Download - Listing in Hong Kong
Listing in Hong Kong 28 May 2015
PwC
The Hong Kong Capital Market – a brief
overview
Slide 2
PwC
0
20
40
60
80
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120
140
0
10
20
30
40
50
60
70Funds Raised(USD billion)
No. of IPOs
IPO in Hong Kong: 2000 to Q1 2015
Slide 3
Fu
nd
s R
ais
ed
(U
SD
bill
ion
)
Num
be
r o
f IP
O
Year
PwC
Total Equity Fund Raised in Hong Kong: 2000 to Q1 2015
Slide 4
Fu
nd
s R
ais
ed
(U
SD
bill
ion
)
Source: HKEx
0
20
40
60
80
100
120
140 Other Equity Funds Raised(USD billion)
IPO Funds Raised (USDbillion)
Year
60.0
8.3 14.2
27.6 36.2
42.2
68.6 76.2
55.1
82.8
110.6
64.6
39.3
48.9
121.3
10.7
Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Q1
2015
Others 72% 60% 54% 72% 65% 41% 36% 50% 85% 61% 48% 46% 70% 55% 75% 76%
IPO 28% 40% 46% 28% 35% 59% 64% 50% 15% 39% 52% 54% 30% 45% 25% 24%
PwC
IPOs - Hong Kong vs. Other International Markets: 2010 to 2014
Slide 5
2011 2012 2013 2014
No. of
IPOs
IPO Funds
Raised (USD billion)
No. of
IPOs
IPO Funds
Raised (USD billion)
No. of
IPOs
IPO Funds
Raised (USD billion)
No. of
IPOs
IPO Funds
Raised (USD billion)
Hong Kong 102 35.1 64 11.6 112 22.1 122 30.0
Shanghai
Shenzhen
China A-share
39
243
282
16.7
28.7
45.4
26
129
155
6.1
11.3
17.4
-
-
-
-
-
-
43
82
125
5.5
7.2
12.7
NYSE 68 25.6 76 19.7 120 41.5 114 65.5
Nasdaq 66 9.8 70 23.2 118 15.3 187 21.5
London 101 18.3 73 6.8 103 19.8 137 22.9
Euronext 27 0.5 19 1.4 26 4.1 41 12.4
Europe (exclude
Euronext and London)
302 15.5 171 6.3 150 12.5 197 23.3
Australia 105 1.7 54 2.1 61 7.0 78 16.3
Japan 36 2.2 50 12.0 60 9.6 83 10.8
Singapore 23 7.2 21 3.7 26 3.5 28 2.5
Taiwan 48 0.5 22 0.4 32 0.5 21 0.7
PwC
IPO Funds Raised in Major Stock Exchanges
Slide 6
Source: World Federation of Exchanges.
Rank Stock Exchange Funds Raised (USD billion)
1 NYSE 73.3
2 Spain 61.7
3 Nasdaq 26.5
4 Euronext Amsterdam 26.4
5 Germany 23.3
6 Swiss 21.9
7 Hong Kong 16.9
8 London 14.5
9 Japan 12.8
10 Shanghai 11.0
11 Euronext Paris 10.6
14 Australia 5.9
15 Toronto 5.8
17 Shenzhen 2.9
23 Singapore 1.9
Year 2000
Rank Stock Exchange Funds Raised (USD billion)
1 NYSE 65.5
2 Hong Kong 30.0
3 London 22.9
4 Nasdaq 21.5
5 Australia 16.3
6 Euronext 12.4
7 Japan 10.8
8 Shenzhen 7.2
9 Shanghai 5.5
10 Nasdaq OMX 5.4
Year 2014
PwC
Top 10 IPOs in World’s History (up to 31 December 2014)
Slide 7
Rank Listing year Company Stock Exchange Country Fund Raised
(USD billion)
1 2014 Alibaba Group holding Ltd NYSE China 25.0
2 2010 Agricultural Bank of China Hong Kong & Shanghai China 22.4
3 2006 Industrial & Commercial
Bank
Hong Kong & Shanghai China 22.0
4 2010 AIA Group Hong Kong China/ Hong Kong
United States
20.5
5 2008 VISA NYSE United States 19.7
6 1998 NTT Mobile Communications
Network
Tokyo Japan 18.4
7 2010 General Motors Co NYSE United States 18.1
8 1999 Ente Nazionale per I’Energia
Electrica
Milan Italy 17.4
9 2012 Facebook Inc Nasdaq United States 16.0
10 1996 Deutsche Telekom Deutsche Boerse Germany 13.0
Source: Thomson Financial.
