HONG KONG STOCK EXCHANGE PROPOSES GEM LISTING REFORMS
The Stock Exchange of Hong Kong Limited (Exchange) released a consultation paper on 26 September 2023, outlining its proposals
for GEM listing reform. The paper aims to gather feedback from the market, with the deadline for providing input set for 6 November 2023.
BACKGROUND
Since 2019, there has been a notable decrease in the number of new listings on the Growth Enterprise Market (GEM) as well as the
funds raised through these listings. In fact, no new listings have occurred on GEM since January 2021. Recognizing the importance
of GEM as an option for small and medium-sized enterprises (SMEs) to secure capital for growth, innovation, and value
creation, the local stock exchange has acknowledged that promoting and facilitating SME listings remains a top priority. After engaging with various stakeholders to understand their concerns regarding GEM, the Exchange has developed proposals aimed at reforming the GEM listing regime.
KEY PROPOSALS
(A) Proposed amendment – introduction of a new financial eligibility test The proposed amendment by the Exchange includes the introduction of a new financial eligibility test known as the “market capitalization/revenue/R&D test.” This test specifically targets high-growth enterprises that actively participate in research and development (R&D) activities. Meanwhile, the existing cash flow base test will remain unchanged and will remain an available option for companies.
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