Howse Williams’ Capital Markets Quarterly aims to provide you an overview of the various regulatory and market updates in the third quarter of 2025, with summaries of some of the key amendments in the rules and guidelines, as well as important decisions made by the regulatory authorities in Hong Kong. We will also highlight some of the major market transactions over the last 3 months.

 

A) Regulatory Updates

 

The Stock Exchange of Hong Kong Limited (the "Exchange")

 

The Exchange Concludes Consultation on IPO Price Discovery and Open Market Requirements; Launches Further Consultation on Ongoing Public Float Proposals

 

In August 2025, the Exchange published conclusions to its consultation paper on proposals to optimise IPO price discovery and open market requirements (“Consultation Paper”), and launched a further consultation on ongoing public float proposals (“Conclusions and Further Consultation Paper”).

 

Conclusions to IPO price discovery and open market reform proposals

 

The Exchange received 1,253 responses to the Consultation Paper from a broad range of respondents. Having considered the responses, the Exchange will adopt most of its proposals, with some modifications and clarifications.

 

The key changes to the listing requirements include:

 

IPO offering and pricing mechanisms

 

1. Requiring issuers to allocate at least 40 per cent of its shares initially on offer in an IPO to its bookbuilding placing tranche.

 

2. Revising the IPO allocation and clawback mechanism for the public subscription tranche, by allowing a new listing applicant to choose either Mechanism A or Mechanism B as its IPO offering mechanism:

 

• Mechanism A: prescribed allocations to the public subscription tranche with maximum clawback allocation at 35 per cent.

 

• Mechanism B: an alternative mechanism that requires a minimum 10 per cent initial allocation (and a maximum of up to 60 per cent) of offer shares to the public subscription tranche with no clawback mechanism.

 

Open market requirements

 

3. Requiring an issuer to meet the minimum public float and free float requirements at the time of listing.

 

Transitional arrangements have also been made to the existing ongoing public float requirements to ensure their compatibility with the new initial public float requirements.   These arrangements will be superseded and replaced by the final ongoing public float requirements to be implemented following the further consultation on ongoing public float proposals (see below).

 

Further consultation on ongoing public float proposals

 

In response to market feedback on the appropriate ongoing public float requirements, the Exchange is also launching a further consultation on detailed proposals on those requirements.

 

A comparison of the current and proposed ongoing public float requirements is set out below:

 

	Current Requirement	Proposed requirement
Ongoing public float thresholds
Issuers (not incorporated in Mainland China) with a single class of shares	Maintain at all times the percentage of public float prescribed at listing, i.e. 25% or any lower percentage prescribed at listing (the “Initial Prescribed Threshold”)	Maintain at all times: the Initial Prescribed Threshold; OR the Alternative Threshold of HK$1 billion in value and 10% public float
H-share issuers with no other listed shares
A+H issuers		H shares in public hands must have HK$1 billion in value OR 5% public float
Public float shortfall	Breach of Listing Rules if public float falls below the applicable ongoing public float thresholds
Consequence of public float shortfall
Obligations upon breach	Obliged to restore public float and publish announcement	Obliged to restore public float and publish announcement; AND Restricted from taking actions that may further lower public float percentage
Trading suspension	Exchange reserves right to direct trading suspension in case of a public float shortfall	No suspension solely due to a public float shortfall
Delisting mechanism	Delisting if trading is suspended for 18 months (GEM: 12 months)	Impose stock marker if issuer has a significant public float shortfall; AND Delisting if issuer fails to restore public float within 18 months (GEM: 12 months)
Public float reporting	Confirm public float sufficiency in annual reports	Confirm public float sufficiency in monthly returns and annual reports, with additional actual public float disclosure requirements

 

A copy of the Conclusions and Further Consultation Paper is available on here.

 

Update to Guidance Letter, FAQs and Guide for New Listing Applicants (“Guide”)

 

Updated Guides and FAQs

 

The Guide on General Meetings, the FAQs on continuing obligations (FAQ10 – No.1-38) and the FAQs on core shareholder protection standards (FAQ16 – No.1-8) have been updated to offer guidance to issuers on the Exchange’s practices and procedures for handling matters in relation to further expansion of the paperless listing regime.

 

The Guidance Materials for Listed Issuers was also updated to reflect the Rule amendments as set out in the consultation conclusion of the Consultation Paper as discussed above.

 

Amendments to the Guide

 

The Exchange has updated the Guide for New Listing Applicants to include guidance on the following matters:

 

 

(i). To reflect consequential amendments after the implementation of the proposals and related Rule amendments set out in the Conclusions and Further Consultation Paper;

 

(ii). To include further guidance on the sophisticated investor requirement for a Biotech Company under MB Chapter 18A and a Specialist Technology Company under MB Chapter 18C; and

 

(iii). To include reference to questionnaires to facilitate the collection of the required additional information relating to placees.

