The Night Before the Change in Hong Kong Stock Market IPOs: 500 Companies Waiting in Line – Why Has the Robot Industry Suddenly Cooled Down?
Hello everyone, I’m your financial journalist. Today, we’re talking about a “quiet but significant” change in the rules of the Hong Kong stock market.
If you follow investment trends, or if you know people who are starting businesses or working in technology, you might have heard the rumor that the requirements for listing in Hong Kong could be changing.
This is not unfounded. On September 16th, Hong Kong’s Chief Executive, Li Ka-shing, announced the new five-year plan and policy address, which mentioned that the Hong Kong Stock Exchange (HKEX) and the Securities and Futures Commission (SFC) will conduct the “second phase of consultations” this third quarter and will revise the rules specifically for “specialized technology companies” (such as those that haven’t made a profit yet but have impressive technology, classified as 18C) in the first half of next year. The focus is on re-evaluating the “market value threshold.”
In simple terms, in the past, as long as a company was seen as a “star of the future,” it could go public even if it hadn’t made a profit and had a smaller market value. However, this standard might be raised in the future.
Currently, there are over 500 companies waiting outside the doors of the HKEX to get listed. Among them, the most anxious and competitive are the companies in the field of embodied intelligence (humanoid robots).
Today, I’ll break down the logic, current situation, and trends behind this news into five parts in plain language.
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1. Current Situation: A Divided Hong Kong Stock Market IPO Scene
On the surface, the Hong Kong stock market seems very lively. Data shows that 108 new companies have been listed this year, raising over HK$360 billion in funds, ranking among the top in global exchanges. Why is this? It’s because the HKEX has been relaxing the rules in recent years:
- Section 18A: Allows biotech companies that haven’t made a profit to go public.
- Section 18C: Allows “specialized technology companies” (like those in AI and robotics) that haven’t made a profit but have strong technology to go public.
These policies have opened up new opportunities for companies that wouldn’t have met the traditional criteria but represent the future direction of innovation. There were even days when seven IPOs were launched simultaneously.
However, beneath the surface, the market is quite harsh. Despite the excitement, it’s not necessarily easy to make money. As of September 15th, 82 out of these 108 new stocks had fallen below their issue prices, with a break-even rate of over 70%! This means that buying new stocks is likely to result in losses. The market is highly differentiated:
- Hot companies: Those with real strength and performance are attracting a lot of investment.
- Cold companies: Those that rely on hype and have no substantial content see their stock prices plummet shortly after listing.
So, the current IPO era in Hong Kong is no longer one where “going public equals easily raising money”; it has become a period of harsh selection, where only the best survive.
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2. Policy Changes: The 18C Channel Faces Its First Major Test
The core message of this news is that the rules are about to change. Section 18C was designed for companies that haven’t made a profit but have advanced technology, such as those in humanoid robotics and large-scale AI. This channel has been in place for two years, and now it’s undergoing its first systematic review.
Why the change?
The previous thresholds might have been set too low or enforced too loosely, allowing companies of varying quality to enter the market, which affected its credibility.
What’s Changing?
The main focus is on re-evaluating the market value threshold. For example, in the past, a company might have been eligible to list as long as its valuation reached a certain amount and it was in the specialized technology category. In the future, that threshold might need to be raised significantly.
Additionally, the SFC and HKEX are consulting on ways to make the listing process more competitive and transparent, making it harder for companies trying to take advantage of the system.
For companies, this means that the “rules of the game” are about to change. In the past, a good technology and a strong team might have been enough to get listed; in the future, they will also need to demonstrate a solid financial foundation.
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3. Why Are Robot Companies Most Anxious? The “Window Period” is Closing
Among the companies waiting to list, those in embodied intelligence (humanoid robots) are the most anxious.
Why them?
For a while, many robot companies saw Hong Kong as a safe haven or a shortcut to the stock market:
- A-share market: Has higher requirements; companies must have made a profit, have revenue, and have a commercial presence, making it difficult to get approved.
