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Hong Kong's New Listing Regime for Specialist Technology Companies

posted 1 year ago

By: Rossana Chu

By the March 2023 Conclusions[1] to the Consultation on the Listing Regime for Specialist Technology Companies[2], the Hong Kong Stock Exchange (HKSE) has announced some changes to its original proposals after considering responses to the consultation. The objective of the new regime is to allow the specialist technology companies to apply for listing on the main board of HKSE, even if they do not satisfy the usual profits, revenue and cash flow listing criteria.

We summarise below the conclusions which form the new listing regime from 31 March 2023 onwards.

Qualifications for listing

  • The term “specialist technology companies” refer to companies engaging in (1) next-generation information technology, (2) advanced hardware and software, (3) advanced materials, (4) new energy and environmental protection, and (5) new food and agriculture technologies.

  • An applicant falling outside the current list of industries or acceptable sectors may still be considered if (1) it has high growth potential, (2) its success can be demonstrated to be attributable to the application of new technology to a new business model which differentiates it from traditional market participants serving similar consumers or end users, and (3) its research and development (R&D) significantly contributes to its expected value and constitutes a major activity and expense.

  • The applicant should have at least three financial years of operation for its current line of business (with R&D activities) prior to listing under substantially the same management, but the HKSE may accept a trading record period of two financial years in exceptional circumstances.

  • There should be continuity of ownership and control for the applicant in the 12 months prior to its listing application.

  • There will be two types of specialist technology companies, namely, “Commercial Companies”, meaning those that have commercialised their technology products with a revenue of at least HKD250 million (USD32 million) for the most recent audited financial year, and “Pre-Commercial Companies”, meaning those which have not met such revenue threshold.

  • The minimum market capitalisation of a Commercial Company and a Pre-Commercial Company is HKD6 billion (USD770 million) and HKD10 billion (USD1,282 million), respectively (reducing from the proposed figures of HKD8 billion and HKD15 billion, respectively).

  • A Commercial Company is expected to demonstrate a year-on-year growth of revenue throughout the trading record period, with allowance for temporary declines in revenue due to economic, market, industry-wide conditions or temporary factors outside the applicant’s control.

  • The R&D expenditure of a Commercial Company should constitute at least 15% of its total operating expenditure. The percentage for a Pre-Commercial Company is 50% if its revenue is less than HKD150 million for its most recent financial year and 30% if its revenue for its most recent financial year reaches HKD150 million. The applicant must meet the applicable percentage threshold (1) on a yearly basis for at least two out of the three financial years prior to listing, and (2) on an aggregate basis over all the three financial years.

  • A Pre-Commercial Company must demonstrate and disclose in its listing document a credible path to the commercialisation of its specialist technology product(s).

  • A Pre-Commercial Company must ensure that it has available sufficient working capital to cover at least 125% of its group’s costs for at least 12 months from the publication of its listing document (after taking into account the IPO proceeds).

Pre-IPO investments

  • As an indicative benchmark, the applicant is expected to have received investments at least 12 months prior to its listing application from a group of two to five sophisticated independent investors (referred to by HKSE as “pathfinder sophisticated independent investors”). Such investors in aggregate should (1) hold shares or securities convertible into shares equivalent to at least 10% the applicant’s issued share capital as at its listing application and throughout the 12-month pre-application period, or (2) have otherwise invested an aggregate sum of at least HKD1.5 billion (USD192 million) in the applicant’s shares or securities convertible into shares at least 12 months prior to its listing application. Also, at least two of such investors should (1) each hold shares or securities convertible into shares equivalent to at least 3% of the applicant’s issued share capital as at its listing application and throughout the 12-month pre-application period, or (2) each have otherwise invested at least HKD450 million (USD77 million) in the applicant’s shares or securities convertible into shares at least 12 months prior to its listing application.

  • The prescribed minimum equity holding by all sophisticated independent investors varies from 10% to 25%, depending on whether the applicant is a Commercial Company and its market capitalisation expected at listing.

IPO arrangements

  • The share offer must include both a placing tranche and a public subscription tranche. That essentially means retail investors are allowed to subscribe for, and trade in, the securities of both Commercial Companies and Pre-Commercial Companies. … READ FULL ARTICLE

Note: This material has been prepared for general information purposes only and is not intended to be relied upon as professional advice for any cases. Should you need further information or legal advice, please contact us.


[1] https://www.hkex.com.hk/-/media/HKEX-Market/News/Market-Consultations/2016-Present/October-2022-Specialist-Technology-Co/Conclusions-(Mar-2023)/cp202210cc.pdf 

[2] https://www.hkex.com.hk/-/media/HKEX-Market/News/Market-Consultations/2016-Present/October-2022-Specialist-Technology-Co/Consultation-Paper/cp202210.pdd




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