A digital leap for IPOs

By Melissa Tan

Like any Hong Kong firm which depends on initial public offerings (IPOs) for a significant amount of business, we follow developments in the sector with more than passing interest. So confirmation that this city’s new – and long-awaited – digital platform designed to speed up the IPO process will be launched in just three weeks is welcome news.

The Fast Interface for New Issuance (FINI), due to become operational on 22 November, will cut the time between listing pricing and the start of trade from the current five business days to two. While the present system involves manual processes and much paperwork, FINI is a cloud-based platform that allows all parties involved in the listing process to collaborate digitally in real time.

Stock market operator Hong Kong Exchanges and Clearing (HKEX) is optimistic the platform will boost investor confidence and increase this city’s attractiveness as a listing venue. Why? The shorter “settlement window” for offering, pricing and listing will result in lower risks for issuers and investors, goes the thinking.

It also brings greater efficiency for stakeholders and aligns Hong Kong with international best practices. The US Securities and Exchange Commission, for example, reduced its three day settlement period to two days as long ago as 2017 and is planning on bringing it down to just one day sometime next year.

For the uninitiated, an IPO involves multiple parties – such as sponsors, underwriters, legal advisers, banks, clearing participants, share registrars and regulators – performing specific and sometimes overlapping tasks. At Headland Intelligence, we work with IPO sponsors, typically investment banks, in carrying out background searches and providing a comprehensive overview of the listing company. Our report serves as a validation of the listing applicant’s corporate disclosures.

Clearly, therefore, any innovation which brings increased listing activity to Hong Kong – not to mention less paperwork and enhanced efficiency – is fine with us.

If truth be told, FINI’s imminent arrival is much-needed. HKEX is currently wrestling with a business slowdown which has seen share listing volumes hit a 20-year low in the first three-quarters of this year. Hong Kong is currently the ninth best performing IPO venue globally, quite a fall from grace for a city which has been ranked as the world’s largest IPO market seven times in the past 12 years. Some 42 companies raised US$3.13 billion here from January through September, according to data company Refinitiv, a 65% drop in funding from the same period last year.

While FINI alone is not a magic wand to revive Hong Kong’s sluggish market – global factors and geopolitics are at play, after all – it is further proof that HKEX is doing all it can to ensure we stay competitive in the IPO field. FINI’s impending implementation follows the opening of a New York office in June and a London office several weeks ago amid ongoing efforts to attract more international listings.

HKEX describes the launch of FINI as “a milestone development in the evolution of the city’s capital markets”. At Headland Intelligence, we are ready for lift-off.

Melissa Tan is Managing Director of Headland Intelligence, having founded the company in 2021. She takes pride in being the first port of call for many business owners, not-for-profits and professional parties when problems arise.