Alumni Network Southern Region webinar HK IPO market review for 2021 and the latest regulatory update - 25 January 2022
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Alumni Network Southern Region webinar HK IPO market review for 2021 and the latest regulatory update 25 January 2022
Opening
Alumni Network Southern Region
Ryan Wu
Lead Client Service Partner, Strategic Clients
Alumni Network Southern Region
Deloitte China
Tel: +852 2740 8855
Email: rywu@deloitte.com.hk
© 2022. For information, contact Deloitte China. Presentation title 2
Disclaimer Any material or explanation (including but not limited to presentation slides or verbal explanation) (collectively “Material”) provided hereunder serves as a general guide instead of a basis for decision making and shall not be construed as any advice, opinion or recommendation given by Deloitte Touche Tohmatsu (“DTT”) on the presentation. In addition, the Material will be limited by the time available and by the information made available to (“DTT”), you should not consider the Material as being comprehensive as DTT may not become aware of all facts or information. Accordingly, DTT will not be in a position to make a representation, and will not make a representation as to the accuracy, completeness and sufficiency of the Material. You will rely on the contents of the Material at your own risk. This Material shall be kept confidential and any person other than DTT’s authorized personnel shall not, in any way, retain, use or disseminate this Material without DTT’s prior written consent. All duties and liabilities (including without limitation, those arising from negligence or otherwise) to all parties, including you are specifically disclaimed. All copyrights and other intellectual property rights contained in the Material are reserved by DTT. For the avoidance of doubt, the Material contains general information only, and none of Deloitte Touche Tohmatsu Limited, its member firms, or their related entities (collectively, the “Deloitte Network”) is, by means of the Material, rendering professional advice or services. Before making any decision or taking any action that may affect your finances or your business, you should consult a qualified professional adviser. No entity in the Deloitte Network shall be responsible for any loss whatsoever sustained by any person who relies on the Material. The speaker's view, comment and speech are personal and do not constitute any position or opinion of DTT or otherwise represent DTT, or partners, principals, members, owners, directors, employees thereof. DTT does not endorse and is not responsible for any such personal expression in whatever form. Please take the view as the speaker's own only. © 2022. For information, contact Deloitte China. 3
Deloitte speaker
Edward Au
Managing Partner, Southern Region, Deloitte China
Edward Au is Deloitte China Southern Region Managing Partner. He is responsible for Deloitte China's
offices in Southern China, and with a focus on the development of the practice in the Greater Bay Area.
Edward is also Vice President of the Hong Kong Institute of Certified Public Accountants and contributes to
other organizations and the community in Hong Kong through his service including Financial Services
Development Council and Hong Kong Red Cross.
© 2022. For information, contact Deloitte China. 4
Deloitte speaker
Johnny Chu
Partner, Audit & Assurance, Deloitte China
Johnny is an audit partner and has extensive experience in serving listed and multinational companies. He
has been actively involved in various IPOs in Hong Kong and is a member of the Capital Market Service
Group in Deloitte China. Johnny has broad exposures to clients in many sectors but has focused
predominately in serving clients in consumer businesses and manufacturing industries.
Johnny is a member of our Capital Market Service Group, Southern China and has assisted many of his
clients to successfully list on Hong Kong Stock Exchange. He also provides advisory services to clients on IPO
plans and strategies as well.
© 2022. For information, contact Deloitte China. Presentation title 5
Agenda 1. Overview of global macroeconomic and geopolitical conditions in 2021 2. Review of IPO Market in 2021 - Global 3. Review of IPO Market in 2021 - Hong Kong 4. Outlook for IPO Market in 2022 - Hong Kong 5. Regulatory landscape for Hong Kong 6. HK SPAC Regime - overview 7. Q&A 8. Closing © 2022. For information, contact Deloitte China. 6
Hong Kong IPO Market Review for 2021 and Latest Regulatory Update Edward Au, Southern Region Managing Partner Deloitte China 25 January 2022
Review of IPO Market in 2021 ─ Global © 2022. For information, contact Deloitte China. 9
NASDAQ, NYSE, and Shanghai Stock Exchange were the top 3 exchanges globally by IPO proceeds
raised, followed by HKEX and Shenzhen Stock Exchange
Top 5 global stock exchanges by IPO proceeds
raised in 2021
NASDAQ
NYSE
352 IPOs Shanghai Stock
Exchange
Raising HKD782.2 110 IPOs
billion HKEX
Raising HKD454.2 249 IPOs Shenzhen Stock
billion Exchange
Raising HKD441.0 97 IPOs
billion
Raising HKD331.4 232 IPOs
billion
Raising HKD204.8
billion
Source: China Securities Regulatory Commission (CSRC), NASDAQ, Hong Kong Stock Exchange (HKEX), New York Stock Exchange (NYSE), Bloomberg and Deloitte’s analysis, as of 31 December 2021. All of the proceeds
include funds raised from the listings of real estate investment trusts, but exclude proceeds raised by investment trust companies, closed-ended investment companies, closed-ended funds, and special purpose
acquisition companies (SPACs).
© 2022. For information, contact Deloitte China. 10
Proceeds raised by the top 10 global IPOs in 2021 were up 36% from 2020’s level, with Chinese
Mainland and HK IPOs dominating the lists for both years
2021 2020
Rank Company Exchange Proceeds Rank Company Exchange Proceeds
(HKD100m) (HKD100m)
1 Rivian Automotive NASDAQ 1,069 1 SMIC SSE STAR Market 588
2 China Telecom SSE 576 2 JD.com HKEX 346
3 Kuaishou Technology HKEX 483 Beijing-Shanghai
3 SSE 344
High Speed Railway
4 Coupang NYSE 353
JD Health
4 HKEX 310
5 Didi NYSE 344 International Inc.
5 Snowflake NYSE 299
6 InPost SA AEX 304
6 Airbnb NASDAQ 297
7 Krafton Inc KRX 300
7 DoorDash NYSE 261
8 JD Logistics HKEX 283
8 NetEase HKEX 243
9 CTGR SSE 274
9 JDE Peet's BV AEX 219
10 BeiGene SSE STAR Market 271
10 Allegro.eu SA GPW 218
Total 4,257
Total 3,125
Source: CSRC, HKEX, NYSE, NASDAQ, Amsterdam Stock Exchange (AEX), Korea Exchange (KRX), Warsaw Stock Exchange (GPW), Bloomberg and Deloitte’s analysis, as of 31 December 2021.
