Hong Kong to accept New Third Board companies

The two exchanges signed a memorandum of understanding saying that applications from qualified applicants would be welcomed. NEEQ, which is better known as the New Third Board, added that there would be no domestic pre-approval processes or special conditions for companies targeting the Hong Kong Stock Exchange (HKEx).

The development – for which no timeline was given – was positioned as part of broader efforts intended to deepen ties between Hong Kong’s capital markets and those in the mainland. HKEx has separately been looking for ways to attract more mainland companies. 

The exchange is also looking at ways to loosen its listing requirements. It published a consultation paper in February asking for comment on three proposals: to permit listings of biotech companies that do not meet any of the financial eligibility requirements; to accept companies with weighted voting right structures (which usually enable the founder to retain control after his equity interest is diluted); and creating a concessionary secondary listing route for Chinese and international companies.

The New Third Board was introduced in 2006 through pilot programs in Beijing, Tianjin, Shanghai, and Wuhan. It serves as a national share transfer system for small and medium-sized enterprises (SMEs), especially high-tech companies. It was intended to serve as an alternative exit channel for PE investors whose portfolio companies didn’t meet the requirements for the main boards in Shanghai and Shenzhen.

It soon went nationwide and from around 2015 established itself as a credible and well-used listing channel for private equity-backed companies as well as for some PE firms.

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• Topics
• Greater China
• Regulation
• IPO
• China
• Hong Kong (China)