Reed Smith Client Alerts

Key takeaways

  • The Stock Exchange introduced a new financial qualification test for high-growth companies engaged in R&D activities, namely the “market capitalisation/revenue/R&D test”.
  • The Stock Exchange cancelled the mandatory quarterly reporting requirement.
  • The Stock Exchange simplified the Main Board transfer mechanism.

On 26 September 2023, The Stock Exchange of Hong Kong Limited (the Stock Exchange) published a consultation on the proposed revisions to the Growth Enterprise Market (GEM) Listing Rules (the Consultation). In 2022, there were no new GEM-listed issuers in Hong Kong. In order to promote the listing of small and medium-sized mainland Chinese enterprises in Hong Kong, the Stock Exchange proposed the reform of the GEM Listing Rules and sought opinions from investors and the market regarding the rules, so that more favourable listing conditions may be provided for small and medium-sized enterprises.

Major changes

Since 2019, the number of new IPOs and the size of fundraising on the GEM have been in steep decline. In 2022, with no new issuers listed on GEM, existing listed issuers only raised HK$ 2.7 billion in funds. The main reasons for the continued slump in the number of GEM-listed issuers may include: (1) the COVID-19 pandemic having taken a heavy toll on the financial performance of potential listing applicants, the number of companies that can meet GEM listing qualification requirements declining in the past few years; (2) Mainland China has established more financing platforms for small and medium-sized enterprises – in addition to the Shanghai Stock Exchange and Shenzhen Stock Exchange, the Beijing Stock Exchange was established in November 2020, bolstering services for innovative small and medium-sized enterprises; and (3) Hong Kong’s GEM listing threshold and listing costs are relatively higher, which hinders mainland Chinese companies from listing in Hong Kong. In view of this, in order to attract more small and medium-sized mainland Chinese enterprises and encourage them to list in Hong Kong, it is imperative for the Stock Exchange to reform the GEM Listing Rules.