Includes funds raised from listings of real estate investment trusts, but excludes proceeds raised from investment trust companies, closed-ended investment companies, closed-ended funds, and special purpose
acquisition companies (SPACs).
© 2022. For information, contact Deloitte China. 11Review of IPO Market in 2021 ─ Hong Kong © 2022. For information, contact Deloitte China. 12
Affected by regulations introduced for several Chinese Mainland industries, HK IPO proceeds raised
declined by 17% in 2021 and the number of IPOs dropped by 34%
No. of IPOs
34%
Proceeds raised 2021 97 IPOs
17%
Raising HKD331.4 bn
• In 2021, the number of mega and small IPOs
fell sharply, with the drop in mega IPOs the
major cause of the overall decline
• IPO activity slowed after Q2
• More companies went public under the new
146 IPOs
listing regime, including WVR IPOs and pre- 2020
revenue biotech and pharmaceutical Raising HKD 397.9 bn
companies
• There was just 1 GEM IPO
Source: HKEX, Deloitte’s analysis as of 31 December 2021.
© 2022. For information, contact Deloitte China. 13There were a few more new economy IPOs in 2021 than there were in 2020, although proceeds raised
edged down by 4%
• The overall trend in new economy IPOs
remained the same, with health care & 44 IPOs HKD 226 billion 2021 No. of IPOs
pharmaceutical companies dominating volume 7%
and TMT taking the lead in proceeds raised Proceeds raised
• Proceeds from 8 mega IPOs in TMT reached
4%
•
more than 60% of total proceeds, vs. 5 in 2020
20 pre-revenue biotech and pharmaceutical
41 IPOs HKD 234.6 billion 2020
companies listed in 2021, vs. 14 in 2020
Industry distribution of new economy IPOs (by number) Industry distribution of new economy IPOs (by proceeds)
2021 2020 2021 2020
4% 2% 13% 3% 1%
5% 23%
32% 42% 40%
3% 44%
57% 46%
7% 61% 12%
5%
Financial Services Health Care & Pharmaceutical Consumer Business TMT Manfuacturing Property
Source: HKEX, Deloitte’s analysis as of 31 December 2021.
© 2022. For information, contact Deloitte China. 14Hong Kong has emerged as the world’s second largest and Asia’s largest biotech fundraising hub. Its pre-
revenue biotech listings continue to grow
0 5 14 28 48
2017 2018 2019 2020 2021
No 18A listings and no
IPO funds raised
HKD18.0 billion
raised HKD 33.8 billion
raised
HKD 74.0 billion
raised
HKD 111.7 billion
raised
Source: HKEX and Deloitte’s analysis as at 31 December 2021
© 2022. For information, contact Deloitte China. 15Knowledge check
Do you know how many of the 10 biggest listed companies in Hong Kong by market
capitalization as of 24 January 2022 are new economy companies?
A 3
B 4
C 5
D 6
© 2022. For information, contact Deloitte China. 16Importance of the new economy sector to Hong Kong’s capital market is growing
Top 10 HK-Listed Companies by Market Capitalization
1 Tencent Holdings 4,512
2 Alibaba Gp - S W 2,556
3 Meitun - W 1,428
China Construction Bank 1,428
China Mobile 1,115
HSBC 1,099
AIA 1,065
4 JD.com - S W 905
Hong Kong Stock Exchange 600
5 NetEase - S 515
(HKD billion) 0 1,000 2,000 3,000 4,000 5,000
Source: AAStocks.com, Deloitte’s analysis, based on the market closing prices on 24 January 2022
© 2022. For information, contact Deloitte China. 17Overview of HK IPO market – 2021
The number of IPOs in Q4 continued to drop, hitting a recent-year low since 2012; proceeds raised in
2021 failed to surpass 2020’s level but still outperformed previous years
Lowest proceeds and number Highest proceeds in
Most IPOs in recent
of IPOs in recent years recent years
years (HKD billion)
70 300
7
60 250
12
33
50
17 200
13 8 1
25
Number of IPOs
40 20 2
1
Proceeds
5 2 150
49 8 1
30 5 19 59
5 1 10 20 17
2
3 7 29 46 100
20 3 5 9 16 40 42 2 3 38
3 5 27 5 38 35
4 3 2 39
6 9 30 31 31
1 16 27 16 27 24
10 23 18 15
24 19 22 20 18 20 32 20
50
5 19
10 10 12 13 10 18 16 11 13 14
26
6 13
0 0
HK MB IPOs HK GEM IPOs IPO proceeds
Source: HKEX, Deloitte’s analysis as of 31 December 2021.
© 2022. For information, contact Deloitte China. 18Overview of HK IPO applications – 2021
Total IPO applications received in 2021 were up 37% from the same stage in 2020; there were 8% fewer
lapsed applications although withdrawn and returned applications increased
Total IPO applications 316 231 37%
received*
IPO applications being 42%
processed**
131 92
Lapsed applications (i.e.
approval in principle 8%
44 48
granted but not listed prior
to lapse of application)
1 1 0%
Rejected applications
Withdrawn applications 9 6 50%
2 0 N.A.
Returned applications
2021 2020
Source: HKEX, Deloitte's analysis, as of 31 December 2021.
