The Hong Kong Securities and Futures Commission and the Hong Kong Exchanges and Clearing express joint concerns about sponsors: some listing documents are of "poor quality."

With the increase in the number of IPO projects in Hong Kong, the quality issues of listing application documents have gradually come to light. Recently, the Hong Kong Securities and Futures Commission and the Hong Kong Stock Exchange jointly issued a letter to IPO sponsors, expressing regulatory concerns regarding the observed decline in quality of new listing applications submitted recently, as well as certain non-compliance behaviors. According to reports, the letter mentioned instances of non-compliance, including poor quality of the provided listing documents and insufficient review, such as unclear descriptions of business models and excessive use of promotional language. In practice, it is not uncommon for sponsoring institutions to "over-package" the issuer's business. For example, Shenzhen Huaxida Technology Co., Ltd. (hereinafter referred to as "Huaxida"), which is rushing for a Hong Kong IPO, has promoted the "AI Home" concept, but its core product is just a TV box. Huaxida stated in its Hong Kong IPO prospectus that its business solutions allow users to easily control their home environment using cloud technology, the Internet of Things, and AI technology through digital video devices, network communication devices, and system platforms. In fact, Huaxida's core product is a TV box. Xinfeng noted that Huaxida admitted in its 2023 Beijing Stock Exchange listing application materials that "the company's sales revenue mainly comes from the income of Android TV smart terminal products." Android TV smart terminal products are a subcategory of TV boxes. In July of this year, the China Securities Regulatory Commission also mentioned in its feedback on Huaxida's overseas listing filing, "Please explain your company's business model in plain and understandable language." The stranger social networking company Soul has made four attempts to rush for a Hong Kong IPO, with its business model description undergoing several changes. In the prospectuses submitted in 2022 and 2023, Soul positioned itself as a social metaverse and pointed out that the pioneers of the social metaverse would form strong competitive barriers and are expected to stand out in future competition. However, in the fourth IPO process, the term "metaverse" no longer appeared in Soul's prospectus, which instead donned the guise of AI and emotional value, positioning itself as an "AI + immersive social platform," and described the fees paid by users for additional features and subscription fees as "emotional value service fees." In fact, the essence of Soul's business has not changed; it is still based on matching strangers based on users' interest graphs and providing channels for making friends. The Hong Kong regulatory authorities also pointed out in the letter that sponsors failed to respond promptly to the opinions of regulatory agencies, and even when clear instructions were given, some sponsors still lacked awareness of the basic facts of individual cases. The occurrence of such basic errors may be related to an overload of work. "Some investment banks, in order to expand the market and seize projects, sometimes ignore the team's capacity and blindly expand their business," pointed out an investment banker from the south. "In this process, there may be a situation where investment banks excessively pursue revenue and market share while neglecting risk control, and some investment banks' internal control departments also exhibit negligence." In fact, when the IPO fundraising amount in the A-share market set a historical record of 586.966 billion yuan in 2022, there were also frequent quality issues with documents, and even some sponsoring institutions "missed" regulatory inquiries. For example, during the listing process of Tianrun Technology, the Beijing Stock Exchange originally required Tianrun Technology and its sponsor, Kaiyuan Securities, to supplement the implementation status of the fundraising project for leased properties, including the signing date of the agreement, rental prices, and costs. However, in its response, Kaiyuan Securities only disclosed the specific location and size of the leased property, omitting issues such as rental prices and costs. At that time, some insiders from securities firms revealed to Xinfeng that due to limited manpower, the inquiries for some projects were answered by interns, which led to problems with the quality and professionalism of the related disclosures. To promote the vigorous development of the capital market, the Hong Kong Stock Exchange stated its commitment to ensuring rigor while timely advancing the review of new listing applications, and to maintaining close communication with issuers, sponsors, and professional advisors to ensure that the submitted listing documents are complete and of high quality