PwC
Top 10 IPOs in the World : 2014
Slide 8
Rank Listing
month
Company Stock Exchange Country Fund Raised
(USD billion)
1 September Alibaba Group Holding Ltd New York Stock
Exchange
China 25,032
2 November National Commercial Bank
SJSC
Saudi Arabia Stock
Exchange Saudi Arabia 6,000
3 November Medibank Private Ltd Australia Stock
Exchange
Australia 4,886
4 December Dalian Wanda Commercial
Properties Co Ltd
Hong Kong Stock
Exchange China 4,039
5 December CGN Power Co Ltd Hong Kong Stock
Exchange China 3,638
6 September Citizens Financial Group Inc New York Stock
Exchange
United States 3,462
7 March Japan Display Inc Tokyo Stock Exchange Japan 3,231
8 January HK Electric Investments Ltd Hong Kong Stock
Exchange
China 3,111
9 July Synchrony Financial New York Stock
Exchange
United States 2,955
10 October Pershing Square Holdings Ltd Euronext Amsterdam United States 2,747
Source: Thomson Financial.
PwC
P/E Ratio of Hong Kong IPOs: 2012, 2013 & 2014
Slide 9
9
19
13
10
3 2
1
7
4
25
22
15 15
8
4
19
3
25 25
21
17
6 6
19
0
5
10
15
20
25
30
2012
2013
2014
*
* Listing by introduction, transfer from GEM to Main Board, REITs or listing of loss-making companies.
Nu
mb
er
of
IPO
P/E Ratio
PwC
Market Capitalisation of Major Stock Exchanges
Slide 10 Source: World Federation of Exchanges.
Rank Stock Exchange Market
Capitalisation
(USD billion)
1 NYSE 11,534
2 Nasdaq 3,597
3 Tokyo 3,157
4 London 2,612
5 Euronext Paris 1,447
6 Germany 1,270
7 Switzerland 792
8 Toronto 770
9 Italy 768
10 Euronext Amsterdam 640
11 Hong Kong 623
13 Australia 373
15 Shanghai 325
17 Shenzhen 256
22 Singapore 153
Year 2000 Year 2014
Rank Stock Exchange Market
Capitalisation
(USD billion)
1 NYSE 19,445
2 Nasdaq 7,096
3 London 6,577
4 Tokyo 4,419
5 Euronext Europe 3,464
6 Hong Kong 3,288
7 Shanghai 3,275
8 Toronto 2,131
9 Shenzhen 2,060
10 Germany 1,798
20 Singapore 766
PwC
HK Main Board listed companies as at 31 December 2014 by sector (by number)
11
Consumer Products 26%
Consumer Staples (Food & Beverage)
5%
Energy 3%
Financials 21%
Healthcare 4%
Industrials 16%
Information Technology 11%
Materials 10%
Telecommunication Services
1%
Utilities 3%
PwC
HK Main Board listed companies as at 31 December 2014 by market capitalisation
12
Below US$0.5 billion 65%
Above US$0.5 billion but below US$1.0 billion
12%
Between US$1.0 billion to US$2.0 billion
9%
Above US$2.0 billion 14%
PwC
Foreign Company Listing in Hong Kong
PwC
Cross-Border
Slide 14
• The trend started 2 to 3 years ago. Hong Kong emerges as a key international capital market, together with US and London
• Cross-Border listing of companies from emerging countries
• Dual (Multiple) listings in domestic stock exchange as well as Hong Kong as a major international capital market
PwC
Cross border listings into Hong Kong : Some recent examples
Slide 15
AIA
USD20.4 bn
L’Occitane
USD0.7 bn
Vale
Introduction
Mongolian Mining
USD0.7 bn
Rusal
USD2.2 bn
Prudential
Introduction
Sands
USD2.5 bn
Wynn
USD1.9 bn
SBI
USD0.2 bn SouthGobi
USD0.4 bn
Glencore
USD10 bn
(HK:USD0.3 bn)
Samsonite
USD1.2 bn
Prada
USD2 bn
Kazakhmys
Introduction
Coach
Introduction
PwC
Why Hong Kong?