- HKEX Section 18C: Was relatively lenient; as long as a company was in robotics or AI and had a strong team, it could go public.
As a result, many companies flocked to Hong Kong. Public data shows that there are over 50 robot and embodied intelligence companies under review at the HKEX, and the actual number might be even higher if we include those that have submitted their applications secretly.
But the tide is turning:
- Cooling Market Sentiment: The stock prices of leading robot companies that went public on the A-share market have dropped quickly, casting doubt on their valuations.
- Break-even Rates Shaking Confidence: Recent listings of embodied intelligence companies that fell below their issue prices have worried others waiting to list.
- Tighter Regulation: The National Development and Reform Commission has warned against a blind rush into the robotics industry. Regulatory authorities have also provided guidance to investment banks and firms, requiring robot companies to prove they have regular revenue, are reducing losses, or have genuine technological innovations.
Conclusion: In the past, the rule was “if you’re in robotics, you get a chance to list.” Now, it’s “you need to prove you can survive and make a profit before we let you list.”
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4. Logic Change: From “Hype to Reality” – A Complete Reversal in Valuation
This change is not just about updating the rules; it represents a fundamental shift in market investment logic:
- In the past: Investors bought into the “dream” of robotics, believing that humanoid robots would replace human labor and that this was the next billion-dollar industry. A compelling story and a well-presented PPT could lead to high valuations.
- Now: Investors are becoming more pragmatic. They focus on:
- Product Adoption: Have your robots actually been sold? Who are your customers?
- Revenue Sustainability: Is your revenue stable, or is it one-time?
- Customer Quality: Are your customers large companies or small, unproven entities?
This change is reflected in:
- Primary Market (Financing): Investors are more cautious when valuing companies and no longer offer high premiums.
- Secondary Market (Stock Prices): New stock prices are being set more carefully, and cornerstone investors (large institutions) are less willing to subscribe.
- IPO Process: The same prospectus might have been highly sought after half a year ago but is now ignored.
Impact on Companies:
With more companies competing for the same resources, these become scarce:
- Early Entrants: Could have listed easily, with high valuations and easy access to funds.
- Late Entrants: Face fierce competition and downward market sentiment.
The article advises that companies should “hurry up and list” before the rules tighten and market sentiment cools down, as the door will not remain open forever, and the entry barriers will become higher and the competition more intense.
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5. Advice for Ordinary Investors and Entrepreneurs
Let’s summarize what this means for different groups:
For Ordinary Investors:
- **Be wary of “pseudo-technology”: If the market value threshold for listing in Hong Kong increases, it means regulation is playing a role in screening companies. Even so, the break-even rate remains high. Don’t blindly invest in new stocks; instead, evaluate the company’s actual business and revenue.
- **Pay Attention to the “Top Effect”: Resources will concentrate in the best companies. Those with real technological barriers and stable revenue still have opportunities, while those relying on hype are at high risk.
For Entrepreneurs/Companies:
- Re-evaluate the Timing of Listing: If you’re a robotics or AI company considering a listing, now is a critical period.
- Strong Companies with Revenue and Technology: Prepare quickly and try to complete the review process before the second phase of consultations begins.
- Weak Companies with High Expenses and No Revenue: Consider revising your plans, either by refining your product, increasing revenue, or looking for another market.
- Focus on Hard Metrics: Stop just telling stories; provide data on revenue, reducing losses, and customer examples. These are the key indicators of a company’s strength.
- Prepare for the Long Term: Listing is not the end; it’s the beginning. In the current market, post-listing performance and fundraising ability will reflect the company’s true value.
In Summary:
The “inclusive era” of Hong Kong stock market IPOs is coming to an end, and an “elite era” is beginning. Rules are tightening, and the market is becoming more cautious. Only companies with real strength and tangible results will stand out in this transformation. For companies, time is money, and speed is essential. For investors, rationality is key to protecting their investments.