The Stock Exchange of Hong Kong Limited (the Exchange), a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEX), today (Tuesday) published a revised Guidance Letter HKEX-GL85-16 (Guidance) allowing the existing shareholders (including pre-IPO investors) and cornerstone investors2 of a new applicant to subscribe for or purchase further securities in an IPO3 (i.e. to double dip) under certain specified conditions (see Size Exemption Conditions below).

The objective of the new exemption is to provide more flexibility to independent investors. Greater IPO participation by independent investors of a listing applicant should help ensure that the IPO price discovery process is robust and results in a final offer price that reflects market opinion.

With immediate effect, “double dipping” will be permitted if it can be demonstrated that an IPO meets the new Size Exemption Conditions, namely that:

the offer has a total value of at least $1 billion;

the allocation to all existing shareholders and their close associates (whether as cornerstone investors and/or as placees) as permitted under the exemption does not exceed 30 per cent of the total number of securities offered;4 and

each director, chief executive, controlling shareholder and, for PRC issuers5, supervisor, of the listing applicant have confirmed that the listing applicant’s offer securities are not allocated to them or their close associates under the exemption.

“HKEX is committed to reviewing and elevating our listing proposition. We believe this new arrangement will be beneficial to the book building and share allocation process and is designed to maintain the optimum balance between market facilitation and investor protection,” said Katherine Ng, HKEX Head of Listing.

The revised Guidance will take effect immediately and is available on the HKEX website. A marked-up version showing changes against the last published version of the Guidance is also available on the HKEX website.

Notes:

1.“Double dipping” refers to a subscription for, or purchase of further securities by, an existing shareholder or a cornerstone investor of a listing applicant in its IPO.

2.A “cornerstone investor” generally refers to an investor who is allocated IPO shares under the placing tranche on an assured basis and who usually agrees to restrictions on share disposal.

Under this exemption, an existing shareholder of a listing applicant and/or its close associate may also be a placee or a cornerstone investor in an IPO whereas a cornerstone investor of the listing applicant may subscribe for or purchase further securities as a placee in the IPO.

3.Each allocation made in excess of the 30 per cent cap will be subject to the applicable requirements under the Listing Rules and the Exchange's guidance as amended from time to time (including any applicable conditions and alternative exemptions).

4.Issuers which are duly incorporated in Mainland China as joint stock limited companies.