Mainland Start-ups Favour London's AIM to Go Public

Some mainland start-up companies are abandoning plans to list in Hong Kong because of regulatory hurdles, turning instead to London's AIM as the easier and faster alternative.

AIM is the London Stock Exchange's international market for smaller growing companies.

Canton Property Investment, which rejected a Hong Kong share sale, will list on AIM tomorrow after raising US$55 million.

This follows a decision by China Central Properties, formed by Shui On Construction and Materials, to raise 151.2 million British pounds (HK$2.36 billion) from AIM in June.

Charles Li Tak-kwong, the chief executive of British corporate finance specialist Libertas Capital and sponsor of Canton Property, said more mainland firms would list in London instead of on the Growth Enterprise Market (GEM), which has had no new listings this year.

"AIM needs only four to five months of preparation," Mr Li said. "In Hong Kong, it takes a new listing candidate 12 to 18 months to be vetted and approved by the stock exchange and the Securities and Futures Commission."

The second board has faced a multitude of problems with firms that listed shares there, ranging from poor results to bad corporate governance. Turnover is less than 20 per cent that of the main board.

AIM claims to be the most "successful growth market in the world". Since its launch in 1995, more than 2,800 firms have joined the bourse.

Canton Property, founded by mainlander Wong Keng, develops and operates shopping centres in Guangzhou with assets of US$380 million.

Mr Li said the company originally wanted to list in Hong Kong but could not meet the main-board listing requirement for a combined profit of HK$50 million in the three years before the share sale. It also did not meet GEM requirements for two years of continuous operations, as it was set up only about 18 months ago.

Unlike the Hong Kong exchange, AIM has no entry requirements and companies do not need regulatory approval. AIM only requires a sponsor who vets and confirms the candidate's suitability.

Mr Li said mainland firms would find it harder to list in Hong Kong when the exchange sought to raise the entry requirements for GEM.

Under the proposal, aimed at upgrading the second board, only companies with a market capitalisation of at least HK$100 million and cash flow of HK$20 million will qualify to list on the second board.

"The GEM has failed in its duty to help new start-up companies to raise funds," Mr Li said.

However, Hong Kong Exchanges and Clearing chief executive Paul Chow Man-yiu said the AIM model - which is solely for professional investors - was not appropriate at the moment for GEM.

But if they were qualified, mainland businesses still preferred to list in Hong Kong, Sun Hung Kai Financial executive director Joseph Tong Tang said.