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Hong Kong is not the first stock exchange to eye rule changes to make it look more like the US. But its latest move — allowing all companies to file confidentially for an initial public offering — looks particularly fruitless. While the Asian hub measures itself against New York, it’s Shanghai and Shenzhen that are its real competition.
On Friday, the city’s market operator said it would let IPO candidates file prospectuses behind closed doors, meaning any adjustments requested by the regulator happen before the public gets a look. Previously, only certain high-growth tech and biotechnology groups enjoyed that privilege. Now, so will any companies joining the 534 in Hong Kong’s official IPO queue.
Filing in public can bring some uncomfortable rough and tumble. In the US, shoemaker Allbirds was forced by the Securities and Exchange Commission to remove its claim to be the world’s first sustainable IPO in 2021. That said, investors may be better off for the insights into a company’s culture that such changes convey.
The chances are, though, that most companies will take HKEX up on its offer. About two-fifths of those in the current queue have not filed publicly. The US has offered confidential filing for growth companies since 2012 and for almost everyone since 2017. SpaceX and Anthropic are recent beneficiaries.
Hong Kong’s case for enabling companies to avoid early limelight is that it competes against New York. But it’s an unequal competition. Hong Kong’s best-known international trophy listings — L’Occitane, Samsonite and Prada — date from 15 years ago. The first of the trio since went private; the others have discussed dual listings elsewhere.
The reality is that more than four-fifths of Hong Kong’s IPO proceeds over the past 20 years have been raised by mainland Chinese companies, according to Dealogic data. For many Chinese entrepreneurs, politics means a US stock code isn’t on the cards. Since Chinese ride-hailing app DiDi was hit by a regulatory probe back home within days of its 2021 float in New York, the 129 Chinese and Hong Kong companies that have gone public stateside have been minnows, raising an average $35mn apiece.
That leaves Hong Kong competing most fiercely against Shanghai — which is currently basking in the riotous debut of memory-chip maker CXMT — and Shenzhen. In mainland China, IPO filings are still public from the get-go, but companies can’t easily go elsewhere without approval from the Chinese government, as Shein’s long wait to go public shows. All of which makes Hong Kong’s efforts look more like a gesture of global competitiveness than the real thing.
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