Slide 16
Infrastructure
An alternate capital market, other than US, London, etc
Hong Kong Government and HKEx welcome international companies to be listed in Hong Kong
The ‘Asia’ concept; the ‘China’ concept
Gateway to ‘China’
Established legal system (British based)
Excellent banking infrastructure
A well recognised international financial centre
Excellent telecommunication; Excellent transportation
Good supply of quality professionals
Market
A leading sizeable capital market / IPO centre in the world during recent years
Reasonably high P/E
Active secondary market (Liquidity)
Alternative investor base: Hong Kong market has 40% retail market investors, while US and London markets are dominated by institutional investors
Reasonably efficient and transparent IPO process
Good reputation of market integrity and governance
All major investment banks and market intermediates have substantial presence in Hong Kong
All major investment funds have substantial presence in or connection with Hong Kong
PwC
Hong Kong Listing Requirements
PwC
Hong Kong Main Board Listing Requirements
Slide 18
3 financial years trading records
Under substantially same management over the past 3 financial years
Ownership continuity and control for at least the most recent financial year
Minimum public float of at least 25%; or 15 to 25% if market capitalisation is over HK$10 billion (eq. US$1.3 billion)
Minimum of 300 shareholders
Three independent non-executive directors, including one with accounting or related financial management expertise
Audit committee
Competing businesses of controlling shareholders or directors may be allowed - full disclosure is required
Financial requirements:
Profit of at least HK$20 million (eq. US$2.6 million) for the most
recent financial year; and
Profit of at least HK$30 million (eq. US$3.8 million) for the 2 preceding financial years; and
Market cap of at least HK$200 million (eq. US$26 million)
Market cap of at least HK$2 billion (eq. US$256 million); and
Revenue of at least HK$500 million (eq. US$64 million) for the most recent financial year; and
Positive operating cash flows of at least HK$ 100 million (eq. US$13 million) in aggregate for 3 financial years
Market cap of at least HK$4 billion (eq. US$513 million); and
Revenue of at least HK$500 million (eq. US$64 million) for the most recent financial year
Key requirements for new listings:
Market cap / Revenue / Cash
flow
Market cap / Revenue
OR OR
Profit
Alternative rules for infrastructure/mining and investment companies
PwC
Hong Kong Growth Enterprise Market Listing Requirements
Slide 19
2 financial years trading records
Under substantially same management over past 2 financial years
Ownership continuity and control for at least the most recent financial year and up until the date of listing
Market capitalisation of at least HK$100 million (eq. US$13 million) at the time of listing
Minimum pubic float of at least 25%; or 15 to 25% if market capitalisation is over HK$10 billion (eq. US$1.3 billion)
Three independent non-executive directors, including one with accounting or related financial management expertise
Audit committee
Competing businesses of controlling shareholders or directors may be allowed - full disclosure is required
May list by way of placing only
Generally accepted accounting principles in the United States of America (US GAAP) are acceptable if the company is listed, or will be simultaneously listed, on either the New York Stock Exchange or the NASDAQ National Market
Financial requirements:
No profit requirement
Positive cash flow generated from operating activities of at least HK$20 million (eq. US$2.6 million) in aggregate for the two preceding financial years
Key requirements for new listings:
Alternative rules for infrastructure/mineral companies
PwC
Hong Kong Main Board/GEM Listing Requirements for Mineral Companies (cont’d)
Slide 20
A Mineral Company is one whose principal activity involves exploration for or extraction of natural resources, including minerals, oil and gas or solid fuels. Principal activity refers to the activity which is more than 25% of the company's assets, gross revenue or operating expenses
Qualifications for listing is the same as other companies, except that the financial requirements (i.e. profit test, “Big Cap” tests) may be waived for Main Board applicants or the 2 financial years trading records may be waived for GEM applicants if HKEx is satisfied that the board and senior management, taken together, have sufficient experience relevant to the exploration and/or extraction activity that the company is pursuing. Individuals must have a minimum of 5 years relevant industry experience
