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On August 23, the Hong Kong Securities and Futures Commission and the Hong Kong Stock Exchange’s wholly-owned subsidiary, the Stock Exchange of Hong Kong, issued a joint announcement announcingLowering the minimum market capitalization threshold for special technology companies to go public and revising the independent third-party investment requirements for special purpose acquisition companies (SPACs) to conduct SPAC mergers and acquisitionsThe relevant amendments will take effect on September 1, 2024.

Industry insiders said that the relevant revisions were adjusted based on the latest market conditions, which will provide a viable listing channel for new economy companies with high growth potential and help enhance the attractiveness of Hong Kong stocks.

Lowering the listing threshold for special technology companies

The Hong Kong Stock Exchange has made it clear that it will lower the minimum market capitalization threshold for special technology companies when they go public, from HK$6 billion to HK$4 billion for commercialized companies; and from HK$10 billion to HK$8 billion for non-commercialized companies.

Among them, commercialized companies refer to special technology companies with revenue of at least HK$250 million in the most recent audited fiscal year.

In March 2023, the Hong Kong Stock Exchange allowed special technology companies without revenue and profit to be listed under the newly added Chapter 18C (referred to as "18C") of the Main Board Listing Rules, and the 18C reform was officially launched. More than a year later, on June 13 this year, the Hong Kong Stock Exchange welcomed the first 18C stock - Jingtai Technology. On August 8, Heizhima Intelligence became the second special technology company to be listed under 18C.

Optimizing regulations related to SPAC mergers and acquisitions

This time, the Hong Kong Stock Exchange also revised the independent third-party investment regulations for special purpose acquisition companies (SPACs) to conduct SPAC merger and acquisition transactions.

A SPAC is a shell company that raises funds through an IPO with the purpose of acquiring a company within a preset period of time after the IPO.

This revision,On the one hand, the minimum independent third-party investment amount is lowered.It is clarified that the minimum independent third-party investment amount involved in SPAC M&A transactions will be reduced to HK$500 million, or the lower of the percentage of the relevant investment amount as stipulated in Rule 18B.41 of the Main Board Listing Rules to the agreed valuation of the SPAC M&A target.

On the other hand, optimize the independence regulations for third-party investors.First, it is clarified whether the third-party investor is independent, and the date of signing of the final agreement on the investor's investment in the SPAC M&A transaction and the period until the successor company is listed will be used as the assessment basis; second, it is clarified that the controlling shareholders of SPACs or SPAC acquisition targets will not be regarded as independent third-party investors. At the same time, it is clarified that the Stock Exchange reserves the right to regard any other person as non-independent based on individual facts and circumstances.

Source: HKEX website

The Hong Kong Stock Exchange stated that the purpose of requiring SPACs to obtain independent third-party investment before completing SPAC mergers and acquisitions is to reduce the risk of false valuations. The new minimum independent third-party investment requirement will continue to represent third-party investment as an important commitment to invest "risk capital" to help ensure that the valuation of the SPAC merger target in the SPAC merger and acquisition transaction is supported.

Continue to improve the flexibility and vitality of the listing framework

The above amendments will be applied provisionally for a period of three years, from September 1, 2024 to August 31, 2027. Before August 31, 2027, the Stock Exchange may review the relevant requirements and solicit public comments as necessary.

HKEX's Head of Listing, Ng Kit-chun, said that HKEX is committed to continuously reviewing and improving its listing mechanism to ensure that it keeps pace with the times and increases the attractiveness and competitiveness of Hong Kong's capital market. HKEX has further enhanced the flexibility and vitality of its listing framework with the experience gained in handling listing applications and related transactions. These amendments will provide issuers and investors with greater flexibility and clarity while maintaining strict regulatory standards.

"The SFC fully supports these amendments to consolidate Hong Kong's advantages as a preferred listing destination for innovative and fast-growing technology companies. This move once again demonstrates that the listing regulator can continue to maintain market quality while also being flexible and agile in responding to the challenges of the market environment," said David Tai, Executive Director of the Corporate Finance Department of the SFC.