Hong Kong Stock Exchange IPO Reform Liberalizes Innovative Enterprises

Amid the surge of companies going public in Hong Kong, the Hong Kong Stock Exchange (HKEX) has announced major reforms aimed at optimizing the listing mechanism. On March 13, HKEX’s wholly owned subsidiary, the Stock Exchange of Hong Kong (SEHK), issued a consultation paper seeking market feedback on a series of proposals to enhance Hong Kong’s listing competitiveness. The consultation period ends on May 8. Notably, this reform focuses on three areas: optimizing rules for companies with different voting rights, facilitating overseas issuers to list in Hong Kong, and fully liberalizing confidentiality applications.

From halving the thresholds for dual-class share structures and increasing voting rights caps, to lowering the requirements for secondary listings of overseas companies, and expanding confidentiality submission from tech firms to all applicants, these reforms lower the listing barriers for growth-oriented innovative companies—especially those with innovative business models—and provide more flexible pathways for overseas Chinese and multinational companies to return and raise funds. Additionally, by strengthening intermediary accountability mechanisms, the reforms aim to address market transparency concerns associated with confidential submissions.

Easing Restrictions on Dual-Class Shares

Easing restrictions on companies with different voting rights is a key highlight of this reform. Specifically, HKEX has adjusted criteria in three areas: financial qualifications, voting rights, and recognition of innovative industries.

Regarding financial qualifications, the Class A market capitalization threshold is reduced from HKD 40 billion to HKD 20 billion; the Class B threshold from HKD 10 billion to HKD 6 billion, and revenue requirements are lowered from HKD 1 billion to HKD 600 million.

In terms of voting rights and economic interests, HKEX proposes that for applicants with a market cap of HKD 40 billion, the maximum voting rights ratio can be increased from 10:1 to 20:1 at listing.

For companies with dual-class share structures seeking to list as “innovative industry” companies, HKEX suggests refining the criteria to allow companies that innovate through business models rather than technology to list with different voting rights. Furthermore, all qualifying biotech and specialized tech companies—regardless of whether they list under Chapters 18A or 18C—would be automatically recognized as “innovative industry” companies.

Since the implementation of the dual-class share regime on April 30, 2018, 31 companies with such structures have listed on HKEX (21 main board and 10 secondary listings), accounting for 1.2% of the total 2,686 listed companies by the end of 2025.

Yuan Shuai, Deputy Secretary-General of the Zhongguancun IoT Industry Alliance, commented that easing restrictions on dual-class shares may, in the short term, allow more growth-stage companies to enter the market. These companies might have less stable profits and less mature business models compared to previous high-threshold firms, introducing some growth uncertainty. However, in the long term, supporting mechanisms can help identify truly innovative companies. As the definition of “innovative industry” is refined, more tech-forward enterprises can leverage capital markets for accelerated growth, enhancing Hong Kong’s overall innovation capacity and long-term vitality.

Lowered Thresholds for Secondary Listings in Hong Kong

The reforms will also make it easier for overseas issuers to list in Hong Kong.

For overseas companies already listed abroad seeking a secondary listing in Hong Kong, the consultation proposes lowering the financial thresholds to match those for main board listings: a minimum market cap of HKD 20 billion for companies with dual-class shares, HKD 6 billion for those with single-class shares, and a minimum revenue of HKD 600 million. For companies with equal voting rights, those listed on a qualifying exchange with good compliance records for two years can now secondary list with a market cap threshold reduced from HKD 10 billion to HKD 6 billion.

Since the introduction of Chapter 19C of the Main Board Listing Rules on April 30, 2018, 19 companies have applied for secondary listing under this chapter. Among them, 10 have dual-class share structures, raising a total of HKD 216 billion; nine have single-class shares, raising HKD 83.5 billion. Notably, Alibaba Group Holding Limited’s 2019 secondary listing remains the largest in Hong Kong, raising over HKD 100 billion.

Gao Chengyuan, Director of the Visionary Impact Research Institute, told Beijing Business Today that lowering the thresholds for secondary listings continues HKEX’s strategy to attract Chinese concept stocks back to Hong Kong. While giants like Alibaba and JD.com have already returned, mid-sized firms remain excluded. This adjustment allows unprofitable but cash-flow-stable platform companies to list with lower thresholds, opening new channels for such firms. It is expected to invigorate the Southbound Stock Connect and increase the influence of capital inflows from southern markets.

Angel investor and AI expert Guo Tao pointed out that reforming the rules for overseas companies seeking secondary listings in Hong Kong will reduce costs for Chinese concept stocks with mid-market caps to return and list again, helping diversify market risk. It will enrich the types of targets in Hong Kong’s market, activate cross-border capital flows, and improve market liquidity. Additionally, it will reinforce Hong Kong’s status as an international financial hub and financing center, attracting more global capital.

Expanding Confidentiality Applications

Responding to market rumors, the consultation document confirms plans to broaden the scope of confidentiality applications for IPOs. HKEX proposes that all new applicants be eligible to submit confidential applications.

Specifically, the scope of companies eligible for confidential submission, previously limited to qualified secondary listing applicants, biotech firms, specialized tech companies, or those granted exemptions, will be expanded to include all new applicants.

Yuan Shuai noted that for pre-IPO companies, confidentiality applications can help avoid early disclosure of sensitive business information and fundraising plans, reducing market volatility and valuation uncertainties during preparation. For businesses involving core technologies or trade secrets, confidentiality can protect competitive advantages. From a market perspective, expanding confidentiality options can attract more sensitive-stage innovative companies to Hong Kong, boosting its appeal for innovation. It also helps prevent premature hype, allowing market prices to reflect true value based on publicly available information, thus improving pricing efficiency.

HKEX’s main reasons for expanding the scope are twofold: first, to provide all prospective issuers with equal rights and choices; second, to align with international practices—major markets like the US, UK, and Singapore permit confidential IPO applications. This move aims to enhance Hong Kong’s attractiveness to potential issuers.

Yuan Shuai also cautioned that confidentiality applications could pose challenges, such as limited investor access to early information, increasing information asymmetry risks initially. This requires regulators to strictly review company qualifications during the application phase and ensure full disclosure during the listing process. Balancing confidentiality with investor rights is crucial.

HKEX clarified that confidential submission only means companies do not need to disclose application documents immediately. Once the company passes the listing hearing, it must publish the listing documents—specifically, the Post-Hearing Information Pack (PHIP)—to ensure investors have sufficient time to review, maintaining market transparency.

Furthermore, HKEX proposes strengthening the return mechanism. Currently, if an application is rejected, only sponsor information is disclosed. The reform would require revealing the identities and roles of all professional institutions involved in preparing the application. HKEX stated this provides companies with more options: they can choose to submit publicly from the start or opt for confidential submission, allowing flexible timing for new share issuance and giving investors more time to assess. This is expected to improve enforcement and ensure higher quality of listing documents.

Beijing Business Today reporters Ma Huanchang and Li Jiaxue