Must have indicated resources or contingent resources of meaningful and sufficient substance identifiable under one of the acceptable internationally recognised reporting standards supported by a Competent Person Report
Sufficient working capital for 125% of its present requirements for the next 12 months
A Mineral Company that has not yet begun production must disclose plans to proceed to production with indicative dates and costs supported by at least a Scoping Study and substantiated by the opinion of a Competent Person
Disclose social and environment matters in prospectus, if material
For Competent Person’s Report on estimates of resources and reserves, the internationally recognised reporting standards are:
the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (2004 edition)
the Canadian National Instrument 43-101
the South African Code for the Reporting of Exploration Results, Mineral Resources and Mineral Reserves (2007 edition)
the Petroleum Resources Management System (PRMS)
For valuation of resources and reserves, the internationally recognised valuation standards are:
the Code for the Technical Assessment and Valuation of Mineral and Petroleum Assets and Securities for Independent Expert Reports (2005
edition)
the South African Code for the Reporting of Mineral Asset Valuation (2008 edition)
the Standards and Guidelines for Valuation of Mineral Properties endorsed by the Canadian Institute of Mining, Metallurgy and Petroleum,
February 2003 (final version)
Key requirements of new listing of mineral companies:
PwC
Listing Modes for Overseas Companies
Slide 21
Primary Listing
• Full compliance with Listing Rules
• Can be in the form of Shares or Hong Kong Depositary Receipts (HDR)
• Shares are traded in Hong Kong Dollars; HDR can be traded in Hong Kong Dollars or US Dollars
• Financial statements (Accountant’s Report) be prepared in IFRS or HKFRS
• Financial statements (Accountant’s Report) be audited by Hong Kong Certified Public Accountants (“HKCPA”)
• Can be dual primary listing – Hong Kong and overseas
Secondary Listing
• Similar requirements like primary listings, but reasonable waivers may be granted
• Can be in the form of Shares or Hong Kong Depositary Receipts (HDR)
• Shares are traded in Hong Kong Dollars; HDR can be traded in Hong Kong Dollars or US Dollars
• Overseas companies should have a primary listing on an overseas exchange where the standards of shareholder protection are equivalent to those in Hong Kong
• US GAAP is allowed
• Presently, there are only a few secondary listings; there is an increasing trend, especially for foreign companies
• Financial statements may be audited by international and reputable CPA, subject to HKEx’s waiver
PwC
Jurisdiction of Incorporation for Primary Listing
Slide 22
Provide shareholder protection that are equivalent to companies incorporated in Hong Kong
Presently 25 acceptable jurisdictions……. more to be added to the list
Submit a detail paper benchmarking shareholder protection for applications of unprecedented jurisdictions: Companies Laws, Articles of Association, etc.
If insufficient, ratify through additional clauses in the Company’s Articles of Association
Presently Acceptable Jurisdictions:
Australia
Bermuda
Brazil
British Virgin Islands*
Canada – Alberta*
Canada – British Columbia*
Canada – Ontario
Cayman Islands
Cyprus*
France#
Germany*
Guernsey*
Hong Kong
Italy*^
Japan*
Jersey*
Labuan*
Luxembourg*
Singapore*
South Korea *
The State of Delaware*
The Isle of Man*
The People’s Republic of China
The State of California*
United Kingdom
* Have to revise constitutive documents # Only for joint stock company with a single-board structure that are subject to the requirements of Autorite des marches financiers ^ For a corporate type other than joint stock company, or with a management and control structure other than the default structure, will have to address
differences shareholders’ protection Except for Bermuda, Cayman Islands, HK and PRC, all have to demonstrate a reasonable nexus between the place of incorporation and the place of business operations.
PwC
Listing of Russian companies in Hong Kong
• On 16 February 2015, Russia signed the International Organisation of Securities Commissions’ Multilateral Memorandum of Understanding Concerning Consultation and Cooperation and the Exchange of Information (the IOSCO MMoU) which paves the way for Russian companies to list on Hong Kong’s Stock Exchange as this fulfils one of the requirements to be an acceptable jurisdiction of incorporation.
• Currently, only two Russian-based companies are listed in HK:
(i) United Company RUSAL Plc (0486), incorporated in Jersey and listed in January 2010; and
(ii) IRC Ltd (01029), incorporated in Hong Kong and listed in October 2010.
Slide 23
PwC
Listing Requirement HK vs. London vs.
