Summary of Key Points
Recently, the consumer sector on the Hong Kong stock market has experienced a stark contrast: companies like Liumumei and Qiyunshan have successfully gone public, while others with thousands of stores, such as Laoxiangji, Bannu, and Big Pizza, have repeatedly failed to meet their listing requirements. The key difference lies in their compliance capabilities: successful companies were able to address regulatory inquiries (such as equity structure, the rationale for dividends, and compliance with legal frameworks) and provide comprehensive evidence; failing companies, on the other hand, failed to respond satisfactorily to these critical issues. The Hong Kong Stock Exchange (HKEX) has made it clear that it will not lower its listing standards, and ongoing compliance is essential for a company's survival. Cases of companies being delisted due to violations, such as Huiyuan and Tianyun International, serve as a reminder that having a large number of stores does not guarantee a listing—compliance and sound business practices are the true prerequisites for long-term success.
I. Why Do Similar Consumer Companies Have Different Fates in Listing?
Successful companies passed the compliance review, while those that failed struggled to provide clear answers to regulatory questions:
- Liumumei: Was questioned about its controlling shareholders, the completeness of state-owned shareholder documentation, and the fairness of financing pricing. It provided detailed information on each round of financing, identified the ultimate controller of the state-owned shareholders, and had its lawyers confirm that all procedures were legal, ultimately leading to a successful listing.
- Qiyunshan: Was asked about the rationale for historical equity transfers and any issues with capital contributions. It disclosed the details of each transfer, sought legal advice, and provided necessary documentation, thus satisfying the regulatory requirements.
- Failing Companies: Issues such as Laoxiangji's “reverse investment” procedures, Bannu’s sudden dividend distribution, and Big Pizza’s compliance with its red-chip structure remain unresolved, resulting in the rejection of their applications.
In short, successful companies provided all the necessary evidence to address regulatory concerns, while failing companies failed to provide adequate responses.
II. What Are the Major Barriers to Successful Listing?
Each company that encountered difficulties had specific issues that violated regulatory requirements:
- Bannu Maodu Hotpot: Distributed a substantial dividend (70 million HKD, 57% of its 2024 net profit) before listing, with a high debt-to-asset ratio of 60%. Regulators questioned the need for fundraising while distributing profits. Bannu failed to provide clear explanations.
- Laoxiangji: Involved “reverse investment” (an overseas company investing in its domestic operations). The HKEX required proof of compliant foreign exchange and tax handling, but this information was missing from the public documents.
- Big Pizza: Its red-chip structure (overseas control of domestic operations) had issues with foreign exchange registration, and unresolved legal disputes existed. There were also discrepancies between the registered documents and the number of shares offered in the prospectus.
- Qian Dama: The actual controller of its overseas shareholders was not identified, and several senior executives resigned before the application was submitted. Regulators wondered if this would affect operations, but no response was given.
- COMMUNE Fantast: The pricing and quantity of equity incentives for 272 employees were unclear, and some stores lacked fire safety certifications. The company did not provide updates on its remediation efforts.
These issues are not minor; they are critical in determining whether a company is trustworthy from a regulatory perspective. Without basic compliance, companies will not be accepted by the capital market.
III. The HKEX’s Position: Quality Companies Are Welcomed, but Standards Will Not Be Lowered
In December 2025, the HKEX and the Securities and Futures Commission sent a letter to all IPO sponsors, stating that the quality of listing applications had declined significantly, with some documents being poorly prepared and sponsors failing to respond to regulatory inquiries. The HKEX is firm: We welcome high-quality companies, but we will not lower our listing standards. If you want to list, you must provide solid documentation and address all regulatory concerns; even if you have thousands of stores, that alone is not enough to secure a listing.
IV. Listing Is Not the Endgame—Compliance Is Essential
Obtaining a Hong Kong stock code is just the beginning. Failure to comply after listing can lead to delisting:
- Huiyuan Juice: Was suspended for three years and eventually delisted due to a 4.3 billion HKD loan violation.
- Tianyun International: Faced issues with financial fraud, insufficient funds, and non-compliant information disclosure. Its listing was revoked in 2025.
These cases highlight the need for continuous compliance with financial reporting, information disclosure, and internal controls (e.g., how funds are spent and whether related-party transactions are fair) after listing.
V. Lessons for Consumer Companies
To list or maintain their status, consumer companies need to address several key areas:
1. Support Your Claims with Evidence: Provide concrete evidence for all issues raised by regulators. For example, Laoxiangji needed to provide proof of foreign exchange registration and tax payments; Bannu had to explain the rationale behind its dividend distribution and fundraising.
2. ESG Is More Than Just a Formality—it’s About Risk Management: Ensure food safety, employee social security, and fire safety measures are properly implemented. For instance, COMMUNE Fantast needed to obtain fire safety certifications for all stores; otherwise, it faced fines and potential closures, which could impact profits.
3. Compliance Is a Long-Term Habit: From opening stores to going public and beyond, companies must adhere to regulations at every step. For example, Qian Dama had to identify the actual controller of its overseas shareholders to reassure regulators that there were no hidden risks.
In conclusion, having thousands of stores is a sign of business success, but it is not a guarantee of a successful listing. To thrive in the capital market, consumer companies must learn to manage their finances carefully and ensure compliance with all regulatory requirements. After all, investors are looking for transparency and reliability, not just a large customer base.