Interpreting HKEx IPO Reform: Dual-class Share Structure Threshold Halved, Confidential Submissions Fully Opened

Questioning AI · How to attract unicorns with the threshold cut for dual-class shares?

Since 2025, the enthusiasm for IPOs in Hong Kong stocks has been rising. In 2025, a total of 117 IPOs were launched, raising HKD 286.33 billion, a 224.8% increase year-on-year; at the same time, the scale of refinancing also rose to HKD 326.37 billion, up 272.9%. The fundraising scale of Hong Kong IPOs has returned to the top globally after six years.

Entering 2026, the trend of rushing to Hong Kong for IPOs remains hot. At this critical juncture, Hong Kong Exchanges and Clearing Limited (HKEX), a wholly owned subsidiary of the Hong Kong Stock Exchange, published a consultation paper on March 13, seeking market opinions on a series of proposals to enhance the competitiveness of Hong Kong’s listing mechanism.

Nandu·Wan Cai She reporters noted that the proposals include adjustments to several current Hong Kong stock market thresholds, including dual-class shares and initial listings, which are of particular concern to the market. According to Tian Lihui, Dean of the Nankai University Institute of Financial Development, these adjustments represent another milestone in HKEX’s reform since 2018, and their role in attracting new economy unicorns should not be underestimated.

Dual-class Shares:

Significant Relaxation of Market Capitalization and Financial Standards

Further Relaxation of Innovation Recognition

In Hong Kong’s capital market, “dual-class shares” are officially called Weighted Voting Rights (WVR). This is a differentiated equity arrangement introduced to accommodate the development of new economy companies, characterized by equal economic rights but differentiated voting rights.

Under this system, the stocks of listed companies are fully aligned in dividends, stock price fluctuations, and liquidation distributions, with differences only in governance voting rights: ordinary investors hold shares following the “one share, one vote” rule, while founders and core management hold special class shares with higher voting power.

HKEX’s “dual-class shares” mechanism mainly aims to address the development pain points of new economy and tech innovation companies. These companies often require multiple rounds of financing during growth, which can dilute founders’ shares. Weighted voting rights allow them to maintain control without holding the majority of shares, preventing management changes caused by capital operations and ensuring long-term strategic stability.

The proposals significantly lower the thresholds for companies adopting the “dual-class shares” listing mechanism. First, the market capitalization and financial thresholds are adjusted. Companies with no revenue now require a market cap of HKD 20 billion instead of HKD 40 billion; companies with revenue requirements are lowered from HKD 10 billion market cap and HKD 1 billion revenue to HKD 6 billion market cap and HKD 600 million revenue.

Second, the voting rights cap is increased. For large companies with a market cap of HKD 40 billion or more, the ratio of voting power between different classes is raised from 1:10 to 1:20.

Third, the innovation recognition is adjusted. Previously, only companies in innovative industries could adopt different voting structures for listing. The proposal divides “innovation industry” into two categories: A for “technological innovation” and B for “business model innovation.” It also automatically considers all qualified biotech and specialized tech companies (even if not listed under Chapters 18A or 18C) as “innovation industry” companies.

Dean Tian Lihui believes that these adjustments are another milestone in HKEX’s reform since 2018, and their role in attracting new economy unicorns should not be underestimated.

In his view, the “halving” of financial thresholds directly expands the potential pool of listed companies. This means many growth-stage, unprofitable but high-potential innovative companies now qualify financially for Hong Kong listing for the first time. The relaxed voting rights cap of 20 times provides more room for founding teams to retain control after dilution, which is especially attractive for hard-tech companies needing multiple financing rounds. It is foreseeable that this will significantly enhance Hong Kong’s appeal to unicorns in AI, biotech, and other sectors, consolidating Hong Kong’s position as the preferred listing venue for new economy companies.

Regarding the innovation recognition adjustment, Tian Lihui believes it responds precisely to the evolving needs of the new economy. Currently, the core competitiveness of many high-growth companies lies not in technological breakthroughs but in business model reconstruction, such as new consumer platforms, supply chain integration services, and AI marketing tech. These also require different voting rights structures to safeguard founders’ strategic resolve. HKEX’s clear division of innovation paths into “technology” and “business model,” and the automatic inclusion of biotech and specialized tech companies, significantly broadens the scope of the system.

He also points out that objectively, recognizing business model innovation faces challenges: unlike patentable technologies, the criteria for “model innovation” are more subjective and easier to be packaged or imitated. This requires regulators to maintain flexibility while safeguarding substantive innovation.

Initial Public Offerings (IPOs):

All new applicants can submit confidentially

Stricter return mechanisms to hold intermediaries accountable

To assist high-quality tech companies in listing, HKEX and the Hong Kong Securities and Futures Commission jointly launched the “Tech IPO Pathway” on May 6, 2025, providing convenience for specialized tech and biotech companies applying for listing. This reform, based on Chapters 18A and 18C of the Main Board Listing Rules, offers pre-listing guidance and allows confidential submissions.

The scope of applicants eligible for confidential submission has been expanded. Previously, only qualified secondary listing applicants, biotech companies, specialized tech firms, or certain exempted entities could submit confidential applications. HKEX now proposes that all new applicants may choose to submit confidentially.

Dean Tian believes that fully opening up confidential applications is a key step to align with international markets and will profoundly change IPO decision-making. Confidential submissions allow companies to avoid early exposure of sensitive business information, reducing market volatility and valuation interference, especially benefiting R&D-intensive, competitive sectors like AI and pharmaceuticals. It also offers more flexibility in timing, enabling companies to prepare and disclose information after passing review, thus improving efficiency.

He emphasizes the issue of “trial” applications: some companies may submit documents tentatively, deciding whether to proceed based on feedback. While not necessarily negative, this reflects the system’s inclusiveness. The key is the supporting mechanism: HKEX has strengthened the return process, and if documents are incomplete, all intermediary firms involved will be publicly disclosed, creating strong reputational constraints. This can effectively filter out “testing waters” behavior and prevent confidential applications from becoming a channel for low-quality filings.

This is another important mechanism in HKEX’s adjustments—the return mechanism. Previously, incomplete applications could be rejected, and the HKEX website would publish the sponsor’s identity. The proposal now suggests that upon rejection, all responsible intermediaries (law firms, accounting firms, etc.) involved in preparing the application will be publicly disclosed.

Dean Tian sees this move—disclosing all intermediary identities and roles upon rejection—as a direct attack on the “cutting corners” mentality of intermediaries, significantly improving the quality of listing documents. He notes that previously only sponsors were disclosed, allowing other intermediaries to “free ride.” The reform will make the entire team’s reputation at risk if an application is rejected, as lawyers, auditors, and consultants’ identities and roles are all made public.

He emphasizes that this “joint liability” mechanism creates strong behavioral constraints: it fosters mutual supervision among intermediaries, preventing individual lapses from causing collective shame; at the same time, the increased reputational risk will incentivize institutions to be more cautious in client selection and resource investment during document preparation. This market-based reputation mechanism replaces purely administrative oversight.

Reporting by: Nandu·Wan Cai She reporters Wu Hongsen and Qiu Moshang