Listing in Hong Kong

Listing in Hong Kong & Listing Comparison

Global Stock Exchanges Overview

Fund Raising Summary 2021 vs 2022

	2021	2022
NASDAQ	352 IPOs Raising USD99.7 billion	81 IPOs Raising USD5.4 billion
NYSE	110 IPOs Raising USD57.9 billion	9 IPOs Raising USD3.2 billion
Hong Kong Stock Exchange	97 IPOs Raising HKD331.4 billion (equivalent to USD42.2 billion)	67 IPOs Raising HKD96.7 billion (equivalent to USD12.4 billion)
Source	https://assets.ey.com/content/dam/ey-sites/ey-com/en_gl/topics/ipo/ey-global-ipo-trends-2022-v1.pdf	https://www2.deloitte.com/cn/en/pages/audit/articles/mainland-and-hong-kong-ipo-markets-to-remain-strong-and-vibrant-in-2022.html

Comparison between Hong Kong and US IPOs

	Hong Kong Main Board	Hong Kong GEM Board	NASDAQ Capital Market * – “Net Income Standard”
Listing process	Approximately 12 – 24 months	Approximately 12 – 24 months	Approximately 6- 9 months
Vetting approach	Approval and disclosure based	Approval and disclosure based	Disclosure based
Track record period	Not less than three years	Not less than two years	Two years under the “Equity Standard”, no such requirement under the “Market Value of Listed Securities Standard” and “Net Income Standard”
Profit requirement	Profits of HK$35 million for the most recent financial year and of aggregate of HK$45 million for the first two years	No profit requirement Positive cashflow generated from operating activities of at least HK$30 million in aggregate for the two preceding financial years	Under “Net Income Standard”, US$0.75 million of net income from continuing operations in latest fiscal year or in two of the last three fiscal year at least
Sponsor	Yes	Yes	N/A
Underwriters	Yes	Yes	Yes
Market maker	N/A	N/A	N/A

	Hong Kong Main Board	Hong Kong GEM Board	NASDAQ Capital Market * – “Net Income Standard”
Public float	– Minimum 25% of the issuers’ total issued share capital at the time of listing – Market capitalization of at least HK$125 million held by public at the time of listing	– Minimum 25% of the issuers’ total issued share capital at the time of listing – Market capitalization of at least HK$45 million held by public at the time of listing	Market value of publicly held shares: US$5 million
Lock-up on controlling shareholder	– Not to dispose any interest during the first 6 months after listing. – Not to dispose interest in the issuer in the next 6 months such that he/she would cease to be a controlling shareholder (30%)	– Not o dispose any interest during the first 12 months after listing. – Not to dispose interest in the issuer in the next 12 months such that he/she would cease to be a controlling shareholder (30%)	No requirement on lock-up period unless agreed with underwriters (180 days is the customary period)
Litigation risks	Less litigation	Less litigation	Potential risk of securities class action

	Hong Kong Main Board	Hong Kong GEM Board	NASDAQ Capital Market * – “Net Income Standard”
Annual listing fee	HK$145,000 – HK$1,188,000 (US$18,850 – US$154,440)	HK$100,000 – HK$200,000 (US$13,000 – US$26,000)	US$45,000 – US$81,000
Listing expenses	HK$30 million (US$3.9 million)	HK$25 million (US$3.2 million)	US$1.8 million – US$2.5 million
Continuing disclosure obligations	– Annual reporting – Interim reporting	– Annual reporting – Interim reporting – Quarterly reporting	– Annual report on Form 10-K – Quarterly report on Form 10-Q – Current report on Form 8-K (event requiring report) – Annual proxy statement and annual report to stockholders

Advantages of Listing in US

Key Steps Nasdaq IPO

• Prepare the management account for the proposed listing group in accordance with: US Generally Accepted Account Principles for US IPO
• Reorganization – Perform shareholding and/or business operation restructuring (if required)
• Commencement of the listing application included but not limited to the follows:
  • Appointment of the professional parties
  • Audit fieldwork
  • Preparation of due diligence report by US underwriter lawyer
  • Prepare the Registration Statement
• Submission of the Registration Statement – Secret filing of Form F-1
• Address comments from Nasdaq and SEC
• Roadshow – Meeting with potential investors
• Underwriting – Signing of underwriting agreement with the issuer
• Listing

Road Map (US IPO)

NASDAQ Capital Market: Financial and Liquidity Requirements

Requirement	Equity Standard	Market Value of Listed Securities Standard	Net Income Standard
Listing Rules	5505(a) and 5505(b)(1)	5505(a) and 5505(b)(2)	5505(a) and 5505(b)(3)
Stockholders’ equity	US$5 million	US$4 million	US$4 million
Market value of unrestricted publicly held shares	US$15 million	US$15 million	US$5 million
Operating history	2 years	N/A	N/A
Market value of listed securities*	2 years	US$50 million	N/A
Net income from continuing operations (in the latest fiscal year or in two of the last three fiscal years)	N/A	N/A	US$750,000
Unrestricted publicly held shares	1 million	1 million	1 million
Unrestricted round lot shareholders**	300	300	300
Market makers	3	3	3
Bid price or closing price***	US$4 or US$3	US$4 or US$2	US$4 or US$3
Corporate governance	Yes	Yes	Yes
Total Shareholders	300	300	300

Fund Raising

In the entire listing process, underwriting and fund raising are the last steps for a successful listing. Underwriters plays an important role in this step and is responsible for selling new shares.

Underwriters will determine the valuation of the company with the issuer and conduct road shows with investors. Underwriters will normally charge 8% underwriting commission on IPO gross proceeds.

Since most of the issuers seeking listing on the Nasdaq Capital Market are small to medium size companies, therefore, the gross IPO fund raising amount will normally in the range from US$15 million to US$20 million depending on the size of the issuer’s net profit, industry and market sentiment at the time of listing.