Publication
Investment and M&A trends in FinTech
At the start of last year there was an expectation that momentum in the FinTech sector would pick up, including as a result of anticipated improvements in global macroeconomic conditions.
Global | Publication | December 2017
On 16 June 2017, the Stock Exchange published its New Board Concept Paper which stated that the Stock Exchange intended to attract more high growth companies from innovative sectors (or so-called new economy companies). New economy companies include companies in the biotechnology, health care technology, internet & direct marketing retail, internet software & services, IT services, software, technology hardware, storage & peripherals industries.
The consultation conclusions published on 15 December 2017 stated that the Stock Exchange will introduce two new chapters to the Main Board Listing Rules which allow (1) biotech issuers that are pre-revenue; and (2) innovative and high growth issuers that have WVR (weighted voting rights) structures, to list on the Main Board, subject to appropriate disclosure and safeguards.
In addition, the Main Board Listing Rules will be amended to create a new secondary listing route to attract innovative issuers that are primary listed on a qualifying stock exchange (being the New York Stock Exchange, NASDAQ and the “premium listing” segment of the London Stock Exchange’s Main Market).
Details of the proposals and rule amendments are subject to further market consultation. Hence, the initial pointers set out below may be subject to further changes after the further market consultation:
Biotech issuers | High growth and innovative issuers with WVR structures | New route secondary listing | |
Types of issuers and eligibility requirements | Initially, among the new economy companies, only biotech issuers are eligible to list on a pre-revenue basis (that is, not meeting the profit test, the market capitalisation/revenue test, or the market capitalisation/revenue/cash flow test under the Main Board Listing Rules). Guidance letter will be published by the Stock Exchange on factors that the Stock Exchange will take into account when determining an applicant’s eligibility to list on a pre-revenue basis. A biotech company is expected to have the following features:
|
It is hard to define what a “high growth and innovative” issuer means, and the definition is bound to evolve over time. Guidance letter will be published by the Stock Exchange on the characteristics of an innovative company. The Stock Exchange would normally consider a company suitable for listing in Hong Kong with WVR structures if they are able to demonstrate the following characteristics:
|
This new secondary listing route will be available to companies with all of the following characteristics:
|
Minimum market capitalisation at the time of listing | Not less than HK$1.5 billion. |
|
|
Working capital requirements |
|
||
Public float | Shares held by cornerstone investors in biotech issuers will not count towards public float. | ||
Automatic waivers |
|
||
Holders of WVR shares |
|
For Grandfathered Greater China Companies and Non-Greater China Companies, they are not required to meet WVR safeguards nor change WVR structure to meet primary listing requirements, except for the WVR safeguards that are disclosure requirements. For Non-Grandfathered Greater China Companies, they must meet WVR standards and WVR structure must conform with primary listing requirements. |
|
Limits on WVR powers |
|
For Grandfathered Greater China Companies and Non-Greater China Companies, they are not required to meet WVR safeguards nor change WVR structure to meet primary listing requirements, except for the WVR safeguards that are disclosure requirements. For Non-Grandfathered Greater China Companies, they must meet WVR standards and WVR structure must conform with primary listing requirements. |
|
Ring-fencing | After listing, issuers with WVR structures will be prohibited from increasing the proportion of weighted voting rights in issue or issue any further WVR shares (subject to a limited right of pre-emption in the case of a pro rata offering to all shareholders - that is, a rights issue or open offer). | For Grandfathered Greater China Companies and Non-Greater China Companies, they are not required to meet WVR safeguards nor change WVR structure to meet primary listing requirements, except for the WVR safeguards that are disclosure requirements. For Non-Grandfathered Greater China Companies, they must meet WVR standards and WVR structure must conform with primary listing requirements. |
|
|
For Grandfathered Greater China Companies and Non-Greater China Companies, they are not required to meet WVR safeguards nor change WVR structure to meet primary listing requirements, except for the WVR safeguards that are disclosure requirements. For Non-Grandfathered Greater China Companies, they must meet WVR standards and WVR structure must conform with primary listing requirements. |
||
Key shareholder protection standards | Grandfathered Greater China Companies and Non-Greater China Companies, are required to comply with the Key Shareholder Protection Standards (note 5) set out in the Main Board Listing Rules. Hence, they do not have to amend their constitutional documents to incorporate those standards. Non-Grandfathered Greater China Companies are required to change their constitutional documents (as necessary) to meet equivalent shareholder protection standards to those of Hong Kong. |
||
Constitutional backing | The prescribed safeguards are required to be incorporated in the issuer’s constitutional documents. | Grandfathered Greater China Companies and Non-Greater China Companies are not required to meet WVR safeguards nor change WVR structure to meet primary listing requirements, except for the WVR safeguards that are disclosure requirements. Non-Grandfathered Greater China Companies must meet WVR standards and WVR structure must conform with primary listing requirements. |
|
Disclosures | Enhanced disclosures on the business and R&D risks involved (eg phases of development for its product(s), potential market for its product(s), details of spending on R&D, patents granted and applied for, and R&D experience in management). |
|
Grandfathered Greater China Companies and Non-Greater China Companies are not required to meet WVR safeguards nor change WVR structure to meet primary listing requirements, except for the WVR safeguards that are disclosure requirements. Non-Grandfathered Greater China Companies must meet WVR standards and WVR structure must conform with primary listing requirements. |
Note (1): The following are some of the factors that will be considered in determining whether an overseas company has its “centre of gravity” in Greater China:
These factors are not exhaustive. The Stock Exchange and SFC may take other factors into consideration in determining whether a listing applicant has its “centre of gravity” in Greater China.
Note (2): Grandfathered Greater China Companies means Greater China Companies that are primary listed on a qualifying stock exchange on or before 15 December 2017.
Note (3): Non-Grandfathered Greater China Companies means Greater China Companies that are primary listed on a qualifying stock exchange after 15 December 2017.
Note (4): Non-Greater China Companies means companies that are not Greater China Companies.
Note (5): The key shareholder protection standards set out in section 1 of the Joint Policy Statement 2013 comprise:
Publication
At the start of last year there was an expectation that momentum in the FinTech sector would pick up, including as a result of anticipated improvements in global macroeconomic conditions.
Subscribe and stay up to date with the latest legal news, information and events . . .
© Norton Rose Fulbright LLP 2025