For any growth-stage business, going public is a huge step. If you’re looking to hit the public capital markets without dealing with the giant hurdles of a main board, perhaps you are considering using the Growth Enterprises Market as your launching point. This is a market for small- and mid-sized companies ready to grow. We dissected the new listing rules and financial benchmarks so you don’t have to.
Here’s precisely what you must do and know to prep your business for a successful listing.
Auditing your eligibility for the Growth Enterprise Market: An introduction to financial and regulatory benchmarks
Beyond just a great product, looking to sell it via a public exchange. You require a verified track record. Regulators need to know that your business is stable, legally compliant, and prepared for public scrutiny.
In other words, you need to show that your company has management continuity for at least 2 years going back from the financial year immediately preceding your listing. You also require continuity of ownership and control for the 12-month financial year preceding the issuance of your listing document.
Financial Health Check: Analyzing revenue growth, EBITDA margins, and net asset requirements for listing
A lot of founders think you need massive net assets or perfect EBITDA margins to go public. But recent regulatory changes are opening up new paths for high-growth companies. To qualify, you usually have to meet one of two primary financial tests.
The Cash Flow Test
This is the traditional route. Your company is required to produce a positive operating cash flow in aggregate of at least HK $30 million over the two financial years immediately prior to your listing.
The Market Capitalization and Revenue Test
This alternative funding method is ideal for businesses that dedicate significant resources to research and development (R&D). If your revenue, market cap, and research-and-development expenditure meet certain thresholds for your latest two financial years, you can also be exempt from the cash flow rule.
Corporate Governance and Compliance: Establishing a board of directors and internal controls that meet institutional standards
Public investors require transparency and accountability. You have to build a strong corporate governance structure before you list.
You must name an independent compliance consultant. This adviser will help shepherd your board through the listing process and remain on your team until after you’ve released the financial results for your first full year as a public company. You must also create a separate board committee to oversee financial reporting and internal controls.
Optimizing your startup booted fundraising strategy: Transitioning from private rounds to public market readiness
A startup booted fundraising strategy often relies on pitching to a small group of angel investors or venture capitalists. Going public changes everything. You have to turn your attention to institutional and retail investors who value liquidity and predictable growth.
Regulators ask for a minimum public float as part of this transition. At the time of listing, you must have at least 25% of your company’s total issued share capital held by the public. In addition, the three largest public shareholders may not collectively own more than 50% of those publicly held shares.
Scalability Data Table: Key performance indicators (KPIs) and quantitative metrics required for market entry
Go over this checklist to determine whether your company hits the precise quantitative benchmarks for a successful entry into the market.
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Key Performance Indicator |
Required Market Threshold |
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Minimum Public Float |
25% of the total issued share capital |
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Public Shareholders |
At least 100 public shareholders |
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Cash Flow Route |
HK$30 million operating cash flow (over 2 years) |
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Alternative R&D Route: Revenue |
HK$100 million aggregate revenue (over 2 years) |
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Alternative R&D Route: Market Cap |
HK$250 million minimum market capitalization |
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Alternative R&D Route: R&D Spend |
HK$30 million minimum aggregate R&D expenditure |
Risk Management and Reporting: Building the infrastructure for transparent, real-time financial disclosures
When you are listed, your financial reporting must run like clockwork. Recent reforms have simplified those obligations, reducing compliance costs.
The requirement for quarterly reporting is also repealed. Instead, your organisation will have to issue its annual reports within four months after the end of your financial year. You also have to publish interim half-year reports within three months of the end of the period. Having a robust internal finance team will be key to meeting these stringent regulatory deadlines down the road.
Ready to Ring the Bell? Next Steps for Your IPO
The move toward a public market requires careful planning and accurate execution. Begin with a robust internal audit of your cash flow, management structure, and cap table. Get early engagement with a licensed sponsor to address any compliance gaps. If you prepare correctly, your startup can successfully access the capital it requires to provide its next stage of growth.
FAQs
Do founders have a lock-up period after listing?
Yes. The initial public offering includes a lock-up period preventing controlling shareholders from disposing of any shares for the first six months.
Do I need to appoint a sponsor?
Absolutely. You will have to hire an approved sponsor who performs due diligence, guides your application, and delivers a prospectus that complies with all regulatory requirements.
Can a company transfer to the Main Board later?
Yes. Eligible issuers with a three-year track record in the growth market may transfer to the Main Board without issuing a new prospectus, subject to a streamlined notification and transfer mechanism.
How much daily trading volume do I need to transfer boards?
To be eligible for a streamlined pathway to the Main Board, you must achieve a daily turnover of at least HK$50,000 on 50% or more of trading days during the reference period of 250 days.
Can employee shares count toward the public float?
Yes, but employee-held shares count toward the minimum 25% public float requirement only if those employees are not deemed connected persons and/or directors.
