On 20 May 2021, The Stock Exchange of Hong Kong Limited (SEHK) published the consultation conclusions on the Main Board Profit Requirement. On the same day, the Securities and Futures Commission (SFC) and SEHK issued a joint statement (Joint Statement) on IPO-related misconduct and their approach in tackling such issues.
With effect from 1 January 2022, the aggregate profit requirement for the three-year trading record period for a Main Board’s listing applicant will increase by 60% to HK$80 million with a profit spread of 56%:44% (Modified Profit Increase). SEHK will be prepared to grant a relief from the profit spread on case-specific circumstances to provide flexibility. Potential applicants seeking or contemplating seeking a Main Board listing should critically assess the potential impacts of the Modified Profit Increase on their eligibility for listing as well as their proposed listing timetable.
The SFC and SEHK have observed an increasing number of suspected “ramp-and-dump” schemes in recent IPOs. A joint statement was issued highlighting a number of non-exhaustive features of problematic IPOs that may lead to enquiries by the regulators, such as market capitalisation which only barely meets the minimum requirement, high P/E ratio, high underwriting fees or expenses and high shareholder concentration. It is also set out in the Joint Statement the regulators’ approach in tackling suspected misconduct, including exercising their discretion to object to a new listing, suspending trading or taking appropriate action against the parties involved in the suspected misconduct.
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