The Stock Exchange of Hong Kong Limited (the Exchange), a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEX), today (Wednesday) issued a guidance letter on bonus issues of shares (bonus issues) by listed companies.
The Exchange has noted recent increases in listed companies conducting bonus issues with a large distribution ratio, and significant price and volume fluctuations in the trading of their shares during the ex-entitlement period in a number of these cases (please see note below). The guidance letter reminds listed companies to properly plan their bonus issues to avoid disorderly trading.
"Under the Rules, listed companies must ensure that their issues of securities are conducted in a fair and orderly manner," said David Graham, HKEX's Chief Regulatory Officer and Head of Listing. "The Exchange may not grant listing approval for large-scale bonus issues where there is reasonable likelihood of disorderly trading during the ex-entitlement period."
Generally, the Exchange is likely to raise concern about the operation of an orderly market when a company proposes a bonus issue of 200 per cent or more of its existing issued shares. The Exchange may raise the same concern after considering the relevant facts and circumstances of a proposed bonus issue of a smaller scale.
The guidance letter can be found on the HKEX website.
| Note: |
The ex-entitlement period refers to the time interval between the ex-entitlement date for a bonus issue (the ex-date) and the date of allotment of the bonus shares (the allotment date).The previous closing share price is adjusted on the ex-date to reflect the bonus issue, but the bonus shares are not available for trading until the allotment date.In a number of recent cases, there was a squeeze in the availability of shares and significant price fluctuations during the ex-entitlement period. |
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