Hong Kong Exchange Denies IPO -- WSJ
July 26 2017 - 03:02AM
Dow Jones News
Rare rejection is given to firm with backing from Morgan Stanley
and Asian billionaire
By Ese Erheriene and Gregor Stuart Hunter
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (July 26, 2017).
Hong Kong's stock exchange has rejected the application for a
potentially multimillion-dollar listing involving one of Asia's
richest men, as the city -- a hot spot for initial public offerings
-- has come under increasing regulatory scrutiny.
The exchange in June sent back the IPO application of AMTD
Strategic Capital Group, which was filed the previous month,
deeming it to be "substantially incomplete" without elaborating on
what it found lacking, according to a list posted on its
website.
The commercial-insurance brokerage firm was seeking to
potentially raise about $200 million, according to reports. AMTD
Strategic Capital is majority owned by AMTD Group, an Asian
financial firm founded in 2003 whose other businesses include an
investment bank. Among the group's owners are CK Hutchison Holdings
Ltd., the Hong Kong-based conglomerate controlled by billionaire Li
Ka-shing, and Morgan Stanley's private-equity arm.
Such rejections are rare in Hong Kong: This was only the sixth
time in four years that it has occurred, according to exchange
data.
AMTD and CK Hutchison didn't immediately respond to a request
for comment. Morgan Stanley declined to comment.
A spokesman for the exchange operator, Hong Kong Exchanges &
Clearing Ltd., didn't offer any details beyond what it had posted
online.
In recent years, Hong Kong has been trying to strike a balance
with its regulatory efforts as questions about the effectiveness of
such measures have persisted. Its exchange operator earlier this
year revived a debate over whether it should allow listings of
companies with dual-class shareholding structures, a proposal the
city's securities regulator shot down in 2015. Hong Kong lost the
$25 billion listing of Chinese e-commerce titan Alibaba Group
Holding Ltd. to New York in 2014 in part because it wouldn't permit
companies with that structure to list shares.
Hong Kong IPOs have been dominated for some time by financial
companies, contributing to the market's generation of more money
than any other in 2015 and 2016, according to Dealogic data.
However, so far this year the city has dropped to third, with IPOs
valued at a collective $8.4 billion of IPOs. By comparison, $20.9
billion has been raised in New York and $11 billion in
Shanghai.
The Hong Kong exchange's statement on AMTD's thwarted IPO
emerged in the wake of a selloff late last month of more than a
dozen small-capitalization companies listed on the city's Growth
Enterprise Market, home to many so-called penny stocks that trade
for less than one Hong Kong dollar (13 U.S. cents). Some shares
tumbled more than 90%.
What caused the plunge remains unclear. However, in a speech
earlier this month, the chief executive of the Securities and
Futures Commission said that the regulator had had a "fundamental
rethink" about how it polices the markets and that it would take a
more proactive approach to market intervention. Ashley Alder cited
the reputational damage done by an "accumulation of serious
governance and misconduct issues," including the small-cap
crash.
In response, Charles Li, the exchange operator's CEO, wrote in a
blog posting Sunday that officials should balance the desire for
tougher regulation with preserving smooth operation of the market
at large. "It's not worth getting a few extra dollars in revenue
and allowing bad actors onto our market, which hurts the overall
market reputation and diminishes our business," he wrote.
There have also been questions about the sharing of regulatory
responsibility between the exchange and the SFC. In his posting,
Mr. Li said ensuring a violation-free market, even with the
parallel work of the SFC, would be "very difficult."
The SFC didn't immediately respond to a request for comment.
To be sure, sizable IPOs continue to be launched in Hong Kong
and a flurry of activity is expected toward the end of 2017 --
particularly among companies whose financial years ended in June,
said a person familiar with the matter.
Last week, Zhongyuan Bank Co. became the former British colony's
third billion-dollar IPO of the year, with the large regional
Chinese commercial lender raising some US$1.04 billion.
Write to Ese Erheriene at ese.erheriene@wsj.com and Gregor
Stuart Hunter at gregor.hunter@wsj.com
(END) Dow Jones Newswires
July 26, 2017 02:47 ET (06:47 GMT)
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