New York
PwC
Listing Requirements: Hong Kong vs. London vs. New York
Slide 25
Requirements Hong Kong London
(Premium listing)
NYSE
(World-wide
criteria)
3 financial years trading records
Similar Similar Similar
Under substantially same management over past 3 financial years
Similar Similar No particular requirement
Ownership continuity and control
Ownership continuity and control for at least the most recent audited financial year
Control over the majority of the entity’s assets for the three years period
No particular requirement
Minimum public float of at least 25%; or lower if ‘big’ market capitalisation
Similar Similar N/A; Minimum public shares is 2.5 million.
Three independent non-executive directors, including one with accounting and related financial management expertise
Similar Similar No particular requirement
PwC
Listing Requirements: Hong Kong vs. London vs. New York (cont’d)
Slide 26
Requirements Hong Kong London
(Premium listing)
NYSE – World-
wide criteria
Audit Committee Similar Similar Similar
Competing business of controlling shareholders or directors may be allowed – full disclosure is required
Similar Similar No particular requirement
Jurisdiction of incorporation
Presently 25 acceptable jurisdiction; more to be added
No particular requirement No particular requirement
Appointment of Sponsor
Required Required N/A
PwC
Hong Kong vs. London vs. New York: Reporting Requirements for IPO
Slide 27
Requirements Hong Kong London
(Premium listing)
NYSE
(World-wide criteria)
Accountant’s Report: 3
years + stub
GAAP
Similar
HKFRS or IFRS
Similar
IFRS as adopted by the
European Union or
equivalent standards for
non-UK issuers
Audited financial statements
for the two most recent
years
US GAAP or IFRS
Profit forecast: Optional.
Must be reported on by an
accountant if included in
the prospectus
Similar Similar Not applicable
Working capital forecast:
Generally required and
must be reported on by
an accountant
Less comprehensive than
London
Exemption for regulated
industries, e.g. banks and
insurance companies
A comprehensive report
(included in the long-form
report)
Not applicable
Pro forma financial
information
Required and must be
reported by an accountant
Required where there has
been a significant change in
the issuer’s business prior
to listing. Must be reported
on by an accountant.
Not applicable
PwC
Hong Kong vs. London vs. New York: Reporting Requirements for IPO (cont’d)
Slide 28
Requirements Hong Kong London
(Premium listing)
NYSE
(World-wide criteria)
Capitalisation and
indebtedness
A statement is required,
dated within 8 weeks prior
to the date of the
prospectus
A statement is required,
dated within 90 days prior to
the date of the prospectus
No particular requirement
Long-form report No particular requirement Need to issue a long-form
report covering the due
diligence of the applicant
No particular requirement
Internal controls PN 21. Generally require an
Agreed-Upon Procedures
(AUP) type of report to be
issued by an accountant
Market practice requires a
Financial Reporting
Procedures (FPR) report on
the internal reports system,
which may require negative
assurance opinion to be
issued by an accountant
No particular requirement
PwC
Reporting Requirements of a Hong Kong Listing
PwC
Key financial deliverables by Reporting Accountants
• The key items that the listing candidate and the reporting accountants must produce during the listing process are set out below.
Deliverable Explanation
Accountant’s Report • 3 years (Main Board) plus stub period (financial period ended not more than 6 months before the date of the prospectus)
• Prepared under IFRS or HKFRS • ‘True and Fair’ opinion by Reporting Accountant
Statement of adjustments • Document to be prepared reconciling the previously published financial information of the listing business to the financial information as presented in the Prospectus
• Statement of adjustments is filed with the HKSE and available for public inspection
• Report from the Reporting Accountant has to be issued in respect of the statement of adjustments (a separate set of consolidated IFRS audited financial statements with the figures exactly same with the accountant's report could substitute for the statement of adjustments)
Working capital forecast for 12 months from date of prospectus
• Directors have to make a statement in the prospectus that the working capital available to the applicant (consolidated group) is sufficient for its present requirement (at least next 12 months from the date of the prospectus)
• Reporting Accountant is required to perform work and to issue a private comfort letter to the Directors of the applicant
Slide 30
PwC
Key financial deliverables by Reporting Accountants
Deliverable Explanation
Pro forma financial information showing impact of proceeds
• Pro forma adjusted net tangible asset statement to illustrate the effect of the IPO
• Reporting Accountant has to render a report on the compilation and appropriateness of the pro forma adjustment(s)
Indebtedness • Disclose in the prospectus the details of indebtedness (debt securities, borrowings, contingent liabilities, guarantees, etc; but excluding normal trade bills) at a date within 8 weeks before the date of the prospectus
• Reporting Accountant is required to perform work and to issue a private comfort letter to the directors of the applicant