*Includes investment vehicles applying to list under Chapters 20 and 21 of the MB Listing Rules, applications for transfer from GEM to MB, applications from deemed new applicants under Rule 8.21C or Rule 14.84 of
the MB Listing Rules, and very substantial acquisitions regarded as reverse takeovers under Rule 14.06(6) of the MB Listing Rules or Rule 19.06(6) of the GEM Listing Rules.
**Figures for 2020 and 2021 include IPO applications that were accepted between 1 January and 31 December in 2020 and 2021.
© 2022. For information, contact Deloitte China. 19Overview of HK IPO market – 2021
Boosted by 5 mega IPOs (4 of which were new economy IPOs with WVR structures), proceeds raised by the
top 5 IPOs increased by 14% to HKD139.8 billion from HKD123 billion in the same period of 2020
W
1. Kuaishou
W Technology – W
(HKD48.3 billion)
1. JD.com – SW
(HKD34.5 billion)
2. JD Logistics 2. JD Health
(HKD28.3 billion) (HKD31.0 billion)
W 3. Baidu – S W
(HKD23.9 billion)
3. NetEase – S
(HKD24.3 billion)
W 4. Bilibili – S W
(HKD23.2 billion) 4. YUM China – S
(HKD17.3 billion)
W 5. XPeng – W
(HKD16.0 billion)
2021 2020
5. CBHB – H shares
(HKD15.9 billion）
Source: HKEX, Deloitte’s analysis as of 31 December 2021.
© 2022. For information, contact Deloitte China. 20Overview of HK IPO market – 2021
Chinese Mainland companies accounted for more than 80% of HK IPOs and over 90% of total proceeds;
fewer overseas companies went public in HK; there were more loss-making IPOs due to an increase in pre-
revenue biotech listings
Number of IPOs by location of issuer P/E multiples of HK IPOsHK IPO valuation analysis – 2021
Nearly half of IPOs were priced at above the mid-point of their indicative ranges, and 35% were priced
below their mid-point, a decline of 12 percentage points from 2020’s level
2021 2020
Top of range
4% 6%
Above mid-point of range 2% 6%
1% 24%
33% Mid-point of range
25% Below mid-point of range
Bottom of range
35%
Below range
17%
10% 17% Fixed price
5%
Others 4%
11%
Source: HKEX, Deloitte’s analysis as of 31 December 2021.
© 2022. For information, contact Deloitte China. 22Analysis of HK IPO’s public offering subscriptions – 2021 5 most over-subscribed IPOs in 2021
Public offering subscriptions were generally better than Issuer
Over-subscription
rate
they were in 2020. The top 5 over-subscribed IPOs in 1H,
New Horizon Health – B 4,133x
most of them new economy companies, remained the top 5
Angelalign Technology 2,079x
at the end of the year
Yidu Tech 1,634x
Cheshi 1,275x
99
(2020: 94%)
Kuaishou Technology – W 1,204x
% of IPOs over-subscribed Best performing IPOs by over-
subscription rate
4,133x 4,500
Among those over-subscribed, 3,600
Over-subscription rate
(2020: 58%)
56 % were over-subscribed by
1,949x
2,700
1,800
900
over
Source: HKEX, Deloitte’s analysis as of 31 December 2021.
20
x 2021
New Horizon
Health – B
2020
Ye Xing Gp
0
© 2022. For information, contact Deloitte China. 23Industry representation of HK’s IPOs in 2021 (by number)
Health care & pharmaceutical and property took the lead, with representation of the former up sharply
from 2020, resulting in varying reductions in the representation of nearly every other sector except
consumer business
2021 2020
Energy & Resources
1% Financial Services 3%
19% 1% 5%
19%
Health Care &
14%
Pharmaceutical
33%
Manufacturing
17% Property 17% 10%
Consumer Business
8%
21% TMT 32%
Others
Source: HKEX, Deloitte’s analysis as of 31 December 2021.
© 2022. For information, contact Deloitte China. 24Industry distribution of HK’s IPOs in 2021 (by proceeds)
TMT was well ahead thanks to 7 large or mega IPOs, followed by health care & pharmaceutical
2021
TMT 140.5 3%
Consumer Business 58.3
Property 15.8 22%
Kuaishou, Baidu,
Manufacturing 35.4 42% Bilibili, Linklogis
Health Care & Pharmaceutical 72.0 and Trip.com
drove TMT into 11%
Financial Services 9.1 the lead
5%
Energy & Resources 0.3 17%
(HKD billion) 0 - 50 100 150
Energy & Resources Financial Services Health Care & Pharmaceutical Manufacturing Property Consumer Business TMT
2020
TMT 109.7
6% Consumer Business 62.0
27% TMT proceeds Property 94.3
24% Source: HKEX, Deloitte’s analysis as
boosted by Manufacturing of 31 December 2021.
10.9
listings of
NetEase, JD.com, Health Care & Pharmaceutical 97.6
GDS and XDF.CN 3% Financial Services 22.3
16%
Energy & Resources 1.1
24%
(HKD billion) 0 40 80 120
© 2022. For information, contact Deloitte China. 25Knowledge check
Which one below is NOT a key highlight of the HK IPO market in 2021?
A 2 out of global top 10 IPOs in funds raised
B Listed 1st homegrown tech unicorn
C New records in WVR and biotech listings
D Top 3 in IPO funds raised in the world
Increased weight of new economy IPOs and their funds raised in the
E market
© 2022. For information, contact Deloitte China. 26Outlook for IPO Market in 2022 – Hong Kong © 2022. For information, contact Deloitte China. 27
Industry distribution of active HK listing applications in 2021
There were around 58% more active MB listing applications in 2021 than in 2020, mostly from health
care & pharmaceutical, followed by TMT and property; GEM continued to be dominated by consumer
business, with a further reduction in the number of applications
MB GEM
Consumer Business
Energy & Resources
14%
25% 25%
3% Financial Services
3% 37%
Property
TMT
12% 21%
Manufacturing
25%
Health Care & 13%
22%
Pharmaceutical
Others
Number of applications: 141 Number of applications: 8
Source: HKEX, Deloitte’s analysis, as of 31 December 2021.
