HK Exchange Tells IPO Hopefuls To Detail Impact Of Virus

Hong Kong‘s stock exchange has told companies looking to list in Asia’s biggest IPO centre to disclose the impact of the coronavirus on their businesses and detail plans to mitigate the effects, three sources with direct knowledge of the matter said.

Eighteen companies have filed for an initial public offering (IPO) since the start of February when Hong Kong authorities and companies began taking steps to limit the spread of the coronavirus.

Malaysian software developer C-Link Squared, the latest company to file for an IPO, referenced the coronavirus 34 times in its listing application following the stock exchange’s demand, documents showed.

IPOs are big business in Hong Kong. The city saw $25 billion raised through them last year, without including the $12.9 billion from Alibaba’s secondary listing, placing the exchange third globally behind New York’s Nasdaq and the Saudi Exchange, according to Refintiv data.

However, the number of deals completed in the past five weeks has slowed sharply as face-to-face meetings were cancelled and global financial markets tumbled on fears the spreading virus will become a pandemic.

The city’s benchmark Hang Seng Index has slid 5.9% since Jan. 24, the last trading day before the Lunar New Year holiday during which the coronavirus spread rapidly in Hubei province, the epicentre of the epidemic in China.

Three sources told Reuters the stock exchange, operated by Hong Kong Exchanges and Clearing (HKEX), has asked five specific questions of companies looking to go public.

These centre on detailing any supply chain disruptions, business contingency plans and the burn rate of existing cash balances in a worst-case scenario where the group’s operations are suspended.

It has also asked for details on the companies’ precautionary measures to deal with the virus and any potential customer and supplier impact that could occur.

The sources declined to be named because the information is not yet public.

“The exchange’s listing rules require listing applicants to provide sufficient information to enable potential investors to make a properly informed assessment of an applicant,” said an HKEX spokesman in an email.

“On issues that are widely applicable to many applicants – such as COVID-19 – the exchange could ask applicants for specific disclosure if such issues are relevant and material to them.”

COVID-19 is the name of the illness caused by the new coronavirus, which has infected 101 people in Hong Kong.

C-Link Squared, detailing the coronavirus’ impact on its operations, said in its filing to the HKEX: “Due to the nature of our group’s business operations … our directors believe that the coronavirus (COVID-19) has not had any material adverse impact on our operation and business of our group and we have developed strategic pandemic planning to minimise and mitigate the potential impact of the coronavirus outbreak.”

Reuters