Profit forecast • Optional • Covering the year of the IPO (total 12 months, with some actual results) • Only a statement that net profit will not be less than a certain amount • Report from Reporting Accountant covers only compilation and accounting
policies used; however, the professional standard has much wider requirements for the related work
Private Comfort Letter on Extraction of Financial Information in the Prospectus and Comfort on Subsequent Changes
• Sponsor’s due diligence obligation under Listing Rules, and Underwriters’ due diligence
• Up to 3 comfort letters for each offering tranche: (i) Hong Kong tranche; (ii) Reg S International offering; and (iii) US 144A
Slide 31
PwC
Key financial deliverables by Reporting Accountants
Deliverable Explanation
Internal Control Report
(PN 21)
• Listing Rules set out that the applicant shall have established procedures, systems and controls, which are adequate having regard to their (the applicant and its directors) obligations under listing rules, to make proper assessment of the financial position and prospects of the applicant (consolidated group)
• Sponsor has to provide a confirmation to HKEx whether the applicant has adequate internal control system in accordance with the requirements of the Listing Rules
• This is more on design effectiveness at one point in time
• Reporting accountant is required by the applicant and the sponsor to assist in reviewing the consolidated group’s internal controls relating to financial reporting and to provide them with a private report. Exact scope to be agreed among the applicant, the Sponsor(s) and the Reporting Accountant, which is primarily an Agreed-Upon-Procedures (AUP) type of report
Other Deliverables/Work from the Reporting Accountant
• Checklists under Sponsors Guidelines for New Listing Applications
• Attend essential meetings with Sponsor, solicitors, other professional parties, and if necessary Hong Kong Stock Exchange to discuss various financial and accounting matters relating to the listing application
• Work together with management and other professional parties to prepare answers to questions raised by Hong Kong Stock Exchange
Slide 32
PwC
A Typical Listing Process
Slide 33
Strategic Investors
Working Team:
• Management & IPO project team
• Sponsors
• Reporting Accountants
• Lawyers to the sponsors
• Lawyers to the Group
• Others
Application submitted to SFC/HKEx
and hearing by Listing Committee
Subscription by the public
Roadshow Listing
Cornerstone Investors
Decide on listing
Internal Preparation
• Reorganisation
• Strengthen management
• Prepare financial statements
• Enhance governance
Audit
Prospectus
Legal opinion
Placing
Private Investors
PwC
1 month Pre-listing preparation and
prepare prospectus- 1-3 months
Appoint professional parties
1-2 months 1 month
Application and vetting by HKEx
Listing division approval
Road show
Listing
Decision to list
Prospectus and other documents
Total ~ 5-8 months
1 month
Initial filing
The extent of the review process by the HKEx is variable.
A Typical Listing Timetable
Slide 34
PwC
A Typical Listing Timetable
Slide 35
Suggested milestones Indicative timelines
1. Formalise an IPO plan and establish a core project management team 15 April 201x
2. Appoint key professional parties, including Sponsor(s), Reporting Accountant, lawyers, etc 1 May 201x
3. Establish overall approach, detailed timetable and responsibilities 15 May 201x
4. Begin / Substantially complete the audit for the 3 years during the track record period, by
the Reporting Accountant
15 May 201x /
31 July 201x
5. Begin / Substantially complete prospectus drafting and preparation of other filing documents for A-1 submission to HKEx
15 May 201x /
31 July 201x
6. Finalise group restructuring plan 30 June 201x
7. Resolution of potential legal, tax, accounting and other issues 30 June 201x
8. Finalise preliminary draft of legal opinion(s) and valuation report(s) 15 July 201x
9. Complete preliminary due diligence by Sponsor(s) 31 July 201x
10. A-1 filing 1 August 201x
11. Substantially complete the audit for the stub period (e.g. 30 June 201x) 15 September 201x
12. Respond to questions raised by HKEx and SFC (may be 3 to 5 rounds) 1 September to
31 October 201x
13. Listing Committee hearing 15 November 201x
14. Issue prospectus; Public Offering 10 December 201x
15. Listing on HKEx 20 December 201x
For a target listing by the end of 201x, a typical milestone is as follows (now is early April 201x):
PwC
Listing of Debt Securities in
Hong Kong
PwC
Listing of Debt Securities in Hong Kong: 2010 to Q1 2015
Slide 37
Source: HKEx
0
50
100
150
200
250
300
2010 2011 2012 2013 2014 Q1 2015
No. of New Issues
Amount Raised (USD Billion)
Note: As at 31 March 2015, the nominal amount of debt securities issued amounted to USD306 billion for 665 issues
PwC
Debt securities – basic conditions for listing
Slide 38
• Guided by Chapter 23, 36 (overseas issuers) and 37 (issuance to professional investors) of the
Main Board Listing Rules
• The issuer and the guarantor, in the case of a guaranteed issue, must each be duly incorporated or otherwise established under the laws of the place where it is incorporated or otherwise established
• An issuer which is a Hong Kong company must not be a private company within the meaning of section 11 of the Companies Ordinance.
