Hong Kong allowing listing applicants more privacy sparks wave of confidential filings
The Hong Kong exchange's rule for U.S.-style confidential filings, which allows certain companies to keep their business plans and financials under wraps in the initial stages of their stock market debut process, was implemented in May.
Chinese companies, including autonomous driving firm Zelos Tech and artificial intelligence (AI) startup MiniMax, have filed confidentially in recent months to get themselves listed in the city, according to separate sources.
Most filings followed the launch of the Technology Enterprises Channel (TECH) in May, allowing certain niche biotech and technology firms, including AI companies, to apply privately.
Confidential filings appeal to sectors such as AI and semiconductors that are deemed sensitive due to heightened macroeconomic and geopolitical risks, advisers say. The mechanism allows firms to navigate the regulatory review process without public disclosure, offering flexibility when IPO timelines are uncertain, according to several senior bankers at global and Chinese investment banks.
Previously, without getting exemptions from the Hong Kong exchange, only firms already listed on another major overseas bourse could lodge draft prospectuses confidentially ahead of launching a share sale in the Asian financial hub.
The new filing mechanism is set to bolster Hong Kong as a preferred fundraising venue mainly for Chinese companies amid fierce competition with other major listing venues, notably New York, where confidential filings have been allowed for years.
A record number of Chinese companies are seeking a U.S. listing this year, braving volatile Sino-U.S. relations and U.S. calls for strict oversight of Chinese firms, Reuters reported last week.
Still, Hong Kong has been propelled by the influx of Chinese companies to the global top spot by listing volume of initial and second listings so far this year, overtaking its biggest rival, New York Stock Exchange, according to data from LSEG.
The listing momentum is set to continue with more than 190 listing applications - approximately 45% in technology and 20% in healthcare, according to the exchange operator Hong Kong Exchanges and Clearing Ltd (HKEX) (0388.HK), opens new tab.
U.S.-listed robotaxi companies Pony AI (PONY.O), opens new tab and WeRide (WRD.O), opens new tab have also submitted confidential filings for their second listings in Hong Kong earlier this year, two sources with knowledge of the matter said.
The sources declined to be named as they were not authorised to speak to the media.
MiniMax, Pony AI and WeRide declined to comment. Zelos did not respond to Reuters' request for comment.
HKEX declined to comment for this story or on the total number of confidential applications.
Other companies not covered under the newly-launched TECH initiative can request a waiver from the Hong Kong exchange to keep their listing applications private, according to capital markets bankers and lawyers.
Fast-fashion retailer Shein, for example, lodged its filing for a Hong Kong IPO confidentially last month, in the most high-profile such case so far, according to two separate sources with direct knowledge of the matter. Shein did not respond to a request for comment.
Confidential filings are advantageous in the innovation-driven economy.
Biotech companies are particularly cautious about releasing information on their projects and research and development plans due to intense competition in the sector, according to Jean Thio, a Clifford Chance capital markets partner.
"These companies have valuable IP that's being developed and they're trying to monetise that," Thio said.
"If you were to put all that information out at such an early stage, there are worries that you could be leaking confidential trade secrets which your competitors could use against you."
A typical IPO process in Hong Kong generally takes at least six months from filing preliminary documents to launching the book, bankers and lawyers said.
"The market just shifts overnight with geopolitical or just tariff news. No one wants to be in the headline of an IPO flop after they file," said a Chinese company executive who held discussions about filing confidentially for a Hong Kong IPO.
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