© 2022. For information, contact Deloitte China. 28Number of active HK listing applications from overseas companies in 2021
Malaysian companies dominated HK listing applications from overseas businesses, and most overseas
applicants were manufacturing companies
Overseas applicants by country Overseas applicants by industry sector
20% 20% 20%
40%
MB
20%
40% Number of applications: 5
40%
Consumer Business Property
Manufacturing TMT
Malaysia Singapore Vietnam
Health Care & Pharmaceutical
GEM
Number of applications: 1
100% 100%
Source: HKEX, Deloitte’s analysis, as of 31 December 2021.
© 2022. For information, contact Deloitte China. 29In 2022, the HK market’s liquidity will be affected by the Fed's balance sheet reduction and interest rate
hikes, and China concept stocks will accelerate their HK listings, with overall performance expected to
remain robust
More high-growth Asian More China concept stocks to
companies to seek HK listings return and list in HK
More HK local unicorns to Sustainability and ESG
go pubic companies to go public
HK in a strong position to attract listings of innovative industry
and new economy companies
Enhanced listing regime for Promoting sustainable and
SPAC listing regime Ongoing geopolitical issues Maturing market ecosystem Staying relevant green finance
overseas issuers
Clarification of dual primary More technology companies Chinese companies HK has been Asia’s largest, Continuous Further developing sustainable
listing regulations and will be attracted to list in HK, have to consider more and the world’s 2nd largest, enhancement and financial products to bring more
requirements for opening including SPAC M&A targets farsighted and prudent biotech fundraising hub, reform of listing growth opportunities for issuers and
secondary listings. from privatized China fundraising solutions with related fund investors regimes and rules investors, and subsequently support
and strategies. Chinese Mainland's "30-60" goals of
Concept Stocks. to support the development
peak emissions by 2030 and carbon
of new economy enterprises.
neutrality by 2060.
© 2022. For information, contact Deloitte China. 30Regulatory landscape – Hong Kong © 2022. For information, contact Deloitte China. 31
In 2021, extensive reforms successively introduced in HK capital market creating a new landscape and
expanding the range of fundraising opportunities for businesses
1 T+2 IPO Settlement Plan 2 Listing Regime for Overseas Issuers
Relaxed listing requirements for overseas
“Fast Interface for New Issuance” (FINI)
issuers, including secondary listing and dual
platform accessible by market
primary listings
participants to handle subscription,
pricing, allotment, payment, listing Hong
approval and stock admission
Kong
3 Uplifted MB Profit Requirements for
4 SFC and HKEX Joint Statement on Listing
New Listing The Mainboard (MB) listing requirements have been
The regulators identified a list of features increased to HKD80 million for the three-year track
that may prompt them to make further record period to align better with the market
inquiries regarding a new listing. capitalization requirements raised in 2018.
Capital
Market
5 SPAC Listing Regime 6 IPO Applicants’ CG and ESG Practice
Disclosure
A regime tailored to the particular risks and
The Exchange has provided guidance on prospectus
requirements of the Hong Kong market and
disclosure requirements on Corporate Governance (CG)
is heavy on investors protection measures
and ESG and expected practice.
© 2022. For information, contact Deloitte China. 32T+2 Settlement Under FINI Plan
Modernising Hong Kong’s IPO Settlement Process
FINI
(Fast Interface for
New Issuance)
A secure web-based
portal for market
participants and
authorities to interact
digitally and
seamlessly for end-
to-end IPO settlement
process in Hong Kong
Expected to launch in
Q4 2022 at the
earliest
Source: Fast Interface for New Issuance (FINI): Concept Paper Conclusions – Modernising Hong Kong’s IPO Settlement Process published by HKEX on 6 July 2021
© 2022. For information, contact Deloitte China. 33In 2021, extensive reforms successively introduced in HK capital market creating a new landscape and
expanding the range of fundraising opportunities for businesses
1 T+2 IPO Settlement Plan 2 Listing Regime for Overseas Issuers
Relaxed listing requirements for overseas
FINI platform accessible by market
issuers, including secondary listing and dual
participants to handle subscription,
primary listings
pricing, allotment, payment, listing
approval and stock admission Hong
Kong
3 Uplifted MB Profit Requirements for
4 SFC and HKEX Joint Statement on Listing
New Listing The MB listing requirements have been increased to
The regulators identified a list of features HKD80 million for the three-year track record period to
that may prompt them to make further align better with the market capitalization requirements
inquiries regarding a new listing. raised in 2018.
Capital
Market
5 SPAC Listing Regime 6 IPO Applicants’ CG and ESG Practice
Disclosure
A regime tailored to the particular risks and
The Exchange has provided guidance on prospectus
requirements of the Hong Kong market and
disclosure requirements on CG and ESG and expected
is heavy on investors protection measures
practice.
© 2022. For information, contact Deloitte China. 34HK’s new secondary listing rules – Chapter 19C (Main Board)
In effect since 30 April 2018
Chinese concept stocks
“Innovative” company?*
(1) New technologies; (2) innovations; and/or (3) a new business
model, which also serves to differentiate the company from
existing players
What is an “innovative”
Qualifying primary stock exchanges company?
