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Highlights of Requirements for Companies Seeking to List on the Hong Kong Stock Exchange Main Board

1.   Financial Criteria
(meet one of the three tests)

Profit Test

  • Profit ≥ HK$20 million for the most recent year, and aggregate ≥ HK$30 million for the two years before
  • Market capitalisation ≥ HK$200 million at the time of listing

Market Capitalisation/Revenue Test

  • Market capitalisation ≥ HK$4 billion at the time of listing
  • Revenue for the most recent year ≥ HK$500 million

Market Capitalisation/Revenue/Cash Flow Test

  • Market capitalisation ≥ HK$2 billion at the time of listing
  • Revenue for the most recent year ≥ HK$500 million
  • Positive 3-year aggregate operating cash flow ≥ HK$100 million
2.   Management and Shareholdings
  • 3 years of management continuity
  • 1 year of ownership continuity
  • ≥ 3 independent directors and control representing ≥ 1/3 of boards
  • Semi-annual financial reporting required
3.   Public Float
  • ≥ 25% of the issuer’s total issued share capital
  • 15% to 25% of the issuer’s if market capitalisation ≥ HK$10 billion
  • ≥ 300 shareholders
  • Market capitalisation of public floats ≥ HK$50 million
4.   Professionals
  • Appointment of a suitable licensed sponsor required for listing proposal
  • Initial public offerings are all underwritten
  • Compliance adviser for the period commencing on initial listing and ending on the publication of the first full financial year’s results after listing

Listing Requirements Highlights for Biotech Companies

With effect from 30 April 2018, Biotech Companies failing to satisfy either the profit test, the market capitalisation/revenue test or the market capitalisation/revenue/cash flow test for the financial criteria can still seek to list on the Main Board of the Hong Kong Stock Exchange.

Definitions and Interpretation

Approved Product A Biotech Product which has been approved for commercialisation by a Competent Authority
Biotech The application of science and technology to produce commercial products with a medical or other biological application
Biotech Company A company primarily engaged in the research and development, application and commercialisation of Biotech Products
Biotech Product Biotech products, processes or technologies
Competent Authority The US Food and Drug Administration, the China Food and Drug Administration, the European Medicines Agency. The Exchange may, at its discretion, recognise another national or supranational authority as a Competent Authority for the purposes of this Chapter in individual cases (depending on the nature of the Biotech Product)
Core Product A Regulated Product that (alone or together with other Regulated Products) forms the basis of a Biotech Company’s listing application
Cornerstone Investor An investor in the initial public offering of a new applicant’s shares to whom offer shares are preferentially placed with a guaranteed allocation irrespective of the final offer price, usually for the purpose of signifying that the investor has confidence in the financial condition and future prospects of the new applicant
Regulated Product A Biotech Product that is required by applicable laws, rules or regulations to be evaluated and approved by a Competent Authority based on data derived from clinical trials (i.e. on human subjects) before it could be marketed and sold in the market regulated by that Competent Authority

Conditions for Listing

  1. Demonstrate to the Exchange’s satisfaction that the company is both eligible and suitable for listing as a Biotech Company;
  1. Have an initial market capitalisation at the time of listing of at least HK$1,500,000,000;
  1. Have been in operation in its current line of business for at least 2 financial years prior to listing under substantially the same management;
  1. Ensure that it has available sufficient working capital to cover at least 125% of the group’s costs for at least 12 months from the date of publication of its listing document (after taking into account the proceeds of the new applicant’s initial listing). These costs must substantially consist of
  • General, administrative, operating and production (if any) costs; and
  • Research and development costs;
  1. In addition to meeting the Public Float criteria of listing, a Biotech Company must ensure that a portion of the total number of its issued shares with a market capitalisation of at least HK$375 million are held by public at the time of its initial listing. Any shares allocated to a Cornerstone Investor and any shares subscribed by existing shareholders of the Biotech Company at the time of listing shall not be considered as held by the public;
  1. Without the prior consent of the Exchange, a Biotech Company listed under this new rule must not effect any acquisition, disposal or other transaction or arrangement or a series of acquisitions, disposals or other transactions or arrangements, which would result in a fundamental change in the principal business activities of the relevant issuer as described in the listing document issued at the time of its application for listing.

Note 1  Capital expenditures do not need to be included in the calculation of working capital requirements for the purpose of this result. However, where capital expenditures are financed out of borrowings, relevant interest and loan repayments must be included in the calculation. For the avoidance of doubt, Biotech Companies must include research and development costs, irrespective of whether they are capitalised, in the calculation of working capital requirements for the purpose of this rule.

Note 2  The Exchange would expect the issuer to use a substantive portion of the proceeds from its initial listing to cover these costs.

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