Hong Kong's anti-acquisition of the New Deal to introduce blockchain enterprises to reinvigorate the road

The consultation summary on the backdoor listing and other shell stock activities released in Hong Kong is likely to interrupt the backdoor of OK and fire coins.

On July 26, the Hong Kong Stock Exchange issued a heavy regulatory document, “Consultation Summary on Backdoor Listings and Other Shell Stock Activities”, which mentioned that the listing of backdoors has been popular in recent years, and the value of listing status has soared. The market has seen a lot of related activities. On the one hand, investors buy control of listed issuers to obtain their listing platform (rather than related business) with a view to the ultimate backdoor listing, and on the other hand, listed issuers conduct corporate actions (such as selling business) in order to sell the listing platform. These activities create opportunities for market manipulation and undermine investor confidence in the market. The Hong Kong Stock Exchange stated that the relevant rules of the Listing Rules relating to the listing of the backdoor and the criteria for continuous listing have been revised and entered into force on October 1, 2019.

The Securities Daily quoted industry insiders as saying that as of now, 1480 stocks in Hong Kong stocks have a market capitalization of less than HK$1 billion, accounting for 62% of Hong Kong stocks. Such small-cap companies, the main business is not attractive to investors, the market transactions are not active, generally considered to be "shell stocks."

In recent years, many mainland enterprises have listed on the IPO in Hong Kong due to the relatively loose policies of Hong Kong's supervision on listed companies. However, for blockchain companies that are still under the supervision of “blind spots”, due to the disputes in the supervision of various countries, it is basically difficult to achieve through the normal IPO listing. Bitian, Jianan, and Yibang International are the lessons of the past. Chain Finance has mentioned the best option for backdoor listing or its compliance. At present, the acquisition of Tongcheng Holdings (01611.HK) by Firecoin and the acquisition of Forward Holdings Group (01499.HK) by OK are all key steps in the backdoor. As of now, the Hong Kong regulatory authorities have not stopped the two acquisitions.

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In addition, the current backdoor of the fire currency is speeding up. On July 19, Tongcheng Holdings announced that its wholly-owned subsidiary, Huobi Investment Limited (Hong Kong), acquired blockchain cloud service provider Win Techno Inc. Some analysts believe that this move is a sign that the fire currency will begin to pack the digital asset business, and it is also a test for the Hong Kong Stock Exchange.

However, the "Consultation Summary on the Backdoor Listing and Other Shell Stock Activities" issued by Hong Kong is likely to interrupt the backdoor of OK and fire coins. According to the document, the revised “Listing Rules” mainly include: the identification of shell companies, the concern about the control of listed companies, and so on.

According to the principle of GL78-14, the regulatory layer determines the shell company, mainly from the acquisition or issuance scale, whether the issuer's main business has fundamentally changed, the nature and scale of the business before the acquisition, the quality of the acquisition target and the listing. Judging whether the issuer’s control has changed or not.

It is worth mentioning that changes in control or actual control rights and changes in acquisitions, sales and/or control or actual control that are related to each other within 36 months become new changes. “The regulatory authorities have made new regulations on the disposal of listed companies and the asset disposal after backdoors,” said Li Congming, founder of a Hong Kong research institute, on the chain.

“The regulatory layer is more concerned about the changes of the actual controllers of listed companies, which makes the potential shell resources less. The time required for the buyer to dispose of the old assets is lengthened, resulting in an overall lengthening of the backdoor time, leading to an increase in the uncertainty of shell transactions. Li Congming said.

According to the statistics of the chain, at present, the largest controlling shareholder of Tongcheng Holdings is Li Lin, the actual holder of the Fire Exchange, with a share ratio of 65.24%, while the largest shareholder of the forward holding group is Xu Xing, and the share of the shares reaches its total. 60.49% of circulation. The actual control of both companies has changed. At the same time, if the two exchanges continue to pack according to the original plan, it is likely to violate the anti-acquisition rules just issued by the Hong Kong Stock Exchange. That is, if there is a change in the control or actual control of the listed issuer and a fundamental change in the issuer's main business. The regulatory authorities will most likely use the anti-takeover rules to suspend or even delist.

In addition, Li Congming expressed concern about the future main business of Tongcheng Holdings and Forward Holding Group. He said that according to the latest Main Board Rule 13.24, the listed issuer's continuous listing responsibility is to maintain its business with sufficient business operations and valuable assets to support its operations, enabling it to continue to go public, with only significant Issuers who have assets but do not have sufficient business operations do not comply with this requirement. "No matter whether the blockchain or the cryptocurrency business has reached a consensus on a global scale, whether the field is in line with the business with real value and can support the sustainable development of the listed company, it depends on the subjective judgment of the regulatory layer, which actually exists. Very uncertain." Li Congming said.

At the request of the respondent, Li Congming was a pseudonym.

Source: Financial Network · Chain Finance

Author: Changfeng

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