24 listing applications were rejected by The Stock Exchange of Hong Kong Limited (the “SEHK”) in 2018[1]. This is eight times the number of rejections in 2017, and we have continued to see rejections in light of the heightened scrutiny of listing applications by the SEHK in 2019.

With that background of heightened scrutiny of listing applications by the SEHK, we are glad to report that Tony Jacobsen of our Hong Kong* office, a former Senior Vice President of the IPO vetting team of the SEHK, was recently able to assist a client in overturning a decision of the Listing Committee of the SEHK (the “LC”) in rejecting a listing application in an appeal to the Listing Appeals Committee.

The team was only engaged after the client’s listing application was initially rejected by the SEHK.

General principles

We cannot disclose specific details of the appeal, and each case turns on its own specific facts, but for those who are considering a listing on the SEHK, the following general principles should help to ensure a smooth and successful application:

Be prepared for the listing hearing

  • In addition to all the effort in preparing the draft prospectus and submission documents, don’t forget to be fully prepared for the listing hearing itself. It has now become quite common for the sponsor and the applicant to be asked by the LC to attend the actual listing hearing to address its concerns.
  • An applicant, together with its sponsor and advisers should ensure they are prepared for any questions at the actual listing hearing. The LC is made up of well-versed businessmen and other professionals, who do know what questions to ask.
  • In particular, for an applicant with an unusual business model or growth strategy, or which otherwise raises “shell company” concerns under the SEHK’s guidance letter HKEX-GL68-13A, the ability to build up a good rapport with the LC is crucial.

Focus on the issues - less is more

  • Disclosure in the prospectus and replies to the regulators should be succinct and to the point. It is tempting to over-draft in order to address a particular issue which could potentially be a sticking point with the LC. However, the right balance must be achieved, so that the key message is not lost.
  • One must step into the shoes of the public investor, to ensure that the prospectus is both comprehensive and easy to understand, and that only material information is included.
  • Choose your battles wisely. Focus on the main points. It is sometimes neither practical nor productive to address all the issues raised by the SEHK.