New York Stock Exchange, Nasdaq or London Stock Exchange Main Market • Its success is demonstrably attributable to the
(“premium” only)
application, to the company’s core business, of (1),
(2) and/or (3);
Good track record of regulatory compliance • R&D is a significant contributor to its expected
At least two full financial years value and constitutes a major activity and expense;
• Demonstrable success attributable to its unique
features/IP; and/or;
Expected market capitalization at time of listing* • Outsized market cap./intangible asset value relative
If below HKD40 billion, needs at least HKD1 billion of revenue in most recent audited
to tangible asset value
financial year and HKD10 billion expected market cap at time of secondary listing
* These only apply to secondary listing with a WVR structure upon the consultation conclusion for Qualified to seek listing under Chapter 19C
“Listing Regime for Overseas Issuers” published in November 2021. 19C.03 Rules 8A.04 to 8A.06 do not
apply to a qualifying Issuer seeking a secondary listing under Chapter 19C.
© 2022. For information, contact Deloitte China. 35Listing regime for Overseas Issuers
The enhanced overseas listing regime provides flexible dual primary listings with WVR and VIE
Structures, and Expansion of Secondary Listing regime
Recognised
jurisdictions • No distinction
• Codification and consolidation of and
requirements of the two routes acceptable
• Codification of all secondary listing jurisdictions
related JPS provisions into Chapter
19C of the Listing Rules
• Non-WVR Greater China Issuers
seeking a secondary listing are no
longer required to demonstrate that
they are innovative companies and Enhanced
have the option of meeting a regime
minimum market capitalisation at
listing of either HKD3 billion or Shareholder • 1 common set of Core Standards
HKD10 billion Secondary
protection applicable to all issuers regardless of
• Codification of JPS Automatic Waiver listings
standards their places of incorporation
eligibility requirements with minor
modifications
• An issuer will be regarded as having a Dual primary
primary listing on the Exchange upon listings • Grandfathered Greater China Issuers and Non-Greater China Issuers
its delisting from the stock exchange with Noncompliant WVR and/ or VIE Structures may apply directly for
on which it is primary listed a dual primary listing and retain the non-compliant structures
• Codification of some conditional Common Waivers for dual-primary
© 2022. For information, contact Deloitte China. listed issuers and the principles for granting Common Waivers 36Knowledge check
Do you know how many overseas listed China concept stocks have returned to list in
HKEX since the new listing regime (i.e. April 2018)?
A 16
B 17
C 18
D 19
© 2022. For information, contact Deloitte China. 37The secondary listing and dual-primary listing regimes of HK are well received among US-listed Chinese
technology companies
2018 August 2019 November December
6 13 20 27 4 11 18 25 2 9 16 23 30
BeiGene, Ltd. – B (06160) Alibaba Group Holdings Ltd. –
S W (09988)
2020 June July August September October November
1 8 15 22 29 6 13 20 27 3 10 17 24 31 7 14 21 28 5 12 19 26 2 9
NetEase, Inc. – S (09999)
JD.com, Inc. – SW (09618)
Yum China Holdings, Inc. – S
(09987)
Huazhu Group Ltd. – S (01179)
Zai Lab Ltd. – S B (09688)
ZTO Express (Cayman) Inc. – SW
(02057)
Baozun Inc. – SW (09991)
GDS Holdings – SW (09698)
New Oriental Education &
Technology Group Inc. – S
(09901)
Source: HKEX and Deloitte’s analysis as at 31 December 2021
© 2022. For information, contact Deloitte China. 38The secondary listing and dual-primary listing regimes of HK are well received among US-listed Chinese
technology companies (cont’d)
2021 March April July August December
1 8 15 22 29 5 12 19 26 5 12 19 26 2 9 16 23 30 6 13 20 27
Autohome Inc. – S (02518)
Baidu, Inc. – S W (09888)
Bilibili Inc. S W (09626)
Trip.com – S (09961)
Xpeng Inc. – W (09868)
Li Auto Inc. – W (02015)
Weibo Corp. - S W (09898)
Total funds raised: HKD
Source: HKEX and Deloitte’s analysis as at 31 December 2021
336 billion
© 2022. For information, contact Deloitte China. 39In 2021, extensive reforms successively introduced in HK capital market creating a new landscape and
expanding the range of fundraising opportunities for businesses
1 T+2 IPO Settlement Plan 2 Listing Regime for Overseas Issuers
Relaxed listing requirements for overseas
FINI platform accessible by market
issuers, including secondary listing and dual
participants to handle subscription,
primary listings
pricing, allotment, payment, listing
approval and stock admission Hong
Kong
3 Uplifted MB Profit Requirements for
4 SFC and HKEX Joint Statement on Listing
New Listing The MB listing requirements have been increased to
The regulators identified a list of features HKD80 million for the three-year track record period to
that may prompt them to make further align better with the market capitalization requirements
inquiries regarding a new listing. raised in 2018.
Capital
Market
5 SPAC Listing Regime 6 IPO Applicants’ CG and ESG Practice
Disclosure
A regime tailored to the particular risks and
The Exchange has provided guidance on prospectus
requirements of the Hong Kong market and
disclosure requirements on CG and ESG and expected
is heavy on investors protection measures
practice.
© 2022. For information, contact Deloitte China. 40Uplifted MB Profit Requirements for Listing
Effective on 1 January 2022
1. Profits test
Profits in the last 3 financial years >HKD80 million
Preceding 2 years' aggregate profits >HKD45 million
Most recent year's net profit >HKD35 million
Market capitalization at time of listing >HKD500 million
2. Market capitalization/revenue test
Market capitalization at time of listing >HKD4 billion
Main Board Most recent audited financial year's revenue >HKD500 million
3. Market capitalization/revenue/cash flow test
Market capitalization at time of listing >HKD2 billion
Most recent audited financial year's revenue >HKD500 million
Preceding 3 financial years’ aggregated positive cash flow from operating activities >HKD100 million
Increase in minimum public float value at the time of listing increased to HKD125 million.
Main Board new applicants must meet one of the three financial criteria above.
