This LawFlash breaks down the key conclusions of the HKEx’s consultation on optimizing IPO price discovery and open market requirements, which aimed to review the existing decades-long regulatory framework and enhance the competitiveness of the Hong Kong securities market while improving the transparency and efficiency of the IPO process.
In particular, the HKEx is minded to optimize the price discovery process for IPOs to increase the participation of “price setting” investors and to review open market requirements to ensure that issuers have sufficient shares in public hands available for trading.
The new listing rules requirements came into effect on August 4, 2025 and apply to all issuers and all new applicants with listing documents published on or after that date.
The HKEx is also seeking public comments on a further consultation on allowing more flexibility on the ongoing public float thresholds and indicated that it will publish another conclusion for those requirements.
The HKEx’s key conclusions are discussed below.
OPEN MARKET REQUIREMENTS
Public Float Calculation
The HKEx adopted proposals that the public float percentage be calculated by reference to the total number of that class only, except for the proposal to prescribe a different basis of calculation of public float for issuers with other share class(es) listed overseas.
- PRC Issuers: In the case of a PRC issuer, its public float percentage would be calculated only by reference to its H shares. Any other shares that the issuer has in issue that are in the class to which H shares belong (e.g., A shares or unlisted shares, as the case may be) will be included in the denominator only.
- Issuer with other share classes listed overseas: The HKEx will not require that its public float, at listing, be calculated as a percentage of the issuer’s total number of issued shares (of all classes). It will not require that only shares of the class sought in Hong Kong be counted towards meeting the minimum public float thresholds.
Tiered Initial Public Float Threshold
The HKEx adopted the following tiered structure based on market capitalization. The tiered structure will apply towards any class of securities new to listing on the exchange, except for PRC issuers with other listed securities (e.g., A+H issuers), for whom bespoke initial public float requirements apply.
Ongoing Public Float
The HKEx is seeking further consultation on allowing more flexibility on the ongoing public float thresholds. In response, the HKEx will implement transitional arrangements to the ongoing public float requirements and the regulatory approach of suspending trading of issuers with public float below a prescribed level.
During the transitional period, the ongoing public float requirements are as follows:
- New applicants with listing documents published on or after August 4, 2025: Maintain the relevant minimum public float percentage prescribed at the time of their listing.
- All Other Issuers: Continue to be subject to the existing minimum ongoing public float thresholds, based on the existing basis for calculation.
During the transitional period, the HKEx reserves the right to require suspension of trading of issuers. Brightline suspension thresholds of 15% and 10% are applied, as the case may be:
- 15% suspension threshold would apply in the case of an issuer with a minimum prescribed percentage of public float of 25% at the time of listing.
- 10% suspension threshold would apply in the case of an issuer with a minimum prescribed percentage of public float between 15% and 25% at the time of listing.
With respect to the further consultation to the ongoing public float, the HKEx proposes the following thresholds:
Free Float Requirement
The HKEx adopted the proposal for a new minimum free float requirement, ensuring that a portion of the class of shares for which listing is sought on the HKEx be held by the public and not subject to any disposal restrictions at the time of listing to provide greater liquidity. The minimum free float must either (1) represent at least 10% of the number of shares in the relevant class for which listing is sought, with an expected market value of at least HKD 50 million; or (2) have an expected market value of at least HKD 600 million at the time of listing.
Biotech Companies and Specialist Technology Companies
The existing free float requirements are removed, and replaced with the new, general minimum free float. All issuers are now subject to a consistent free float requirement.
Requirements for A+H Issuers and Other Prescribed Types of Issuers
The HKEx adopted the proposal for lowering the minimum H-share issuance threshold for a PRC issuer with other listed shares, such as an A+H issuer. At the time of listing, H shares for which listing is sought on the exchange must either (1) represent at least 10% of the total number of shares in the class to which H shares belong (excluding treasury shares); or (2) have an expected market value of at least HKD 3 billion. These changes will not be adopted for issuers with other share class(es) listed overseas. The minimum free float must either (1) represent at least 5% of the number of shares in the relevant class for which listing is sought, with an expected market value of at least HKD 50 million; or (2) have an expected market value of at least HKD 600 million at the time of listing.
IPO OFFERING MECHANISM
Lock-up Requirement for Cornerstone Investors
The HKEx will retain the current six-month lock-up period.
Allocation to the Placing Tranche
The HKEx adopted its proposal with amendments to impose a minimum threshold of the shares initially on offer to be allocated to the bookbuilding placing tranche. Issuers will be required to allocate at least 40% initially offered to the bookbuilding placing tranche (except for Specialist Technology Companies). The existing requirements to allocate at least 50% of the total offer shares to independent price setting investors will continue to apply to Specialist Technology Companies.
Place Spread
The HKEx adopted the proposal to remove the requirements that there must be (1) no fewer than three holders for each HKD 1 million of the placing; and (2) a minimum of 100 holders in an IPO placing tranche. Notwithstanding this, a new applicant or listed issuer, as the case may be, is reminded that it must maintain an “adequate spread of holders” in the placing tranche.
Public Subscription Tranche
The HKEx adopted both proposed mechanisms for allocation as available options, with minor amendments to Mechanism A. Both mechanisms would not apply to a Specialist Technology Company which would retain the existing initial allocation and clawback mechanism designed for them.
- Mechanism A: The HKEx will adopt the following structure, as modified.
- Mechanism B: The HKEx will adopt the proposal of a minimum initial allocation of 10% of the offer shares to public subscription tranche, with no clawback mechanism.
Pricing Flexibility Mechanism
The HKEx will not adopt the proposal of enabling flexibility to increase the offering price by up to 10% above top of the offer price.
ALLOCATION OF SHARES IN SPECIALIST TECHNOLOGY COMPANIES
The HKEx adopted the proposal that a minimum of 50% of shares offered in a Specialist Technology Company’s IPO must be initially offered to the placing (bookbuilding) tranche prior to the exercise of any offer size adjustment option and/or overallotment option.
TRANSPARENCY OF PUBLIC FLOAT
The HKEx intends to adopt proposals of mandating annual disclosure of the actual public float percentage and detailed shareholding composition in the monthly returns and annual reports of listed issuers. Nonetheless, in light of further consultation regarding the ongoing public float requirements, these disclosure requirements will be implemented upon conclusion of the further consultation.
ESTABLISHING AN OVER-THE-COUNTER TRADING MARKET
The HKEx has yet to reach a conclusion on the viability of establishing an OTC trading market in Hong Kong. The HKEx will continue to work with various stakeholders on this matter.
