an offer price adjustment limit of 10% in both directions (as set out in paragraph 281 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Answer
Agree.
Question 13.3
If your answer to Question 13.1 is “yes”, in respect of the initial offer price range, would you prefer adjustment to be made:
(a) up to 30% of the bottom of that range (as set out in Option A of paragraph 282 of the Consultation Paper); or
(b) up to 20% of the bottom of that range (as set out in Option B of paragraph 282 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Answer
Tends to support Option 13.3(a).
Question 13.4
If your answer to Question 13.1 is “yes”, do you agree with the Proposed Opt-in Arrangement (as set out in paragraphs 283 to 284 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Answer
Agree. Our organization supports the proposed optional participation arrangement. This arrangement grants public offering investors greater autonomy, allowing them to decide whether to participate in the share subscription after the upward pricing based on their own risk preferences and market judgment.
Question 13.5
If your answer to Question 13.1 is “yes”, do you agree with our proposal to extend the current disclosure requirements (as set out in paragraph 285 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Answer
Agree.
Question14
Do you agree with our proposals to make consequential and housekeeping amendments to the Placing Guidelines (as set out in paragraphs 302 and 303 of the Consultation Paper and Appendices I and II to the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Answer
Agree.
Question 15
Do you agree with our proposal to disapply the proposed initial public float requirement in the case of a bonus issue of a new class of securities involving options, warrants or similar rights to subscribe for or purchase shares (as set out in paragraph 306 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Answer
Agree.
Question 16
Do you agree with our proposal to add new provisions under Appendices D1A and D1B to the Main Board Listing Rules to require disclosure of the minimum prescribed percentage of public float in listing documents (as set out in paragraph 311 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Answer
Agree.
Question 17
Do you agree with our proposal to waive the initial free float requirement for overseas issuers that have, or are seeking, a secondary listing on the Exchange (as set out in paragraph 315 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Answer
Agree.
Question 18
Do you agree with our proposal to repeal the requirement that PRC issuers list H-shares that have an expected market value, at the time of listing, of HK$50 million (as set out in paragraph 319 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Answer
Agree.
Question 19
Subject to the proposals on minimum allocation of offer shares to the public subscription tranche (as set out in paragraph 248 of the Consultation Paper) being adopted, do you agree with the proposed consequential amendment to enable GEM listing applicants to choose either Mechanism A or Mechanism B (as set out in paragraph 325 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Answer
No comments.
Question 20
20.1 Do you agree with our proposals on the determination of market capitalisation for new applicants that have other classes of shares apart from the class for which listing is sought or are PRC issuers (as set out in paragraph 333 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
20.2 Do you agree with our proposal to introduce an equivalent GEM Listing Rule provision on the basis for determining the market value of other class(es) of shares for a new applicant (as set out in paragraph 335 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Answer
No comments.
Question 21
Do you agree with our proposal to amend the Listing Rules (MB Rule 12.02 (GEM Rule 16.07)) to require issuers to publish a formal notice on the date of issue of a listing document for offers or placings where any amount placed is made available directly to the general public (as set out in paragraph 339 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Answer
No comments.
Question 22
22.1 Do you agree with our proposal to amend Chapter 18B of the Main Board Listing Rules so that the open market requirements of MB Rule 8.08 do not apply to Successor Company’s warrants (as set out in paragraph 349(a) of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
22.2 Do you agree with our proposal to amend Chapter 18B of the Main Board Listing Rules so that the minimum market value requirement of MB Rule 8.09(4) does not apply to SPAC Warrants and Successor Company’s warrants (as set out in paragraph 349(b) of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Answer
No comments.
Question 23
Do you agree with our proposal to amend MB Rule 18C.08 so that the 50% minimum requirement is to be determined by reference to the total number of shares initially offered in the IPO (as set out in paragraph 352 of the Consultation Paper)?
Please give reasons for your views and any alternative suggestions.
Answer
No comments.