HK’s Listing
Framework
Aggregated positive cash flow from operating activities for the 2 years prior to listing >HKD30 million
Market capitalization at time of listing >HKD150 million
Substantially the same management for 2 years
The removal of the streamlined process for GEM transfers to the Main Board (including that a sponsor
GEM must be appointed at least two months before the submission of a listing application)
Increase in minimum public float at time of listing to HKD45 million
A mandatory public offering requirement (at least 10% of total offer size) for all GEM IPOs
An extension of the post-IPO lock-up requirement on controlling shareholders to 2 years
© 2022. For information, contact Deloitte China 41In 2021, extensive reforms successively introduced in HK capital market creating a new landscape and
expanding the range of fundraising opportunities for businesses
1 T+2 IPO Settlement Plan 2 Listing Regime for Overseas Issuers
Relaxed listing requirements for overseas
FINI platform accessible by market
issuers, including secondary listing and dual
participants to handle subscription,
primary listings
pricing, allotment, payment, listing
approval and stock admission Hong
Kong
3 Uplifted MB Profit Requirements for
4 SFC and HKEX Joint Statement on Listing
New Listing The MB listing requirements have been increased to
The regulators identified a list of features HKD80 million for the three-year track record period to
that may prompt them to make further align better with the market capitalization requirements
inquiries regarding a new listing. raised in 2018.
Capital
Market
5 SPAC Listing Regime 6 IPO Applicants’ CG and ESG Practice
Disclosure
A regime tailored to the particular risks and
The Exchange has provided guidance on prospectus
requirements of the Hong Kong market and
disclosure requirements on CG and ESG and expected
is heavy on investors protection measures
practice.
© 2022. For information, contact Deloitte China. 42SFC and HKEX Joint Statement on New Listing
Features of problematic IPOs which may lead to enquiries by regulators
Small market capitalisation Unusual underwriting
The applicant’s market capitalisation barely
meets the minimum threshold under the
commission
Unusually high underwriting or
Listing Rules#.
placing commissions or other listing
expenses##.
Highly concentrated
Very high P/E ratio shareholding
Very high price to earnings (P/E) ratio Shareholding is highly concentrated in a
taking into account the applicant’s limited number of shareholders,
fundamentals (including its profit particularly where the value of the
forecast) and the valuation s of its peers. public float is small and the spread of
shareholders barely meets the minimum
thresholds set out in the Listing Rules.
# This is also a characteristic of shell companies identified in the “Guidance on IPO Vetting and Suitability for Listing” (HKEX-GL68-13A) (i) small market capitalization
## This is also a characteristic of shell companies identified in the “Guidance on IPO Vetting and Suitability for Listing” (HKEX-GL68-13A) (iii) involve fund raising disproportionate to listing expenses (i.e. a high
proportion of the listing proceeds were used to pay listing expenses)
Source: Joint statement on IPO related misconduct by Securities and Futures Commission and HKEX on 20 May 2021.
© 2022. For information, contact Deloitte China. 43In 2021, extensive reforms successively introduced in HK capital market creating a new landscape and
expanding the range of fundraising opportunities for businesses
1 T+2 IPO Settlement Plan 2 Listing Regime for Overseas Issuers
Relaxed listing requirements for overseas
FINI platform accessible by market
issuers, including secondary listing and dual
participants to handle subscription,
primary listings
pricing, allotment, payment, listing
approval and stock admission Hong
Kong
3 Uplifted MB Profit Requirements for
4 SFC and HKEX Joint Statement on Listing
New Listing The MB listing requirements have been increased to
The regulators identified a list of features HKD80 million for the three-year track record period to
that may prompt them to make further align better with the market capitalization requirements
inquiries regarding a new listing. raised in 2018.
Capital
Market
5 SPAC Listing Regime 6 IPO Applicants’ CG and ESG Practice
Disclosure
A regime tailored to the particular risks and
The Exchange has provided guidance on prospectus
requirements of the Hong Kong market and
disclosure requirements on CG and ESG and expected
is heavy on investors protection measures
practice.
© 2022. For information, contact Deloitte China. 44SPAC Listing Regime
SPAC IPO volume and proceeds in the US in 2021 are still well above previous years’ levels
(Number of IPOs)
SPAC IPO volume SPAC IPO proceeds
(USD million)
700 180,000
600 613 160,000 162,394
140,000
500
120,000
400
100,000
248 83,379
300 80,000
200 60,000
40,000 13,608
100 46 59 10,752
34 20,000 10,049
7 15 9 12 20 13
0
1 10 36 503 1,082 491 1,455 1,750 3,902 3,499
0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
• Supported by active capital markets and the Fed's continued monetary easing, SPAC transactions set high in 2021
More certainty than traditional
Less time to list Low listing costs
IPOs
Source: SPACInsider, as of 3 January 2022; includes additional proceeds from exercise of over-allotment options.
