There are different ways for Chinese companies to return to Hong Kong stocks, which are mainly divided into: 1) privatization and delisting before coming to Hong Kong to apply for listing; 2) major listing in Hong Kong (dual listing); and 3) secondary listing.

Due to the high cost of privatization and delisting, and the uncertainty of re-listing after delisting, we focus on the more mainstream dual listing and secondary listing.

I. comparison of basic concepts

Dual listing (dual primary listing)It means that both capital markets are primary listing places. If it has been listed on the US market, it will be listed on the Hong Kong market in accordance with the rules of the local market.The rules it has to abide by are exactly in line with the requirements of companies with initial public offerings in Hong Kong. Shares in the two markets cannot be circulated across markets, and share prices are relatively independent, which may lead to price differences.

BeiGene, Ltd. has been listed in many places. In February 2016, the company landed on NASDAQ in the United States and raised US $182 million; on July 29, 2018, it dual listed in Hong Kong, issuing a total of 65.6 million common shares, accounting for 8.55% of the expanded share capital, and finally raised US $902 million.

Secondary listing (secondary listing)It means that companies list the same type of stocks in two places and realize the cross-market circulation of shares through international custodian banks and securities brokers, which mainly exists in the form of depositary receipts (Depository Receipts, referred to as DR).

In this mode of issuance, banks first buy a certain amount of shares of foreign companies and trust them all in the bank, and then the banks package the shares together to sell securities that represent this basket of stocks, which in the United States are called ADR.

If the company is re-listed as a financing Dr, the source of the underlying shares is the company.New issueCommon stock. In terms of pricing, the corresponding DR is on the day of the pricing date.The market price of the company in the original market is converted as the reference price.And a price shall be determined by an agreement between the issuer and the underwriterThis is also the secondary listing method chosen by most Chinese stocks, such as BABA, Baidu, Inc., NetEase, Inc and so on, when they return to Hong Kong.

II. Comparison of issuing policies

1. Dual listing

Compared with the secondary listing, dual listing needs to meet the management requirements of listed companies in both places at the same time, and the overall requirements will be much stricter.If an enterprise chooses to make a dual major listing in Hong Kong, the rules to be observed are no different from those required for the initial public offering of shares in Hong Kong. all the relevant listing rules of the HKEx must be complied with, and the newly revised listing rules in 2018 set out detailed provisions for the listing of Greater China and overseas companies in Hong Kong.

two。 Secondary listing

If an enterprise only makes a secondary listing in Hong Kong, the SEHK expects that the company's securities will mainly be traded on overseas exchanges and will be subject to the supervision of the regulatory authorities of the main place of listing.The SEHK will adopt relatively loose vetting standards and have a number of exemption and preferential policies.

Secondary listing requires listed companies to remain in force.VIE structureAnd different voting structures need to meet certain requirements (listed sector, listing time and market capitalization size), etc., and provide guidance for qualified companies that want to raise funds in the Chinese market. The details are as follows:

1) must be listed on an eligible listed exchange (New York Stock Exchange, NASDAQ Stock Market or London Stock Exchange main Market) and maintain a good compliance record for at least two full fiscal years

2) the market capitalization is at least HK $40 billion at the time of listing, or at least HK $10 billion at the time of listing, and the income for the most recent audited fiscal year is at least HK $1 billion.

III. Liquidity comparison

1. Dual listing:Dual-listed stocks cannot be circulated across marketsAnd as mentioned above, the two markets usually need to be priced separately, such as "A + H shares".

two。 Secondary listing: the ADR (American Depositary receipts) issued by Chinese stocks is fully convertible with Hong Kong stocks.The price of secondary listed shares in the Hong Kong market is closely linked to that in the United States market.. As the shares of the two places are fully convertible and the Hong Kong dollar is pegged to the US dollar, the price difference between the two places is basically negligible after some neglected taxes and fees, as well as friction between trading time and cost.

IV. Discussion on advantages and disadvantages

1. Dual listing

The advantage is that it's completelyMeet the regulatory requirements of the two placesIt is not much different from local listing, and it is more easily accepted by international investors.It is easier to comply with the A-share market regulation into the Hong Kong Stock Connect and lay the foundation for the subsequent return to the A-share market for three listings.

For example, BeiGene, Ltd. was officially included in the Hong Kong Stock Exchange on September 4, 2020, and then started the pace of returning to A-shares after a dual listing in the United States and Hong Kong. On January 29, 2021, the Shanghai Stock Exchange formally accepted Baiji's application for listing on Shenzhou Creative Board. BeiGene, Ltd. plans to raise 20 billion yuan, recommended by China International Capital Corporation and Goldman Sachs Group Gaohua. If it succeeds in landing on the Kechuang board, it will become the first innovative pharmaceutical company listed in three places (US stocks + H shares + A shares).

From the company's point of view, dual listingExpanded its shareholder base and increased the influence of the global marketThus enabling the company to raise funds in other securities markets and further expand its business to other markets.

The disadvantage is that the regulatory requirements of both places need to be met at the same time.The listing process is more complex and takes more time and cost.

two。 Dual listing

The advantage is that the regulatory requirements are relatively simple, compared with dual listing, there are more exemptions and preferential treatment clauses, and the listing cost is lower.

The disadvantage is: the pricing is basically the same as the original market, when subscribingIf the original market price fluctuates and falls out of the pricing range, the risk of a new break is higher.Another disadvantage isIt will be difficult to be included in the stock exchange of Hong Kong stocks in the future.(the mainland has reached an agreement with the HKEx to exclude secondary listings and companies with weighted voting rights from the list of Shanghai and Shenzhen Stock Connect unless the Shanghai Stock Exchange, Shenzhen Stock Exchange and Hong Kong Stock Exchange revise the agreement.)

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