HKSE To Tighten Listing Regulations
The Hong Kong Stock Exchange (HKSE) plans to tighten
regulations for companies planning to list in Hong Kong.
In particular, the exchange plans to work to attract companies
capitalized at more than HK$4 billion and with more than
300 employees. In addition, it plans to tighten regulations
on companies which have listed using reverse mergers.
Analysts believe that the new regulations will pressure
smaller companies and reverse mergers to list before the
deadline at the end of March.
The new regulations are widely seen as favoring larger
companies capitalized at more than HK$400 million and
with more than 300 employees because they are omitted
from the requirement that they have annual earnings of
moreHK$50 million in the first three years. However, they
are still required to have annual sales of more than HK$500
million.
The number of shareholders will also have to go up from
the current 100 to 300, which puts it in line with general
international regulations. It also limits the the holdings
of strategic investors.
Strategic investors are widely used by Chinese state-owned
enteprises listing in Hong Kong. Investment bankers will
frequently line up a famous strategic investor to convince
investors to invest in the Chinese company. In return,
the strategic investor gets a significant number of shares
in the company.
Reverse mergers have also been widely used in Hong Kong.
A company which seeks listing will inject its assets into
a non-performing listed company, issue new financials,
and become listed. In China, this listing strategy is
often known as "going through the back door."
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