© 2022. For information, contact Deloitte China. 45SPAC Listing Regime
The SPAC listing regime will encourage more listings of tech and innovative companies in HK
Establishment of a De-SPAC target Listing of successor
Listing of a SPAC Shareholder vote Close of acquisition
SPAC search company
A de-SPAC target must Must meet all the new
value at least 80% of the listing requirements of
Must raise at least Requires a In case a SPAC is
SPAC IPO proceeds Main Board
HKD1 billion majority of unable to announce a
Investment companies
Apply the cannot be eligible to SPAC’s de-SPAC transaction The IPO sponsor must
Takeover Code to become de-SPAC targets shareholders within 24 months, or be a corporation or
a SPAC during its Have at least one at a general complete one within authorized financial
listing independent PIPE investor meeting, 36 months, it must be institution, licensed or
as an asset management where SPAC liquidated and must registered under the
A SPAC’s board must promoters and return all the funds it
firm to manage assets of at SFC Ordinance for
have at least two their close raised to its
least HKD1 billion or funds Type 6 regulated
Type 6 or Type 9 associates shareholders. The
of at least HKD1 billion activities, i.e. advising
SFC-licensed must abstain SPAC will then be
Require a valuation on corporate finance
individuals. That delisted
validation of the target by
includes one Independent PIPE
independent third parties,
director investment has been
such as outside PIPE
representing the strengthened for a
investors
licensed SPAC stronger regulatory
promoter Require an independent
financial advisor determine check on the terms and
the independence of a PIPE valuation of the de-SPAC
investor in a de-SPAC transaction
transaction
Open to all
Only professional investors will be allowed to participate investors types
including retail
© 2022. For information, contact Deloitte China. 46SPAC Listing Regime
Lifecycle of SPAC in HK
≥ 75 professional Promoters
investors
2a. Fundraising Promoter shares
Public shares 1. Formation of a SPAC by a promoter
via an IPO (≤20%) and
(≥80%) and • The SPAC then issues promoter shares to
Issue price of at warrants
warrants the promoter at nominal consideration
least HKD10/ share (unlisted)
SPAC
2b. Deposit of IPO proceeds Escrow
into a ring-fenced escrow
account
PIPE 3. Acquisition of the target within 36 100% of the
Target months of SPAC IPO with possible
gross IPO
investors extension of up to 6 months
• The target must have a market value proceeds
4. Coordination of a SPAC promoter with the of at least 80% of the funds raised by
external PIPE investors to raise capital from the SPAC from its IPO
hedge funds, private equity firms, management
firms, and family offices to ensure sufficient
funds for the acquisition Successor 5. Completion of combining the SPAC business with
the target through merger, acquisition, reorganization,
© 2022. For information, contact Deloitte China. company or similar 47SPAC Listing Regime The first filing for SPAC listing in Hong Kong on 17 January 2022 © 2022. For information, contact Deloitte China. 48
In 2021, extensive reforms successively introduced in HK capital market creating a new landscape and
expanding the range of fundraising opportunities for businesses
1 T+2 IPO Settlement Plan 2 Listing Regime for Overseas Issuers
Relaxed listing requirements for overseas
FINI platform accessible by market
issuers, including secondary listing and dual
participants to handle subscription,
primary listings
pricing, allotment, payment, listing
approval and stock admission Hong
Kong
3 Uplifted MB Profit Requirements for
4 SFC and HKEX Joint Statement on Listing
New Listing The MB listing requirements have been increased to
The regulators identified a list of features HKD80 million for the three-year track record period to
that may prompt them to make further align better with the market capitalization requirements
inquiries regarding a new listing. raised in 2018.
Capital
Market
5 SPAC Listing Regime 6 IPO Applicants’ CG and ESG Practice
Disclosure
A regime tailored to the particular risks and
The Exchange has provided guidance on prospectus
requirements of the Hong Kong market and
disclosure requirements on CG and ESG and expected
is heavy on investors protection measures
practice.
© 2022. For information, contact Deloitte China. 49IPO Applicants’ CG and ESG Practice Disclosure
Corporate governance measures – Statement on compliance culture
Comprehensive disclosure on
how the issuer instils a strong corporate culture that fully adopts and prioritizes compliance and governance
measures of integrity
(w)e have compliance policies in place that clearly
Board’s attitude or commitment towards lawful,
1 define the company’s compliance requirements,
including business ethics, vendor access and the
ethical and responsible operation of the acceptance and provision of travel and entertainment
businesses. and gifts. We have also established an ethics
Measures to ensure such culture is embedded
2 committee under the oversight of the audit committee
to supervise matters related to FCPA compliance. Our
whistle blowing policy and the related reporting
in the organisation mechanism provide a confidential and protected
Measures to ensure such culture is
3 channel for reporting suspected compliance violations.
Regardless of position or location, we require all
[employees] to comply with our anti-corruption
embedded in the organisation compliance policies and attend related trainings to
embrace the highest standard on integrity.
Leading practice - An information technology company set up a dedicated committee to
oversee compliance matters and established compliance policies.
© 2022. For information, contact Deloitte China. 50IPO Applicants’ CG and ESG Practice Disclosure
Corporate governance measures – Board’s oversight and involvement and diversity
Board diversity policy
Systems and/ or mechanisms
in place to continually
evaluate the appropriateness
and effectiveness of the
board diversity policies
Gender diversity
Single gender board
applicants who have made a
commitment in the listing
document should appoint a
“Over-boarding” INEDs director of a different gender
in accordance with such
Tightened scrutiny of commitment.
the explanations and
replace over-boarding
INEDs A1 submission filed on or
after 1 July 2022 with single
gender board will not be
accepted.
© 2022. For information, contact Deloitte China. 51IPO Applicants’ CG and ESG Practice Disclosure
ESG Disclosures – Climate-change related issues
1 Leading practice
Prospectus disclosure
Climate change-related issue oversight
Board’s overall responsibility and details of any
policy to address climate related issues
An Applicant addressed the climate-
related transition and physical risks by:
Climate-related risks and opportunities (i) identifying policy actions around
Actual and potential impact on business, strategy
and financial performance climate change that would ‘continue
to evolve … and pose varying levels of
Climate-related risks and opportunities financial and reputational risk’ to the
Identification and assessment over the short,
medium and long term, their impact, and steps Applicant; and
taken to mitigate such risks (ii) explaining measures implemented to
Climate-related risks
mitigate the potential impact of
Quantitative information on the metrics and climate change on the Applicant’s
targets used to assess and manage
‘premises, operations, supply chain,
transport needs, and employee safety.’
© 2022. For information, contact Deloitte China. 52Speaker enquiries
Edward Au
Managing Partner, Southern Region, Deloitte China
Tel: +852 2852 1266
Email: edwau@deloitte.com.hk
© 2022. For information, contact Deloitte China. 53HK SPAC Regime - overview 25 Jan 22 Information Classification: Confidential
What is a SPAC?
