U.S.-based cancer detection start-up Grail Inc. is reportedly planning an initial public offering on the Hong Kong Stock Exchange in what could be the first test of the city’s proposed duel-class listing system for tech companies.
The IPO, expected to be worth around US$500 million, would be a coup for the Hong Kong exchange, which has been positioning itself to better serve the technology sector, including the adoption of due-class IPOs for startups.
Dual-class shares give one set of shareholders greater voting rights than others. They have been favored by tech company founders and owners as the extra voting rights can protect them against shareholder pressure for short-term returns. Corporate governance activists have opposed the system as it can limit shareholder rights.
Founded in 2016 and based in Menlo Park, Grail has reportedly received US$1.3 billion in fundraising to date. The company’s investors include Microsoft founder Bill Gates and Amazon founder Jeff Bezos. Other investors include Hong Kong-listed Tencent Holdings Ltd., along with Bristol-Myers Squibb Co., Celgene Corp., Johnson & Johnson Innovation and Merck & Co.
Grail announced in December that it would launch its first product in Hong Kong later this year, a screening test for a type of cancer common in Asia.
Despite traditionally being one of the strongest IPO markets in the world, Hong Kong has recently lagged behind rival New York in the battle for technology stocks. In terms of market capitalization, only three percent of Hong Kong listings over the last decade have been by “new economy” companies, compared with 47% of New York Stock Exchange listings, according to a 2017 study. The lack of tech company listings has hurt Hong Kong’s ability to attract technology startups and stunted growth of the cities tech sector.
To compete, Hong Kong’s stock exchange announced in December that it had begun drafting specific rule changes to facilitate duel-class IPO’s that will be put up for formal public consultation. China’s mainland exchanges are also taking steps to make themselves more attractive to technology IPOs.
The Chinese securities regulator is rumored to consider giving special approvals to tech unicorns, a term for private tech companies worth US$1 billion or more, so that they can achieve speedy regulatory approval to list shares on domestic stock exchanges.
Unicorn companies in the biotech, cloud computing and other high tech industries can submit IPO applications to the China Securities Regulatory Committee (CSRC) immediately. Their applications will be screened and considered without having to wait in the current long queue of companies lining up to get their chance to be reviewed for approval, according to Chinese media reports citing insiders.
Source: China Money Network
