Hong Kong Stock Exchange has launched a new listing regime for “Specialist Technology Companies” under Chapter 18C of the Listing Rules, effective from 31 March 2023. We provide a brief overview of the listing regime including key listing qualification requirements imposed.
Background
On 24 March 2023, The Stock Exchange of Hong Kong Limited (the “Exchange”) published the consultation conclusions on the proposed regulatory framework for the listing of “Specialist Technology Companies” under a new chapter (Chapter 18C) to the Rules Governing the Listing of Securities on the Main Board of the Exchange (the “Listing Rules”). The new Chapter 18C is effective from 31 March 2023 where companies may submit a formal listing application under this new listing regime. The Exchange has adopted a more issuer-friendly approach in setting the eligibility criteria for Chapter 18C after considering the market feedback. This client alert aims to provide a brief overview of the new listing regime.
Specialist Technology Companies are companies that primarily engage in the research and development (“R&D”) of, and the commercialisation and/or sales of, products and/or services (the “Specialist Technology Products”) with science and/or technology applied thereto (the “Specialist Technology”) within an acceptable sector of a Specialist Technology Industry. The Exchange will set out Specialist Technology Industries and acceptable sectors in a non-exhaustive list to be updated from time to time, which currently covers:
- next-generation information technology – cloud-based services and artificial intelligence;
- advanced hardware and software – robotics and automation, semiconductors, advanced communication technology, electric and autonomous vehicles, advanced transportation technology, aerospace technology, advanced manufacturing, quantum information technology and computing and metaverse technology;
- advanced materials – synthetic biological materials, advanced inorganic materials, advanced composite materials and nanomaterials;
- new energy and environmental protection – new energy generation, new energy storage and transmission technology and new green technology; and
- new food and agriculture technologies – new food technology and new agriculture technology.
A company falling outside of the list may still be considered “within an acceptable sector of a Specialist Technology Industry” if it can demonstrate (a) it has high growth potential; (b) its success is attributable to the application, to its core business, of new technologies and/or the application of the relevant science and/or technology within that sector to a new business model, which differentiates it from traditional market participants serving similar consumers or end users; and (c) R&D significantly contributes to its expected value and constitutes a major activity and expense. Such company must submit a pre-IPO enquiry to the Exchange to seek confidential guidance.
The Exchange indicated that the new regime does not limit to those applicants with "leading-edge" technologies as it is believed that the success of a Specialist Technology Company would often be attributed to the successful commercialisation of the core technology rather than the innovativeness of the technology itself. Companies with multiple business segments may also take advantage of the new regime as long as they are "primarily engaged" in the relevant business of a Specialist Technology Industry.
Specialist Technology Companies are categorised into (i) companies that have commercialised their Specialist Technology Products and have generated meaningful revenue, i.e. the Commercial Companies, and (ii) companies that are (a) primarily engaged in R&D and are raising funds to further their R&D to commercialise their Specialist Technology Products and/or (b) have not yet generated meaningful revenue, i.e. the Pre-Commercial Companies. Pre-Commercial Companies are subject to more stringent listing requirements given the heightened risks they are associated with.
Key Listing Qualification Requirements
Key Offering and Disclosure Requirements
Key Post-IPO Requirements
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