Hong Kong Exchanges and Clearing (HKEX) proposed on Friday that the bar for companies with weighted voting rights (WVR) seeking to list in the SAR be lowered as part of broader reforms to further raise the city's listing regime competitiveness.

In a public consultation paper, it suggests lowering the threshold for companies that have such dual-class voting rights to list to a minimum valuation of HK$20 billion, half the current requirement of at least HK$40 billion.

It also proposed the market capitalisation threshold for such WVR listings be trimmed to HK$6 billion from HK$10 billion while lowering their revenue requirement to HK$600 million from HK$1 billion, according to the statement.

The maximum ratio of shares with preferred voting rights, meanwhile, would be eased to 1:20 from the current 1:10 – if the applicant company has a market capitalisation of above HK$40 billion, it said.

"Our proposal aims to enhance the exchange’s attractiveness as a listing venue for high quality, high growth companies intending to retain their WVR structures," a statement reads.

"It also seeks to strike an appropriate balance between market competitiveness and investor protection."

Meanwhile, HKEX seeks to expand the scope of businesses that are eligible for listing under the WVR regime, as it redefines on what can be considered as "innovative companies" so as to cover more non-tech issuers but include those with innovative business models .

Other key recommendations include allowing all companies to file listing applications confidentially, rather than the current regime of allowing only certain firms, such as biotech and specialist tech companies.

To attract more companies that have already listed overseas, the bourse suggested lowering the market capitalisation requirement to HK$6 billion from HK$10 billion.

"Our proposals are consistent with the policy direction of the HKSAR Government and market feedback. They seek to optimise the WVR listing regime, enhance the pathway to listing for homecoming Greater China issuers," it said.

"The proposals in this paper are designed to foster a more inclusive and dynamic market environment, enhancing the breadth of investment opportunities available to meet the needs of both investors and issuers," it added.

The move marks the first major overhaul of the city's WVR regime since its debut in 2018, and the relaxation of these new measures could help smooth the path for large mainland enterprises to debut on the city's stock exchange.

The proposed reform came as the city's initial public offering market topped the world last year with 119 companies raising HK$286 billion in new listings, compared with HK$87.5 billion a year earlier.

HKEX noted that the proposals were made after taking into account the latest market feedback to review its existing frameworks, especially those related to WVR, and as it compared the city's regime with regulatory changes in other markets, including the United States, the UK and Singapore.

The consultation ends on May 8.


Edited by Tony Sabine