The Hong Kong Stock Exchange (HKEX) is easing up IPO public float requirements and is reforming IPO price discovery processes following a market rebound in the first half of 2025.
According to a recent analysis by law firm Linklaters, the Hong Kong bourse navigates its way to boost the administrative region's position as Asia's premier IPO hub,
The new regime, which took effect August 4, introduces key requirements and changes, including revised Open Market Requirements at IPO and updates to the IPO Offering Mechanism.
Linklaters highlights that the bourse is introducing a new free float requirement that now applies to all new primary listings (and not secondary listings), adhering to the principle of ensuring sufficient liquidity in newly listed shares by establishing a minimum “pool” of shares that are not subject to lock-up restrictions and are available for trading at the time of listing.
Further, the framework for a typical offering mechanism for a Hong Kong IPO, including the placing guideline, clawback mechanism, numerous guidance published by the Exchange, as well as market practice, has been modified to optimise the IPO price discovery process and updated to better align Hong Kong with practices in other international markets.
Linklaters says HKEX is now running a further two-month consultation for market feedback on proposed revisions to public float requirements for listed issuers, aligned with the new IPO public float regime, with the deadline of submission on Oct. 1.
Proposed revisions include:
- Greater flexibility for large-cap listed issuers: The Exchange proposes more flexibility for issuers whose public float has a sufficiently high market value.
- Alternatives to suspension: Instead of requiring suspension when the public float falls below the minimum requirement (currently 15% or 10%), the proposals would introduce: (a) a mechanism to allow investors to identify issuers with significant public float shortfalls, and (b) enhanced disclosure requirements.
- Requirements for A+H PRC issuers: The Exchange is proposing a new bespoke public float regime for these issuers, ensuring that either the minimum number of H shares or the market value of their H shares remain listed in Hong Kong to maintain a “critical mass” for trading in Hong Kong.
- Enhanced disclosure: The Exchange proposes to strengthen the ongoing disclosure obligations for all issuers to provide the market with more granular, transparent information about their public float and share capital structure.
