HKEx Scraps Automatic Delisting Plans

by Mary Swire, Tax-News.com, Hong Kong

19 November 2002

Much to the relief of small investors in the SAR, Hong Kong Exchanges and Clearing (HKEx) announced at the weekend that it has scrapped plans to automatically delist companies whose share value falls under 50 cents for 30 consecutive trading days.

In a new consultation paper released on Sunday, HKEx suggested that share price could be one of a number of criteria employed to decide whether to delist a financially weak company, but put forward several other potential minimum requirements as well.

In its initial consultation paper, released in July, the exchange proposed the automatic delisting of certain so-called penny stocks, prompting a panic stricken stampede of investors looking to offload their low-priced stocks.

However, under the new proposals, companies may be removed from the bourse's boards if they have made a loss for three consecutive years and are in negative equity, or if their market capitalisation falls below HK$50 million over 30 consecutive trading days and their shareholders' equity is less than HK$50 million.

Companies which have received an auditor's report containing a disclaimer or adverse opinion, and firms whose shares have been suspended from trading for 12 successive months will also be considered for delisting.

Speaking to the Hong Kong Standard following the release of the consultation paper, director of Phillip Securities, Louis Wong cautiously welcomed the direction of the proposals, observing that: 'It's acceptable. Previously, the trigger for delisting was the stock price but now it's the company earnings. This will place added pressure on management to turn the company around and will benefit small shareholders.'

Recommended