Hong Kong regulators issue guidance to sponsors, underwriters and placing agents on GEM initial public offerings

New listings on the Growth Enterprise Market (GEM) in Hong Kong have been repeatedly in the headlines in recent years for dramatic share price increases on their listing debuts and high share price volatility in post-listing periods. This has led to regulatory concerns. The Securities and Futures Commission (SFC) has been working with the Stock Exchange to review listing policy, including a holistic review of GEM, interlinked with a review of backdoor listings, listed shells and companies with prolonged suspensions.

On 20 January 2017, the SFC and Stock Exchange released a joint statement regarding the price volatility of GEM stocks (Joint Statement). On the same day, the SFC issued guidelines to sponsors, underwriters and placing agents involved in the listing and placing of GEM stocks (Guidelines). These seek to clarify the expectations on those involved in GEM listings and placings pending further regulatory reform.

In our recent bulletin, we highlight the key points in the Joint Statement and Guidelines and the impact for those involved in GEM listings. If you wish to discuss this further, please do not hesitate to contact William Hallatt, Matt Emsley, Tommy Tong, Jason Sung or your usual Herbert Smith Freehills contact.

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