Webinar | HKEX Consultation on Proposals to Optimise IPO Price Discovery & Open Market Requirements

Julia Charlton discusses the Hong Kong Stock Exchange's proposals to optimize IPO price discovery and open market requirements, aiming to enhance the competitiveness of Hong Kong's securities market. The exchange's proposed reforms focus on the IPO price discovery process and open market requirements, particularly the public float calculation and listing rules.

Current public float calculations include shares not publicly traded in Hong Kong, such as PRC issuers’ A-shares listed in the PRC, which the exchange argues do not contribute to an open market. The exchange proposes calculating public float by considering only the class of shares listed on the Hong Kong Exchange, aligning with practices in London, Australia, and Singapore. For PRC issuers, the exchange suggests modifying the public float calculation to ensure H-shares represent a meaningful percentage of all issued shares with similar rights.

The exchange proposes removing certain shares from the public float calculation, such as those with weighted voting rights, promoter shares, or held in trust for share schemes. Tiered initial public float thresholds based on market cap are suggested, potentially reducing public float requirements for large-cap companies and addressing regulatory disparities. The exchange suggests an initial free float requirement for at least 10% of listed shares to be freely tradable, proposing new rules for PRC issuers and specialist technology companies.

Proposed changes in the IPO offering mechanism include a staggered lockup period for cornerstone investors and ensuring a significant portion of IPO shares is allocated to the bookbuilding tranche to enhance price discovery. The exchange also explores adjustments to pricing flexibility during IPOs, allowing upward or downward adjustments to the final offer price within specific limits, while seeking feedback on maintaining or reducing the current offer price range limits.

#HKEXIPOReforms #HongKongStockExchange #PublicFloatRequirements

Timecodes:
0:00 Introduction to Proposed Reforms
1:42 Public Float Calculations and International Comparisons
4:39 Proposed Changes for PRC Issuers and Weighted Voting Rights
6:24 Tiered Public Float Thresholds and Market Value Requirements
9:47 Adjusting Public Float Requirements to Enhance Market Flexibility
13:05 Initial Free Float Proposal and Compliance Disclosure
22:24 Open Market Requirements and Valuation Calculations
36:14 IPO Offering Mechanism and Cornerstone Investor Lockups
39:33 Bookbuilding Process and Allocation Policies
42:37 Subscription Tranches and Clawback Mechanisms
45:58 Enhancing Pricing Flexibility and Final Offer Price Adjustments

Charltons Law Firm:
https://www.charltonslaw.com/

Julia Charlton
https://www.charltonslaw.com/the-firm/people-culture/team-profile/julia-charlton/

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