HKSI Paper 11 key terms

A licensed firm appointed to advise an IPO applicant, conduct due diligence, and confirm Listing Rule compliance. The sponsor is accountable to both the issuer and the Exchange for the accuracy of the listing document.

The prospectus or equivalent disclosure document issued to investors in a public offering, containing the issuer's business, financials, risks and offer terms. It must be accurate and not misleading in any material respect.

A financial eligibility route requiring an applicant to meet minimum aggregated profit thresholds over a defined track record period. Failure to satisfy it may require qualification under an alternative test such as market capitalisation or revenue.

An alternative listing eligibility route based on the applicant's expected market capitalisation, revenue and cash flow rather than pure profitability, used by larger or pre-profit issuers.

The historical period over which an applicant must demonstrate management continuity, ownership continuity and trading performance, typically three financial years for a Main Board applicant.

The investigative process by which advisers verify an issuer's assets, liabilities, contracts, litigation and management before an offering. Adequate due diligence is a condition of sponsor obligations and underwriters' defences.

A transaction by a listed issuer that must be disclosed or approved under the Listing Rules because it crosses a percentage ratio threshold. Classification ranges from share transaction to major transaction depending on size.

Five tests (assets, profits, revenue, consideration and equity capital) comparing a transaction's size to the issuer's own figures, used to classify a transaction and determine disclosure and shareholder approval requirements.

A notifiable transaction where any percentage ratio reaches 25% or more but is below 100%, requiring announcement, circular and independent shareholder approval before completion.

An acquisition where any percentage ratio reaches 100% or more, treated as effectively a reverse takeover risk and requiring independent shareholder approval plus stricter disclosure.

An acquisition that would effectively place a listed issuer's business under the control of the acquired party, requiring the Exchange to treat the transaction as a new listing application with full eligibility scrutiny.

A director, chief executive, substantial shareholder of the issuer or its subsidiaries, or their associates, including entities controlled by them. Transactions with such parties attract stricter rules.

A transaction between a listed issuer and a connected person, or one that is otherwise connected, requiring announcement, reporting and often independent shareholder approval, with exemptions for de minimis amounts.

Voting by shareholders who have no material interest in the transaction, with interested parties and their associates abstaining. Required for major transactions, connected transactions above thresholds and whitewash waivers.

An exemption from a mandatory general offer obligation, granted by the Takeovers Panel, where independent shareholders approve a transaction that would otherwise trigger the obligation.

An obligation to make a cash offer for all remaining shares once a person acquires 30% or more of voting rights, or increases a holding between 30% and 50%, under the Takeovers Code.

A rule that a person acquiring control of a company holding a stake in a listed target may itself trigger a mandatory offer obligation for the target, even without buying target shares directly.

Cooperation between parties to obtain or consolidate control of a company, whether or not under a formal agreement. Concert parties' holdings are aggregated for Takeovers Code thresholds.

The period from announcement of a firm intention to make an offer until the offer closes or lapses, during which special dealing restrictions and disclosure duties apply to the offeror and target.

A court-sanctioned arrangement between a company and its shareholders or creditors, commonly used for privatisations, mergers and group restructurings. It requires shareholder approval and court approval to become binding.

The acquisition of all shares in a listed company so that it ceases to be listed, often by scheme of arrangement or general offer. It requires independent shareholder approval and careful treatment of minorities.

Removal of a company's securities from the Exchange, whether voluntarily after privatisation or compulsorily under delisting procedures triggered by prolonged suspension, failure to meet listing criteria or serious breaches.

A temporary halt in dealing of a listed security pending clarification or announcement of material information, or during a failure to maintain sufficient public float or listing criteria.

The proportion of a listed issuer's shares held by the public rather than connected persons or controlling shareholders. Minimum float must be maintained to preserve an orderly market.

An offer of shares to selected investors, usually arranged by a placing agent, rather than to the public at large. Placings are quicker than rights issues but dilute existing holders who cannot participate.

An offer of new shares to existing shareholders in proportion to their holdings, usually at a discount, with rights that may be renounced or sold. Non-participating holders suffer dilution.

An offer of new shares to existing shareholders on a pro rata basis but not renounceable, so holders may subscribe for their entitlement but cannot sell the right itself.

A process in which an underwriter collects indications of demand and price from institutional investors to set the offer price and allocate shares in an IPO or placing.

A large investor that commits before listing to subscribe for a specified amount of shares at the offer price, providing price support and credibility, subject to lock-up and disclosure requirements.

A debt instrument that may be converted into the issuer's shares at a set conversion price, offering lower coupon in exchange for equity upside. Conversion dilutes existing shareholders.

The price at which a convertible instrument converts into shares, determining the number of shares issued. It is often subject to anti-dilution adjustment for splits, bonus issues and rights issues.

A comparison of pro forma earnings per share with and without a transaction, showing whether an acquisition or issuance increases or reduces EPS for existing shareholders.

A ratio such as price-to-earnings or enterprise value-to-EBITDA used to benchmark a company's value against comparable listed companies or precedent transactions.

A valuation method projecting future free cash flows and discounting them to present value using a risk-adjusted rate, typically the weighted average cost of capital.

A relative valuation technique deriving an implied value from trading multiples of similar listed companies, adjusted for size, growth and risk differences.

An internal information barrier separating corporate finance teams with inside knowledge from sales, trading and research staff, preventing misuse of confidential price-sensitive information.

Specific, precise, non-public information about a listed issuer that would likely affect its share price if disclosed. Dealing or tipping on it is a market misconduct offence.

A situation where an adviser's or firm's own interests, or duties to another client, could compromise independent advice. It must be identified, disclosed and managed or avoided.