 

The above amendments have come into effect on 4 August 2025.

 

The Exchange’s Disciplinary Actions

 

In the third quarter of 2025, the Exchange published sanctions in 3 cases which involve (i) transactions involving connected parties or failure to disclose and comply with procedural requirements, and (ii) directors’ failure to safeguard listed issuer’s interests, discharge directors' duties and obligations under the Listing Rules and cooperate in investigations.  Listed issuers should exercise caution and put in place proper check and balance, and transaction monitoring mechanisms.

 

News release date	Issuer/ directors involved – summary of conduct
15 Sep 2025	Director of LET Group Holdings Limited (Delisted, Previous Stock Code: 1383) and Summit Ascent Holdings Limited (Delisted, Previous Stock Code: 102) In May 2022, the executive director of two listed issuers became the controlling shareholder of one issuer, which held approximately 69.7% of the issued shares of the other. The executive director failed to discharge his duties as a director of each of the listed issuers in relation to the proposed sale of a hotel and gaming business in Russia by an indirect subsidiary of the listed issuer. Despite multiple warnings from the Exchange, the Securities and Futures Commission, and the two listed issuers’ legal advisers, the executive director procured the indirect subsidiary to proceed with the proposed disposal in December 2023, which constituted a very substantial disposal under Chapter 14 of the Listing Rules The executive director claimed he acted in the best interests of the indirect subsidiary and its shareholders, citing a desire to reduce risk exposure in Russia and that the disposal was priced at a 30% premium. However, the Exchange deemed these justifications insufficient to warrant his actions. A Director Unsuitability Statement and public censure were imposed against the executive director. Furthermore, the Exchange directed that if the executive director remains in his role after 14 days from the publication of its disciplinary action, the listing of the Companies’ shares will be cancelled.
02 Sep 2025	Shanghai Henlius Biotech, Inc. (Stock Code: 2696) and One Former Director On the listed issuer’s first day of listing, it entered into an investment management agreement to manage its total IPO proceeds of US$117 million. This use of funds did not match the intended use stated in the prospectus, and the listed issuer failed to disclose the agreement in its listing documents, announce the agreement or disclose the amount involved in its 2019 and 2020 annual reports. The former director approved an upfront management fee payment without adequately fulfilling his director duties. In particular, he did not review the agreement or understand the associated rights and obligations, nor did he present the matter to the Board or consult the lister issuer’s compliance adviser. Had he done so, he would have questioned the agreement's terms, noted the deviation from intended use of IPO proceeds, and ensured the listed issuer’s compliance with Listing Rules. Censures were made against the listed issuer. The former director was criticized, and was directed to attend 26 hours of training on regulatory and legal topics and Listing Rule compliance.
12 Aug 2025	Two Former Directors of TOMO Holdings Limited (Stock Code: 6928) The Exchange has taken its first-ever disciplinary action against two former directors of a listed company for failing to cooperate in investigations conducted by both the Exchange and the Securities and Futures Commission (“SFC”) The SFC investigated potential violations of the Securities and Futures Ordinance (“SFO”) involving the listed issuer and related individuals. It issued notices to the two former directors for information regarding the investigation, but neither responded. Consequently, the SFC referred the matter to the Exchange for action under the Listing Rules. The Listing Division of the Exchange was also conducting an investigation into whether the two former directors had discharged their duties and obligations under the Listing Rules. Neither of them responded to the investigation. Both of the former directors breached the Listing Rules by failing to cooperate with the Exchange and the SFO in their respective investigations, and the Exchange has publicly censured the two former directors.

 

Securities and Futures Commission (the “SFC”)

Takeovers Bulletin No. 74

Redaction from Documents on Display

 

Service contracts and certain other DoDs may contain sensitive personal data such as passport or HKID numbers and residential addresses. Where public disclosure of any personal information is prohibited under the Personal Data (Privacy) Ordinance (Cap. 486) or similar laws in other relevant jurisdictions (eg. In the absence of the consent of the data subject), the SFC considers it necessary and appropriate for such information (Protected Personal Information) to be redacted from DoDs. It is the responsibility of the offeror and the offeree company  to seek advice and assistance from their advisers where necessary, and identify and redact any Protected Personal Information contained in DoDs before uploading the files to WINGS to ensure full compliance with relevant privacy laws.

