HK's new board seen a big draw for startups, not secondary listings


* New board could lure tech startups
    * Less likely to attract Chinese firms already listed
    * New rules overcome hurdles that prevented big-name

    By Elzio Barreto
    HONG KONG, June 20 (Reuters) - Hong Kong stock exchange's
plans for a new board to allow sweeping changes to its listing
rules could lure a slew of technology startups, though they are
less likely to attract Chinese firms already listed overseas.
    Major Chinese firms including Alibaba Group Holding Ltd
<BABA.N>, search giant Baidu Inc <BIDU.O> and e-commerce
platform JD.com Inc <JD.O> all picked New York over Hong Kong
for initial public offerings (IPOs). So the new rules offer Hong
Kong a chance to bring the tech titans closer to home with a
secondary listing.
    But bankers say these companies are not likely to get a big
pickup in valuation or trading activity to justify the cost and
regulatory burden of a secondary listing.
    "The appeal for unlisted companies is more obvious than for
already-listed companies, especially for the non-giants. If your
market cap exceeds $10 billion, your liquidity and valuation is
global," said Kai Fang, head of equity capital markets at
boutique investment bank China Renaissance, which has advised on
some of China's top technology deals.
    Hong Kong Exchanges and Clearing (HKEX) <0388.HK>, which
operates the stock exchange, unveiled a proposal on Friday for a
new board that would allow companies with share structures
providing special voting rights, and those yet to make a profit,
to list.
    They were the two key hurdles that prompted Chinese startups
to choose New York instead of Hong Kong for IPOs. [nL3N1JD2YV]
    If approved, the changes could be implemented at the
beginning of 2018, HKEX chief executive Charles Li said on
    Potential new business for the exchange could be
    Chinese companies targeted by the new board raised IPO funds
of $49 billion in the past 10 years, including $34 billion
raised by mainland companies that listed in the United States
with weighted voting rights structures, the HKEX said. Those
included Alibaba, Baidu and JD.com. Another $15 billion was
raised by Chinese companies that had yet to make a profit.
    Such a voting-rights structure is critical for many unlisted
Chinese firms such as ride hailing company Didi Chuxing, Ant
Financial and food delivery provider Meituan-Dianping. The three
companies, with a combined valuation of about $130 billion, have
different classes of stock to give founders control of the
    "They're trying to attract some of the high profile
companies that have dual class structures and wouldn't list here
otherwise," said an investment banker who worked on recent
Chinese technology listings in the United States and who
declined to be identified. "Without those changes, these
companies just won't come to Hong Kong, full stop."
    Still, some companies with little turnover or low valuations
overseas might seek a secondary listing in Hong Kong to bolster
their prospects, including Chinese firms that had been
considering a delisting from New York.
    Manchester United <MANU.N>, which scrapped a Hong Kong IPO
because of its dual share structure, could get a boost from
Asian investors appetite for sports-related assets, the bankers
    "If you're looking at some companies that have relatively
low liquidity in the U.S., then the dual listing could make
sense," Fang added. "The Hong Kong stock exchange is trying to
find a way to lure some companies that might originally achieve
a premium valuation in Hong Kong, but due to the voting rights
issue they choose to list somewhere else."

 (Reporting by Elzio Barreto; Editing by Neil Fullick)
 ((elzio.barreto@thomsonreuters.com;)(852)(2843-1608; Reuters
Messaging: elzio.barreto.thomsonreuters.com@reuters.net))


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