• Special Purpose Acquisition Companies or “SPAC”, are also known as a “blank check company”, is a company with no commercial operations that is formed to
raise funds through an IPO for the purpose of acquiring an existing private company within a set timeframe.
• The HKEX has published its consultation conclusion in December 2021 and the new SPAC regime under Chapter 18B is effective from 1 January 2022
© 2022. For information, contact Deloitte China. Presentation title 55Life Cycle of a HK SPAC
1 2 3 4 5
Formation IPO of SPAC Target search Approvals IPO of Target
• Promoter forms SPAC • SPAC submits listing • SPAC identifies suitable • Needs approval from • The successor
application to HKEX target both investors and company is listed on
• Promoter usually are HKEX before stock exchange
professional investors • SPAC issues • Target needs to meet all completion
with corporate finance shares/warrants to listing requirement and
experience professional investors has a value of at least • Submits listing
80% of the proceeds document for De-
• Promoter subscribes • Funds raised are kept raised (i.e. HK$800M) SPAC target for HKEX
for shares/warrants in in an escrow account approval similar
SPAC • Transaction needs to be requirement to RTO
• Minimum fund raised done within 3 years
is HK$1B
• HKEX may grant
extension of 6 months
© 2022. For information, contact Deloitte China. Presentation title 56Benefits to De-SPAC targets
1 Deal certainty at acceptable price
•
•
Price is negotiated with the promoter
No underwriters involvement or book building process
2 Expertise of promoter
• Promoter are experts in the sectors and may be able to provide more accurate
valuation of businesses
• Promoters may take up management role in the entity after De-SPAC
3 Dual track approach to listing
• Target company can concurrently apply for listing using traditional IPO and negotiate
with SPAC promoters at same time
© 2022. For information, contact Deloitte China. Presentation title 57Benefits to investors
1 Shareholder votes on De-SPAC
• Details of the De-SPAC transactions are presented to the shareholders for
approval at a general meeting
2 Redemption option
• Shareholders can elect to redeem its shares even if voting in favor of the De-SPAC
transaction
3 Mandatory PIPE investment
• Require third party investors to invest a minimum of 25% of value of the target if the
value is less than HK$2B
• A third party support on the valuation of the De-SPAC target
© 2022. For information, contact Deloitte China. Presentation title 58Speaker enquiries
Johnny Chu
Partner, Audit & Assurance, Deloitte China
Tel: +852 28526374
Email: johnchu@deloitte.com.hk
© 2022. For information, contact Deloitte China. Presentation title 59Questions and answers © 2022. For information, contact Deloitte China. 60
Latest update
“An essential guide to SPAC listings in Hong Kong”
Presented by Deloitte China’s Capital Market Services
Group, the guide is for companies that are considering a
special purpose acquisition company ("SPAC") listing, and
introduces the new listing regime for SPACs in Hong Kong,
its lifecycle and key features.
Access the brochure here, or scan below:
© 2022. For information, contact Deloitte China. 61Upcoming Event
March Alumnus x INED Workshop
Topic on Sino-US relations
Speaker: Xu Sitao
Chief Economist, Partner, Deloitte China
© 2022. For information, contact Deloitte China. 62© 2022. For information, contact Deloitte Advisory (Hong Kong) Limited. 63
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© 2022. For information, contact Deloitte China. 64About Deloitte Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of member firms, and their related entities (collectively, the “Deloitte organization”). DTTL (also referred to as “Deloitte Global”) and each of its member firms and related entities are legally separate and independent entities, which cannot obligate or bind each other in respect of third parties. DTTL and each DTTL member firm and related entity is liable only for its own acts and omissions, and not those of each other. DTTL does not provide services to clients. Please see www.deloitte.com/about to learn more. Deloitte is a leading global provider of audit and assurance, consulting, financial advisory, risk advisory, tax and related services. Our global network of member firms and related entities in more than 150 countries and territories (collectively, the “Deloitte organization”) serves four out of five Fortune Global 500® companies. Learn how Deloitte’s approximately 345,000 people make an impact that matters at www.deloitte.com. Deloitte Asia Pacific Limited is a company limited by guarantee and a member firm of DTTL. Members of Deloitte Asia Pacific Limited and their related entities, each of which are separate and independent legal entities, provide services from more than 100 cities across the region, including Auckland, Bangkok, Beijing, Hanoi, Hong Kong, Jakarta, Kuala Lumpur, Manila, Melbourne, Osaka, Seoul, Shanghai, Singapore, Sydney, Taipei and Tokyo. The Deloitte brand entered the China market in 1917 with the opening of an office in Shanghai. Today, Deloitte China delivers a comprehensive range of audit & assurance, consulting, financial advisory, risk advisory and tax services to local, multinational and growth enterprise clients in China. Deloitte China has also made—and continues to make—substantial contributions to the development of China's accounting standards, taxation system and professional expertise. Deloitte China is a locally incorporated professional services organization, owned by its partners in China. To learn more about how Deloitte makes an Impact that Matters in China, please connect with our social media platforms at www2.deloitte.com\cn\en\social-media. This communication contains general information only, and none of Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of member firms or their related entities (collectively, the “Deloitte organization”) is, by means of this communication, rendering professional advice or services. Before making any decision or taking any action that may affect your finances or your business, you should consult a qualified professional adviser. No representations, warranties or undertakings (express or implied) are given as to the accuracy or completeness of the information in this communication, and none of DTTL, its member firms, related entities, employees or agents shall be liable or responsible for any loss or damage whatsoever arising directly or indirectly in connection with any person relying on this communication. DTTL and each of its member firms, and their related entities, are legally separate and independent entities. © 2022. For information, contact Deloitte China.
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