The listing consultation documents for special technology companies under Chapter 18C of the Hong Kong Stock Exchange's Listing Rules have just been released, providing a new avenue for Chinese tech startups to raise funds through listing. What is the background and logic behind the formulation of the new listing rules under Chapter 18C? How should one understand the meaning of 'special technology' and which industries it includes? What are the differences between un-commercialized special technology companies and those that have been commercialized? In addition to meeting the listing conditions, what other matters need attention according to the listing under Chapter 18C? What are the consulting opinions and expectations of market participants, including investors, regarding Chapter 18C?
In response to the above issues, on December 2nd, RuiSheng International Law Firm, in collaboration with China International Capital Corporation Limited, PricewaterhouseCoopers Zhongtian Certified Public Accountants, and Beijing Zhongguancun Technology Service Co., Ltd., jointly organized an online seminar on the interpretation of the consultation document for Chapter 18C of the Hong Kong Stock Exchange listing rules. Together with representatives from the Hong Kong Stock Exchange, industry consultants, and investors, they conducted a comprehensive and in-depth interpretation of the consultation document for Chapter 18C from the perspectives of capital markets, law, finance, industry, and investment.Cui Nan, Executive Director of Frost & Sullivan Greater China, was invited to participate in a seminar and share insights on the development opportunities for technology-driven enterprises under 18C.
Specialized technology companies refer to those that are mainly engaged in research and development, commercialization, or sales of specialized technology products within the accepted fields of the specialized technology industry (either directly or through their subsidiaries). The specialized technology industry includes five major areas: new-generation information technology, advanced hardware, advanced materials, new energy and energy conservation and environmental protection, as well as new technologies in food and agriculture.
Cui Nan stated that the purpose of the special listing system established for technology-specific companies is to promote and facilitate more technology-specific companies to enter the Hong Kong capital market. This will be conducive to expanding investment opportunities in the Hong Kong market, increasing the variety of listed companies in Hong Kong, making the exchange more diversified, and further enhancing the competitiveness of Hong Kong, China compared to other markets such as the United States and Singapore.
"Currently, all specialized technology companies generally face issues such as difficulty in reaching a consensus on valuation, insufficient robustness of the initial public offering pricing discovery process, inadequate feasibility of specialized technology products, and challenges in defining specialized technologies. Additionally, uncommercialized specialized technology companies also face problems such as failing to successfully commercialize to reach the threshold for commercial revenue and relying on external funding to maintain operations. However, Chapter 18C is conducive to enterprises solving these problems," said Cui Nan.
Cui Nan first briefly analyzed the current development status of the technology and specialty industry, pointing out thatThe industries included in Hong Kong's technology-specific companies are those that are currently highly capital-intensive and have great potential for development in the future.For example, the cloud services and artificial intelligence fields covered by the new generation information technology industry; the robotics, semiconductor, and autonomous driving vehicle sectors encompassed by the advanced hardware industry; and the energy production and new green technologies fields covered by the new energy and environmental protection industries. These areas are supported by policies globally and in China, and are also key areas for the development of various countries in the future.
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New Generation Information Technology
The application of new-generation information technology is one of the important means for various industries to achieve technological innovation. New-generation information technologies, including artificial intelligence, big data, and cloud services, not only demonstrate strong development potential but also empower the digital transformation process of downstream industries through integrated development.
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Semiconductor industry
The development and innovation of semiconductor technology directly determine the computing, storage efficiency, and performance of hardware, and directly affect the capability boundaries of upper-layer applications.
Although China's semiconductor industry started relatively late, it has become a major driving force for global semiconductor industry growth with the continuous optimization of its industrial structure. According to Frost & Sullivan research, the market size of China's semiconductor industry reached $192.5 billion in 2021 and is expected to grow to $297 billion by 2026.
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Autonomous driving market
Autonomous driving-related technologies have become a dual development trend in both the artificial intelligence and automotive industries. The development of autonomous driving technology directly determines the intelligent development process of the automotive industry and is one of the most promising global innovative technologies and emerging industries for the next few decades. China's autonomous driving market has high market potential, and the introduction of relevant policies has attracted many market participants. It is estimated that by 2026, the market scale of multi-scenario autonomous driving in China will exceed one hundred billion yuan.
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Advanced Materials Market
The advanced materials industry is characterized by high technical content and long investment cycles, making it an important indicator of a country's scientific and technological development level. Compared to traditional material industries, the development of the advanced materials industry can not only drive the technological improvement and product upgrading of traditional industries but also promote the progress and comprehensive strength enhancement of the country's overall high-tech industries. Driven by strong downstream market demand and supportive policies, China's advanced materials industry has shown a relatively rapid growth trend in recent years.
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New Energy and Energy Conservation and Environmental Protection Industries
Against the backdrop of global warming and energy crisis, the global energy structure is gradually transitioning towards renewable energy sources, intersecting and permeating with the energy conservation and environmental protection industry. Developing new energy and energy conservation and environmental protection industries is an effective way to transform the mode of economic development and promote sustainable development. It helps to seize future development high ground, enhance national technological competitiveness, reduce environmental carrying capacity pressure, and fundamentally transform energy issues.
Subsequently, Cui Nan shared some specific sub-sectors of technology industries that are currently worthy of focused attention.
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Cloud Services (SaaS + PaaS)
The cloud service industry has a large number of players, with many market participants having less than 500 million in revenue. At the same time, leading companies within the industry have gradually achieved commercialization and possess a high valuation level, having received investment from well-known institutions in the private equity market in the past. On the other hand, there are currently no major technical research and development or commercialization obstacles in the cloud service industry, and the future path for commercialization and expansion is relatively clear.
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Artificial Intelligence
The artificial intelligence industry also has numerous market participants, with leading companies in most vertical fields gradually commercializing their offerings and enjoying high valuation levels. In the future, thanks to advancements in artificial intelligence technologies such as deep learning, as well as the deep application of AI across various industries, China's artificial intelligence industry has tremendous growth potential.
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Artificial Intelligence Generated Content (AIGC)
2022 is the 'Year One of AIGC'. In October, the AI content platform Jasper announced a $125 million Series A financing with a valuation of $1.5 billion; the metaverse and digital media tool development company Stability AI also announced the completion of a $101 million seed round with a valuation of $1 billion. As an emerging sector, the AIGC industry has high ceilings and is in the early stages of rapid growth. The capital market is highly active, and corporate valuations have been rapidly elevated.
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Autonomous driving
In recent years, China has seen the emergence of a number of leading autonomous driving companies, keeping China at the forefront of global development in autonomous driving technology. Although current autonomous driving technology is not yet mature, unmanned operation is an inevitable trend in the development of intelligent connected vehicles. In the future, with the maturity of L4 and L5 level 'driverless' technologies, it is expected to drive leapfrog development in the automotive industry.
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robot
Robot applications are widespread, covering numerous fields such as warehousing and logistics, industrial production, healthcare, catering, hotels, shopping malls/offices, communities, etc. The industry has a huge market reach. After breakthroughs in key technologies such as autonomous mobility technology, flexible joint technology, and multimodal AI technology, there is potential for explosive growth. In addition, leading enterprises in the industry are gradually commercializing and enjoy high valuations in the private equity market.
