An initial public offering, or IPO, is when a private company raises capital by offering shares of stock to be traded on a public exchange for the first time.
Newly created securities for an IPO are sold in the primary market. After an IPO, investors become shareholders of the company, and can trade existing shares with other investors in the secondary market.
Companies seeking to IPO on an exchange entrust financial institutions to handle all the listing-related matters. Upon the approval of the SEHK and SFC's, a company can be listed on the Hong Kong Stock Exchange.
Hong Kong IPO shares are distributed through international placing and public offering, with possible adjustments through the share reallocation mechanisms.
International placing refers to the allocation of shares through underwriters to professional investors, including cornerstone investors (large institutional investors, private equity, etc.), and anchor investors (long-term institutional investors). Shares allocated to cornerstone investors typically have a six-month lock-up period. According to the listing rules, 90% of newly issued shares are allocated through international placing, with the remainder available for public offering for retail investors.
To ensure ample opportunities for retail investors, there's a reallocation mechanism that deducts shares from cornerstone and anchor investors based on the public offerings' oversubscription ratio. By reallocating shares, retail investors can access up to 50% of the total public offering.
Allotment results for IPOs are typically announced one trading day before listing, and allocated shares will arrive on the same day as the announcement.
If your subscription to the IPO is partially successful, or there's a difference between the subscription price and the final issue price, fees will be refunded back to your securities account the same day when the allotment results are announced. To ensure accuracy, please carefully review your account funds and statements.
Note: In the event of any special circumstances, please refer to exchange announcements and notifications in the app.
The prospectus specifies the number of Hong Kong offer shares available for public offering, as well as their corresponding offer price. You are required to pay for the number of shares allotted to you in the IPO. No application for any other number of Hong Kong offer shares will be considered, and any other application is liable to be rejected.
Note: The number of shares and amount payable will vary for each new share issuance. The minimum application quantity for Hong Kong offer shares is usually one lot, and the maximum application limit will be announced by the exchange.
Hong Kong's new share issuances can be priced using one of three methods:
1. The final issue price is determined prior to subscription. Investors can then directly apply for the new shares at this confirmed price. This is a relatively rare occurrence.
2. A price range is determined prior to subscription, with the final issue price determined by the bookrunner based on institutional investor demand.
3. The company sets a price range for its shares that includes a flexible pricing mechanism, which allows for a maximum 10% decrease in the issue price at the lower limit.
Note: Please refer to the actual announcement of the exchange for specific pricing rules.
A company listing on the Hong Kong Stock Exchange involves several key time periods:
1. Subscription period: Lasts three to four days from the start date to the end date. Please apply to subscribe during this period if you wish to purchase new shares. Specific dates will be specified in the company prospectus.
2. Pricing day: The final issue price is determined by the issuing company and underwriters after the subscription deadline. It usually falls on the deadline date or the next trading day.
3. Allotment results announcement: The issuing company announces the allotment results one trading day before the new shares are listed. Allocated shares will be available on the same day as the announcement.
4. Listing day: The first trading day for newly listed shares.
5. Green Shoe option exercise period: For Hong Kong IPOs, the issuer may grant an over-allotment option to underwriters, typically equal to 15% of the total number of shares originally issued in the IPO. The option can be exercised within 30 days after the end of the public offering in Hong Kong. During this period, investment banks may buy additional shares to support the stock price if it falls below the issue price, or the issuer may issue new shares to the investment banks if the stock price rises sharply.
6. Lock-up period for cornerstone investors: Six months after the listing day, during which cornerstone investors cannot sell their shares for cash. The lock-up period can be extended by agreement between the issuer and the investors.
7. Lock-up period for major shareholders of listed companies: Six months for Main Board listings, two years for GEM Board listings.
Note: Please check the subscription page for the opening and closing dates of Futu's subscription periods.
A: Open the app to can view upcoming available IPO stocks and your subscription records.
- Go to Markets > HK > IPO.
Note: If you have any questions, please contact our online customer service.
A: Futu provides two subscription methods:
• Standard Subscription: You can use your buying power to make purchases. This includes cash, securities, or assets held in the account used as collateral for financing. If Unified Buying Power is enabled, it will also include buying power generated by assets pledged in related accounts for US and A-share trading.
• Bank Financing Subscription: You can borrow from banks or Futu to supplement your own buying power for IPO subscriptions.
A: Futu's subscription deadline is earlier than the time specified in the prospectus (T day, usually at 12:00 PM), to ensure sufficient processing time for subscription applications. The subscription deadlines may vary based on the subscription method as follows:
• Standard Subscription: Ends at 09:00 am on the subscription deadline date (T day) with some new IPOs possibly extending until 10:30 am. Please refer to the subscription page for specific details.
• Bank Financing Subscription: Ends at 4:00 pm on the trading day before Futu's deadline (T-1). Please refer to the subscription page for specific details.
A: Futu uses a batch submission strategy, so you can submit, edit, and cancel your subscription before the corresponding batch deadline. However, there are some differences based on subscription methods and batches:
• Bank Financing Subscription: Applications submitted before 4:00 pm on the trading day before Futu's subscription deadline will be processed at 4:00 pm and cannot be edited or cancelled.
