Hong Kong IPO: GEM board welcomes its first small-firm listing in 3 years as UBoT soars 36% in trading debut

UBoT Holding, the first new listing on the Hong Kong stock exchange's secondary board in more than three years, surged on debut, with one analyst saying the listing bodes well for the market.

The semiconductor-component maker's shares rose as much as 36 per cent from its offer price of HK$0.5, before retreating to HK$0.54 at the lunch break on Monday on the GEM market, giving the company a market capitalisation of HK$270 million (US$34.53 million), according to exchange data. The broader Hang Seng Index jumped 2.3 per cent, the biggest advance since May 2.

The Hong Kong-headquartered firm raised HK$68.75 million via its initial public offering (IPO), with the public tranche oversubscribed 2,500 times.

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UBoT is the first new listing after bourse operator Hong Kong Exchanges and Clearing introduced new rules in January to make it easier for companies to list on GEM and streamlined the process to transfer from GEM to the main board. The last GEM listing was in January 2021 when Grand Power Logistics Group raised HK$55.5 million.

UBoT Holding chairman CEO Danny Tong (left) and shareholder Tang Ming (right) with HKEX CEO Bonnie Chan at the company's listing ceremony on Monday. Photo: Jonathan Wong alt=UBoT Holding chairman CEO Danny Tong (left) and shareholder Tang Ming (right) with HKEX CEO Bonnie Chan at the company's listing ceremony on Monday. Photo: Jonathan Wong>

The reforms were one of the firm's "major considerations" to list on the Hong Kong stock exchange as "there is an opportunity for us to switch to the main board", said Danny Tong Yuen-to, chairman of UBoT.

UBoT had considered listing on Nasdaq but decided to list in Hong Kong because of the city's "sufficient capital, sophisticated investors and professional teams", he added.

The reforms removed mandatory quarterly reporting requirements for GEM companies, allowing them to report earnings twice a year and aligning with requirements on the main board.

HKEX, which runs Asia's third-largest stock market, also reduced the lock-up period for major shareholders disposing of their controlling stakes from 24 months to 12. GEM does not have a profit requirement, while the main board requires a company to make at least HK$80 million in the three years leading to its listing.

"This listing is a positive signal for the overall GEM market, and the market response has been relatively enthusiastic," said Kenny Ng, a securities strategist at China Everbright Securities International.

If the trading volume is weak, that would mean that the market is not paying attention to GEM-listed companies, which could become an obstacle for their future financing needs, he said.

"A higher level of trading volumes will better reflect the effectiveness of the reforms and attract more companies to list on GEM."

Other GEM listings currently in the pipeline include precision engineering services provider Metasurface Technologies Holdings, and construction engineering services provider Guangdong Syntrust GK Testing and Certification Tech Service Center.

GEM, formerly known as Growth Enterprise Market, was established in 1999 to accommodate companies that did not meet the tougher main board requirements. As of end-May, it had 323 firms with a combined market capitalisation of HK$46.88 billion. In comparison, the main board has 2,287 companies with a market capitalisation of HK$32.87 trillion.

UBoT will use most of the IPO proceeds to increase production capacity and capabilities, according to its prospectus.

The company recorded a profit of HK$5.04 million in 2023, 77 per cent lower from the previous year. Excluding listing expenses, the profit drop was 67.59 per cent.

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