Hong Kong is projected to record 160 new listings in 2020 as the city brings more US-listed Mainland tech firms to the stock exchange, according to a report by Deloitte. They are expected to raise HK$220 billion (US$28.2 billion) in funds next year — and if the market has any mega initial public offerings (IPOs), the fundraising could reach HK$350 billion.
Chinese restaurant chain operator Jiumaojiu International Holdings is planning to be the first of new stock listings in Hong Kong in 2020. The company is seeking to raise HK$2.2 billion in its listing plan.
The announcement was an early boost for the Hong Kong Stock Exchange, which upstaged Nasdaq and the New York rivals as the world’s top venue for initial stock offerings in 2019. Hong Kong topped the global IPO markets again in 2019 with at least 161 listings with total raised funds of HK$311.8 billion.
The landmark listing of Alibaba Group on the main board of the Hong Kong Exchanges and Clearing Limited (HKEX) last November is expected to inspire more US-listed Chinese new economy and overseas companies to list in Hong Kong in 2020.
Reforms including the offering mechanism, proposals for a limited partnership regime for private equity funds, and expansion of the H-share full circulation programme may also help the market gain further favour amongst issuers.
The Hong Kong Stock Exchange hopes to cut the time between pricing an IPO and the shares trading to a single day as early as late 2020, bringing the exchange into line with rivals such as New York. The current IPO settlement time of five trading days leaves investors and bankers exposed to market falls between the shares pricing and trading
Christina Bao, HKEX head of global issuer services, said the exchange planned to shorten the settlement period to a single day and hoped to achieve this by the fourth quarter of 2020.
The wealth and liquidity created during the IPO process will oblige business owners to make some of the most important financial decisions of their lives. A key challenge facing a business owner is how best to transition the wealth accumulated from his or her business to subsequent generations. It is therefore critical to establish an estate plan early in the pre-IPO planning phase because the opportunities will generally diminish as a deal moves toward the closing date.
One decision is whether or not to place their equity into a trust prior to an IPO. If an appropriate trust and entity holding structure is used, the entrepreneur can retain control and stewardship of the company while minimising the commercial and emotional frictions that can arise before and after an IPO.
Sovereign’s team in Hong Kong set up several pre-IPO trusts last year and is very well positioned to assist with any pre-IPO planning in 2020.