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China Fund News reporter Guo Wenjun

Starting from September 1, the listing threshold for Hong Kong's specialized technology companies and the threshold for special purpose acquisition companies (SPACs) to conduct SPAC mergers and acquisitions transactions have been significantly lowered!

On the evening of August 23, the Hong Kong Securities and Futures Commission (hereinafter referred to as the Hong Kong SFC) and the Hong Kong Exchanges and Clearing Limited (hereinafter referred to as the Hong Kong Exchange) issued the "Joint Announcement on Short-term Changes to the Regulations on Merger and Acquisition Transactions of Special Purpose Technology Companies and Special Purpose Acquisition Companies" (hereinafter referred to as the "Joint Announcement").

All changes will take effect on September 1, 2024, and will be temporarily implemented for three years, ending on August 31, 2027. Before August 31, 2027, the Hong Kong Stock Exchange may review the relevant regulations and conduct public consultation as necessary.

Zhuante Technology’s minimum market value for listing reduced by HK$2 billion!

According to the Joint Announcement, the minimum market capitalisation requirement for special technology companies at the time of listing under Rule 18C.03(3) of the Main Board Listing Rules will be lowered. The specific reduction is as follows:

(a) For commercialized companies: reduced from HK$6 billion to HK$4 billion;

(b) For pre-commercialised companies: reduced from HK$10 billion to HK$8 billion.

The Hong Kong Stock Exchange said the changes reflect the latest market conditions and hope to provide a viable listing path for new economy companies with high growth potential.

The Hong Kong Stock Exchange will allow special technology companies to be listed under the newly added Chapter 18C (hereinafter referred to as 18C) of the Main Board Listing Rules from March 31, 2023. After more than a year, on June 13, the Hong Kong Stock Exchange finally welcomed the first 18C stock - Jingtai Technology. On August 8, Heizhima Intelligence became the second special technology company to be listed under Chapter 18C.

On June 23, in response to a reporter from China Fund News asking industry insiders whether the Hong Kong Stock Exchange would consider lowering the threshold appropriately, Hong Kong Stock Exchange Chief Executive Officer Paul Chan said: "Finance must serve the real economy. We are constantly reviewing every day whether the listing rules can serve companies well." Two months later, the relevant listing rules were revised.

The threshold for SPAC mergers and acquisitions transactions has been lowered

According to the Joint Announcement, the minimum independent third-party investment amount involved in SPAC mergers and acquisitions will be reduced to the lower of the following:

(a) the current requirement under Main Board Listing Rules 18B.41 as to the percentage of the investment amount to the agreed valuation of the SPAC acquisition target;

(b) HK$500 million.

At the same time, the independence requirements for third-party investors have also been relaxed.

The independence test for third-party investors in SPAC M&A transactions under Main Board Listing Rule 18B.40 will be adjusted as follows to align it with the independence test for experienced independent investors in special technology companies (Chapter 18C Independence Test):

(a) Whether a third-party investor is independent will be assessed based on the date on which the investor signs the final agreement for the relevant investment in the SPAC merger transaction and the period until the successor company goes public;

(b) The following persons will not be considered independent third-party investors: (i) core associates of a SPAC or target, except any major shareholder of a SPAC or target who is considered a core associate solely by reason of the size of his or her shareholding in the SPAC or target (subject to paragraph (b)(ii) below); (ii) a controlling shareholder of a SPAC or target (or any member of a group of persons who are considered a controlling shareholder); (iii) the founders of a target and their close associates;

(c) The Hong Kong Stock Exchange reserves the right to deem any other person as non-independent based on specific facts and circumstances. For example, a person who has signed a concerted action agreement or arrangement with a SPAC sponsor or a controlling shareholder of a SPAC/SPAC target or a founder of a SPAC target is generally not considered independent.

Lowering the threshold aims to increase the attractiveness of Hong Kong's capital market

The Hong Kong Stock Exchange said that the above amendments were supported by the Hong Kong Securities and Futures Commission and aimed to adapt to changes in market conditions since the implementation of the two listing mechanisms, and took into account the experience gained by the Hong Kong Stock Exchange in handling listing applications of specialized technology companies and SPAC mergers and acquisitions transactions in the past.

“HKEX is committed to continually reviewing and enhancing our listing regime to ensure it keeps pace with the times and increases the attractiveness and competitiveness of Hong Kong’s capital markets. We are building on our experience in processing listing applications and related transactions to further enhance the flexibility and dynamism of our listing framework. These changes will provide greater flexibility and clarity for issuers and investors, while maintaining our high regulatory standards,” said Ms. Ng, HKEX’s Head of Listing.

David Dai, Executive Director of Corporate Finance at the SFC, said: “The SFC fully supports these amendments to reinforce Hong Kong’s position as a preferred listing venue for innovative and fast-growing technology companies. This move once again demonstrates that the listing regulator is flexible and agile in responding to various challenges in the market environment while continuing to maintain market quality.”