• Standard Subscription - Batch 1: Applications submitted before 9:00 am on Futu's subscription deadline will be processed at 9:00 am and can't be edited or cancelled.
• Standard Subscription - Batch 2: Applications submitted between 9:00 am and 10:30 am on Futu's subscription deadline will be processed at 10:30 am and cannot be edited or cancelled. Please note that not all new IPOs are available for Batch 2 subscriptions. Refer to the subscription page for specific details.
Note: Please see the subscription page for specific deadlines regarding fund deductions. Keep track of account asset changes through your account statement.
A: Fees are charged according to the following rules. However, please refer to the subscription page for specific details.
• Subscription Fee: The standard subscription fee is 50.00 HKD per order, while the bank financing subscription fee is 100.00 HKD per order, regardless of whether you are allotted shares or not.
• Financing Interest Charges: Financing interest is calculated based on the amount, interest rate and number of days borrowed. Financing charges apply regardless of whether you are allotted shares or not.
○ Financing Calculation: Financing amount * interest rate / 365 * days borrowed
○ Amount of financing: The financing amount selected on the subscription page.
○ Days borrowed: From the date of Futu’s subscription deadline (same as the exchange's deadline) to the day before the announcement of final allotment results.
○ Interest rate: Futu currently uses a dynamic interest rate plan that fluctuates based on market conditions. Please refer to the financing interest rate displayed on the subscription page.
• Futu Financing Interest: The financing interest incurred by IPO subscriptions will be credited to your margin account and accrue daily based on the balance of that day. Interest is settled monthly on the last trading day and subject to change as displayed on the app (usually 6.8% p.a., please refer to the page for accurate information). You can borrow and repay financing at any time. The exact interest amount is difficult to determine as it changes with trades and use of financing. The daily interest estimate on the subscription page is based on the amount of financing used for this new share subscription from Futu. Please see your statement for the final interest deduction amount.
A: You can check your allotment results on the announcement date (usually the last trading day before the stock is listed) in one of several ways:
• Open the app, go to Markets > HK > IPOs > History
• Check the notification messages in the app by going to Messages > Alerts
• If you have bound your Futubull ID to an email, check your email for an allotment notification.
• Check your account statement for that day.
• Access public allotment results 24/7 by using the "Allocation Results" feature on the IPO app or visiting here (or here) and searching by ID card number.
A: Based on announcements made by the company and the exchange, here are the possible changes:
• Delayed listing: All submitted applications will be considered valid, and failed applications will be cancelled.
• cancelled listing: All customer applications will be cancelled or deemed invalid once the exchange releases relevant cancellation announcement.
• Changes to listing terms and conditions: A change in the terms and conditions by the company will not affect your application unless it causes a delay or cancellation of the listing.
Note: The handling fees are non-refundable. Financing interest from the bank will be calculated based on the actual number of days the funds were used.
A: After your application to subscribe to the IPO is submitted via Futu to the upstream service provider (3rd party bank and exchange), it may be rejected, which means you can't participate in the IPO allotment process. If your application is rejected, Futu will notify you promptly and arrange for a refund. Please check your in-app messages for details on the refund process. The reason for rejection may be one of the following:
1. Each customer can only apply once for a new stock IPO. Multiple applications using different accounts or brokers may lead to the cancellation of your application.
2. Futu will submit your application using the most up-to-date information you provided during account opening or any subsequent updates to your personal information. Incomplete or inaccurate personal information may cause your application to be cancelled.
Note: The handling fees and financing interest will still be charged for rejected applications. If you have any questions, please contact our online customer service.
A: If the company goes public as planned, here are the changes you can expect for your account assets:
• The subscription funds are frozen upon confirmation and unfrozen if you cancel the order. No interest will be generated during the frozen period.
• After the subscription deadline, Futu deducts the subscription amount and handling fee using your account's buying power. However, bank financing interest is not deducted. Please refer to your account statement for details.
• After the allotment announcement, your account assets will change based on the allotment status.
○ If not allotted: The subscription amount using the buying power is refunded.
○ If allotted: If your allotted amount is no more than the subscription amount using your account's buying power, the remaining subscription amount will be refunded. If your allotted amount exceeds your subscription amount, you should supplement the difference between the buying power and the allotted amount. Bank financing interest is deducted in both cases.
• If coupons are used: The rebate of handling fee or interest will arrive to your account within 2 trading days following the settlement date.
A: To ensure your account and position remain in good standing, you can check your account risk status in the app. Using margin financing to subscribe to an IPO has the following risks:
• If your account risk status is "dangerous" during the subscription period, Futu reserves the right to liquidate your position.
• Margin financing increases the leverage ratio and account risk on the listing day. If you have been allotted shares, please make sure you have enough cash in your account. If there is a margin call on the listing day and you don't have enough cash in your account, Futu may sell some of your stock holdings under certain circumstances.
• In the event of a margin call, any investment losses incurred due to Futu selling stocks to secure accounts are the investor's sole responsibility.
• For more details, please refer to Schedule I: Risk Disclosure Statements of the Client Agreement
A: Futu currently only supports Electronic Initial Public Offerings (EIPO). If the listing company does not support EIPO, you cannot submit a subscription application through Futu.
The listing company determines if the application can be submitted via EIPO, and more information can be found in the prospectus.