• If the shares of the issuer or the guarantor, in the case of a guaranteed issue, are not listed then
both the issuer and the guarantor, in the case of a guaranteed issue, and their respective businesses must, in the opinion of the Exchange, be suitable for listing.
• A new applicant or the guarantor, in the case of a guaranteed issue, must have produced audited accounts in accordance with its national law covering the three financial years preceding the application for listing. In very exceptional cases the Exchange may accept a shorter period of two years.
PwC
• In the case of a new applicant, the latest financial period reported on by the reporting accountants must not have ended more than nine months before the date of the listing document. If the shares of the issuer or the guarantor, in the case of a guaranteed issue, are not listed then the issuer or the guarantor, in the case of a guaranteed issue, must have total shareholders’ funds of at least HK$100,000,000, and the nominal amount of each class of debt securities for which listing is sought must be at least HK$50,000,000, or such other amount as the Exchange may from time to time prescribe. Further issues of debt securities which are or are to be uniform in all respects with debt securities of a class already listed are not subject to these limits.
• The debt securities for which listing is sought must be freely transferable.
• The debt securities for which listing is sought must be issued in conformity with the law of the place where the issuer is incorporated or otherwise.
• Debt securities to which options, warrants or similar rights to subscribe or purchase equity securities or debt securities are attached must also comply with the requirements applicable to such options, warrants or similar rights.
• The issuer must maintain a paying agent at an address in Hong Kong until the date on which no debt security is outstanding unless the issuer performs that function himself.
• Maintain a register of holders and transfers in Hong Kong.
Debt securities – basic conditions for listing
Slide 39
PwC
Critical success factors and challenges
PwC
Critical success factors
Existing banking facilities should be reviewed in order to ensure that the company has sufficient working capital to meet its obligations for at least twelve months after the flotation date.
Financial prospects
Investors will review your company’s accounting policies, contrasting them with other public companies in your company’s industry sector
Accounting policies
Structuring may be required prior to an offering which may impact on the tax position of the company and the owners. Choosing the right holding company structure is important
Tax and structuring aspects
Investors will be interested in the reputation and experience of the management team. A certain level of continuity of management will be regarded as important
Management team
During the offering process you will need to convince investment banks, investors and stock exchange regulators that your company has a coherent strategy with well thought out reasons for considering an offering. Careful consideration is required as to factors which will maximise valuation
Strategy
Any public offering needs careful planning, will take up significant management time and requires the appointment of external advisors
Managing the timetable
Management information systems and processes that are fit for purpose and for a public company will need to be embedded into the business
Building the systems
Investors will look at the historical record of the company’s business to make an assessment of how the business will develop. The trend in profits and cash flows will be a key factor. Can disclosure requirements be met across all 3 years? How might segmental presentation impact the presentation of the business? Is consolidated financial information available at level of issuer? Any changes in accounting policies?
Track record
Slide 41
PwC
Your challenges
Managing the process
Financial statements
Working capital model
Reorganisation
Building financial reporting
procedures
Corporate governance
Share schemes & incentive plans
Tax, capital structure,
distributable reserves Valuation
Jurisdiction of incorporation
Slide 42
Thank You!
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Hong Kong Listing Pricing Liquidity Investor Base China Concept Time Zone
Pauline Leung Partner PwC Hong Kong Capital Markets Tel: +852 2289 1809 [email protected]