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On 15 December 2017, the Stock Exchange published its consultation conclusions on the Review of the Growth Enterprise Market (GEM) and Changes to the GEM and Main Board Listing Rules.
The GEM Board will be re-positioned as a standalone board. The streamlined process for GEM issuers to be transferred to the Main Board will be removed.
The changes to the rules will take effect on 15 February 2018.
The authority to approve GEM listing applications, which is now with the Listing Department, will be assumed by the Listing Committee. This change will be implemented at a later date.
The key changes to the GEM Listing Rules are summarised below:
Current GEM Listing Rules | New GEM Listing Rules | |
Name | English name: Growth Enterprise Market, Chinese name: 創業板 | Rename as GEM for both English and Chinese names. |
Rename as GEM for both English and Chinese names. | Emerging and growth companies | Small and mid-sized companies |
Track record requirement | A GEM applicant has to include financial results for at least two financial years in its listing document. | This two-year track record requirement remains unchanged. |
Qualified for listing on the Main Board | It is unlikely that companies which are qualified to list on the Main Board will apply for a listing on GEM. | No prohibition for the listing of such companies on GEM. However, the Stock Exchange will continue to require such GEM applicants to justify their decisions to list on GEM instead of the Main Board when there is indication in its GEM listing application that the applicant could potentially list on the Main Board. |
Cashflow requirement | A GEM applicant is required to have an adequate trading record of at least two financial years with positive cash flow generated from operating activities in the ordinary and usual course of business, before changes in working capital and taxes paid, of at least HK$20 million. | Increase to HK$30 million. |
Minimum market capitalisation requirement | The expected market capitalisation of a GEM applicant at the time of listing must be at least HK$100 million. | Increase to HK$150 million. |
Minimum market capitalisation in public hands | The market capitalisation of equity securities of a GEM applicant in public hands must be at least HK$30 million. | Increase to HK$45 million. |
Offering structure | No restriction – subject to full disclosure in the listing document. | Mandatory public offer of at least 10% of the total offer size. |
Offering mechanism | No specific requirement under the GEM Listing Rules. | Align the allocation of offer shares between the public and placing tranches and the clawback mechanism to make them consistent with those in Practice Note 18 to the Main Board Listing Rules. |
Placing to core connected persons, etc. | Selected persons are allowed to participate in the placing provided that full disclosure is made in the listing document. | Align the GEM Listing Rules on placing to core connected persons, connected clients and existing shareholders, and their respective close associates, with those under Appendix 6 to the Main Board Listing Rules and Guidance Letter HKEx-GL-85-16 “Placing to connected clients, and existing shareholders or their close associates under the Rules”. |
Lock-up requirements |
Controlling shareholders are prohibited from disposing of shares in the GEM issuer:
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Controlling shareholders are prohibited from disposing of shares in the GEM issuer:
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Eligibility for transfer of listing from GEM to the Main Board |
GEM issuers:
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No change. |
The key changes to the Main Board Listing Rules are summarised below:
Current Main Board Listing Rules | New Main Board Listing Rules | |
Minimum market capitalisation requirement | The expected market capitalisation of a Main Board applicant at the time of listing shall be at least HK$200 million. | Increase to HK$500 million. |
Minimum market capitalisation in public hands | The market capitalisation of equity securities of a Main Board applicant in public hands shall be at least HK$50 million. | Increase to HK$125 million. |
Applicants that have changed their principal businesses and/or controlling shareholders since listing on GEM | Applicants that have not changed their principal businesses and/or controlling shareholders since listing on GEM |
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