 

To facilitate the SFC’s consideration of any redaction proposals, the parties should provide the following documents:

 

1. A submission explaining the basis of the redaction proposal;

 

2. A copy of the proposed redacted version of the DoD, showing clearly the redactions and setting out, on the front page, the following:
   1. A statement to the effect that certain information contained in the document has been redacted, together with a brief description of the nature of the information redacted and reasons for redaction; and
   2. A confirmation that the remaining information is considered adequate by (i) the offeror/ offeree company and its directors, (ii) the financial adviser to the offeror/offeree company for the purpose of disclosing the nature and significance of the document, and for the offeror/offeree company to fulfil its relevant disclosure obligations under the Codes on Takeovers and Mergers and Share Buy-backs;

3. written confirmations from the offeror or the offeree company as well as its directors and financial adviser in a form identical or substantially similar to the confirmation referred to in paragraph 2(b) above.

 

Disclosures of effects of dividends and other distributions on offer price

 

Under Note 1 to Rule 18, an offeror shall be bound by any firm statements it has made as to the finality of its offer and normally may not withdraw its offer. Under Rule 18.1, an offeror must not make a statement to the effect that it may improve its offer without committing itself to doing so and specifying the improvement.

 

If an offeror intends to reduce the offer consideration in the event of any dividends or other distributions which might subsequently be paid or become payable by the offeree company, the offeror must specifically reserve the right to do so in the Rule 3.5 announcement, indicating clearly whether the reduction will be equivalent to all or a quantified portion of the specified dividend or other distribution. In the absence of a clear indication of its intention, the offeror should not deduct any subsequent dividends or other distributions from the offer consideration.

 

In contrast, an offeror is normally free to increase the offer consideration after a Rule 3.5 announcement unless it has made a “no increase” statement. Under Note 4 to Rule 18, only in wholly exceptional circumstances will an offeror be allowed to amend the terms of its offer if it has made a “no increase” statement without specifically reserving the right to set aside that statement.

 

Therefore, if an offeror makes a “no increase” statement but does not intend to reduce the offer consideration by the entire amount of any subsequent dividends or other distributions, it should explain its intention with regard to dividends or other distributions at the same time as it makes the “no increase” statement. The explanation should state the extent to which shareholders will be entitled to receive any subsequent dividends or other distributions in addition to the offer consideration.

 

B) Market Update

 

There were 118 new Main Board, 3 new GEM IPO applications accepted by the Exchange and 25 IPOs launched in the third quarter of 2025 that consists of a diverse range of businesses. Examples of some of the recent Main Board listings are:

 

Issuer	Description
Chery Automobile Co., Ltd. (Stock Code: 9973)	A China-based company principally engaged in the manufacturing and sales of passenger vehicles and automotive parts and components. Its retail offering was over-subscribed by 2,681.3 times with estimated net proceeds from the IPO of approximately HK$8.88 billion. To date, its market capitalisation is approximately HK$73.75 billion.
Dahon Tech (Shenzhen) Co., Ltd. (Stock Code: 2543)	A China-based company primarily engaged in the development, design, manufacturing, and marketing of folding bicycles and related accessories. Its retail offering was over-subscribed by 7,557.4 times with estimated net proceeds from the IPO of approximately HK$342.20 million. To date, its market capitalisation is approximately HK$412.63 million.
Ab&B Bio-Tech CO., LTD. JS (Stock Code: 2627)	A China-based company primarily engaged in the research, development, manufacturing, and commercialization of vaccines. Its retail offering was over-subscribed by 4,006.6 times with estimated net proceeds from the IPO of approximately HK$$382.7 million. To date, its market capitalisation is approximately HK$14.61 billion.
Butong Group (Stock Code: 6090)	A holding company principally engaged in designing, researching, developing, manufacturing and selling of nursery products. Its retail offering was over-subscribed by 3,316.5 times with estimated net proceeds from the IPO of approximately HK$718.26 million. To date, its market capitalisation is approximately HK$9.44 billion.
Guangzhou Innogen Pharmaceutical Group Co., Ltd. (Stock Code: 2591)	A China-based investment holding company principally engaged in the research, development and commercialisation of pharmaceutical products. Its retail offering was over-subscribed by 5,340.7 times with estimated net proceeds from the IPO of approximately HK$634.7 million. To date, its market capitalisation is approximately HK$16.53 billion.
Nanjing Leads Biolabs Co., Ltd. (Stock Code: 9887)	A China-based company primarily engaged in the discovery, development, and commercialization of new therapies in oncology, autoimmune, and other severe diseases. Its retail offering was over-subscribed by 3,493.8 times with estimated net proceeds from the IPO of approximately HK$1.18 billion. To date, its market capitalisation is approximately HK$10.72 billion.

 

 

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Disclaimer: The information contained in this article is intended to be a general guide only and is not intended to provide legal advice. Please contact [email protected] if you have any questions about the article.