(b) Companies with WVR structures and pre-revenue biotech companies
The Exchange allows companies with WVR structures and pre-revenue biotech companies to be listed in Hong Kong, but they have to demonstrate that they possess certain additional characteristics apart from the aforementioned general listing qualifications.
Specific listing requirements for issuers with WVR structures
Listing applicants with WVR structures must demonstrate that they have certain additional characteristics, a summary of which is set out below (please refer to guidance letter HKEX-GL93-18 of the Exchange for more details):
The listing applicant should be an innovative company with the following characteristics:
i) its success is attributable to the application, to the company’s core business, of (1) new technologies; (2) innovations; and/or (3) a new business model;
ii) research and development (“R&D”) is a significant contributor of its expected value and constitutes a major activity and expense;
iii) its success is attributable to its unique features or intellectual property; and/or
iv) it has an outsized market capitalization/intangible asset value relative to its tangible asset value.
Whether the listing applicant is “innovative” will depend on the state of the industry and market in which the listing applicant operates that will be changing as technology, market and industry develop.
WVR holders must have an active executive role within the business and must continue to be a director at the time of listing. Nevertheless, their voting power must not be more than 10 times of the voting power of non-WVR holders. The listing applicants must also ensure that non-WVR holders will hold at least 10% of the voting power of the shares.
Firstly, the listing applicant must achieve, at the time of listing, either:
i) a market capitalization of at least HK$40bn; or
ii) a market capitalization of at least HK$10bn and revenue of at least HK$1bn for the most recent audited financial year.
Secondly, there must be previous third-party investment from at least one “sophisticated investor”. Such investor(s) must retain an aggregate 50% of the investment for a period no less than six months after listing.
Specific listing requirements for pre-revenue biotech companies
Pre-revenue biotech companies applying for listing are also subject to additional listing requirements under Chapter 18A of The Listing Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, which came into effect in April 2018.
The listing applicant must qualify as a biotech company whereby its principal business is R&D, application and commercialization of biotech products. In particular, it must demonstrate the following features:
i) the listing applicant must have developed at least one core product beyond the concept stage i.e. having met the developmental milestones specified for the relevant type of product as defined in guidance letter HKEX-GL92-18;
ii) it must have been primarily engaged in R&D for the purpose of developing its core product;
iii) it must have been engaged with the R&D of its core product for a minimum of 12 months prior to listing;
iv) its primary reason for listing must be to raise finance for R&D to bring its core product(s) to commercialization;
v) it must have registered intellectual property rights attached to its core product(s); and
vi) if the listing applicant is engaged in the R&D of pharmaceutical products or biological products, a pipeline of those potential products must be demonstrated.
The listing applicant must have been in operation in its current line of business for at least two financial years prior to listing with the same management. There must also be sufficient working capital to cover at least 125% of the group’s costs (including general administrative, operating and R&D costs) for at least 12 months from the date of publicizing its listing documents.
Further, at the time of listing, the market capitalization of the listing applicant must reach at least HK$1.5bn, and the listing applicant must have received “meaningful investment” from at least one “sophisticated investor” at least 6 months before listing (which must remain at the time of listing).
Choosing to list in Mainland China
(A) Choosing the route of listing:
The Greater Bay Area companies can choose to list on the following boards in Mainland China:
a) Main Board
Companies listed on the Main Board in Mainland China are listed on the SSE and SZSE. The threshold of listing on the Main Board is higher, which has higher requirements on different aspects of the issuers including their operation period, size of share capital, profitability and minimum market capitalization etc. Most companies that can be listed on the Main Board are sizeable mature enterprises with larger capital scale and stable profitability.
b) SME Board
SME Board is a gathering platform of small and medium-sized companies specifically set up by the SZSE to encourage independent innovation. Although the industrial ranking of companies listed on the SME Board is usually not as high as that of companies listed on the Main Board, some of them have stronger corporate growth and developed exponentially after listing with rapid increase in their market capitalization.
c) ChiNext Board
ChiNext Board is a capital market for fund raising by small and medium-sized enterprises and high-technology companies with high growth potential. At present, ChiNext Board has implemented the registration system.
d) Sci-tech Innovation Board
Sci-tech Innovation Board is the first market in Mainland China to implement a registration system, mainly for sci-tech innovation enterprises which are in line with national strategy, have made breakthroughs in key core technologies and have high market recognition.
The NEEQ is the national share transfer system for small and medium-sized enterprises, mainly for innovative, entrepreneurial and growth-oriented small and medium-sized enterprises. However, as enterprises listed on the NEEQ cannot issue shares publicly, listing on the NEEQ is not considered as listing in the usual sense.
(B) Listing qualifications in Mainland China