IPO pipeline faces delays despite 610 active applications

At least 78 listing plans have been postponed, withdrawn, or lapsed this year.

Hong Kong's initial public offering (IPO) pipeline had more than 610 active applications as of 30 September, up from approximately 420 in January, although dozens of listing plans have been suspended, postponed or withdrawn.

An MIB Securities report said that extending application validity periods inflated the number of active applications, raising questions about how many would translate into completed listings.

About 65 applications had their vetting suspended between January and September, whilst Bloomberg estimates showed that at least 78 listing plans had been postponed, withdrawn or lapsed this year.

"The medium-term picture will now depend on whether the IPO pipeline turns into completed deals and active trading afterwards," the report said.

Hong Kong raised $388b from 118 listings in the first nine months (9M), up 106% year-on-year. By October, proceeds had reached $404b from 121 listings.

Deloitte forecasts $480b in IPO proceeds for the full year, requiring another $76b in November and December to meet the estimate.

The additional amount would be approximately 2.5 times the monthly fundraising pace recorded in October.

"This figure can still be reached, but only if deals actually get done," MIB Securities said.

The Hong Kong Exchanges and Clearing extended the validity of listing applications from six to 12 months on 21 August, which the brokerage said could delay the recognition of fees forfeited from unsuccessful applications.

Listing fees from the cash segment rose 35% to $900m in the first 9M, although management attributed the increase to "more forfeitures" rather than additional successful listings.

Total listing fees grew approximately 10% in the third quarter.

MIB Securities said Hong Kong's Securities and Futures Commission flagged suspended applications, weak due diligence, and potentially artificial IPO demand on 13 October.

Meanwhile, mainland China's securities regulator reportedly issued guidance to pause IPOs and large share sales by existing shareholders.

It added that weaker investor appetite could translate into lower earnings across Hong Kong's capital market in the fourth quarter.