HKEX proposes cutting spin-off lock-up period from 3 years to 1 year as Hong Kong listings surge

On September 21, the Hong Kong Stock Exchange (HKEX) published a consultation paper seeking market feedback on a series of proposals. Among the proposed reforms, the restriction period during which a parent company cannot submit a spin-off listing application after its own listing would be shortened from three years to one year.

Recent Surge in Spin-off Listings on HKEX

Hong Kong's stock market has recently witnessed a new wave of spin-off listings. Companies including Hisense Group, Genscript Biotech, Xinyi Glass, and Fosun International have all announced spin-off plans, utilizing various approaches such as IPO fundraising, in-specie distribution, and hybrid models. Multiple experts interviewed noted that spin-off listings are becoming a normalized capital tool for companies to restructure assets and unlock value. However, they cautioned that spin-offs are not a panacea, and companies must carefully evaluate their spin-off strategies while balancing capital operations with business operations.

Notable Spin-off Cases

• Hisense Group: Its subsidiary Nanzhi Technology will list on the HKEX on September 22, becoming the sixth listed company under the Hisense umbrella. The company focuses on R&D, production, and sales of optical modules, optical chips, and optical network terminals. In 2025, it held a 4% global market share in optical modules, ranking fifth among specialized global manufacturers, with a 10.1% domestic market share, ranking third in China.

• Genscript Biotech: On September 4, the company announced plans to spin off and independently list its subsidiary ProBioGen, which provides CRDMO services for biologics and advanced therapies and represents the company's fastest-growing business segment.

• China Travel International Investment Hong Kong: During a September 1 performance briefing, the company's CFO stated that spin-off work is progressing in an orderly manner. In May, the company announced plans to spin off its wholly-owned subsidiary Hong Kong-Macau Cultural Tourism through an in-specie distribution.

• Xinyi Glass: On August 31, the company announced that its subsidiary Xinyi Automobile Glass Holdings had submitted a spin-off listing application. Upon completion, Xinyi Glass will retain its float glass and architectural glass core businesses and will no longer hold a controlling stake in the automotive glass segment.

• Dongfeng Motor Group and Skyworth Group: Earlier this year, both companies initiated a "cage-changing" model, where the parent company is privatized and delisted while simultaneously spinning off emerging businesses such as new energy vehicles and photovoltaics for independent listing via introduction. This combined approach of "equity distribution + merger by absorption" facilitates a strategic transformation from traditional businesses to technology sectors.

• Other companies: Fosun International received approval to spin off Club Med Lifestyle; Jiangxi Copper passed a resolution to spin off Jiangxi Copper Copper Foil on the HKEX; and both Winsome Holding and Sunny Optical Technology launched spin-off plans for their new energy and automotive optics segments, respectively.

Driving Forces Behind the Spin-off Wave

Zhang Yirui, Managing Director at CIC灼识, identified three key drivers behind the surge in HKEX spin-off listings:

1. Addressing valuation discounts: Conglomerates with diverse business lines often face conservative market pricing. Spin-offs allow high-growth, independent businesses to be valued against their own sector benchmarks, enabling value reassessment.
2. Broadening financing channels: Emerging or R&D-intensive businesses require substantial capital for expansion. Spin-offs enable subsidiaries to raise equity independently, promoting self-sustaining growth.
3. Clear regulatory framework: HKEX's spin-off listing rules are transparent with clear review standards, providing stable expectations for corporate capital operations.

Chang Cheng, Media Strategy Officer for HK/US IPO at Zhongshan Capital, added that this wave of spin-offs essentially reflects companies' strategic efforts to proactively restructure assets and unlock value. Many listed companies have incubated high-growth independent businesses whose true valuations are not reflected within the parent company platform. Through independent listing, market repricing can be achieved. Additionally, listed subsidiaries gain independent capital platforms, offering greater flexibility for subsequent financing, strategic investor introductions, and employee equity incentives—better suited for the long-term development of emerging businesses.

Multiple Spin-off Models for Different Needs

Three main spin-off models have emerged:

1. IPO Fundraising Spin-off

This model primarily involves issuing new shares to raise capital. Hisense's spin-off of Nanzhi Technology is the latest example, with Hisense Group remaining the controlling shareholder post-listing. Other cases include Fosun International's spin-off of Club Med Lifestyle, Genscript Biotech's proposed spin-off of ProBioGen, and Jiangxi Copper's proposed spin-off of Jiangxi Copper Copper Foil.

2. "In-Specie Distribution + Introduction Listing"

Represented by China Travel International Investment Hong Kong, this model involves distributing shares to existing shareholders without raising new capital. In December 2025, the company used in-specie distribution to divest its loss-making tourism real estate business, and in May submitted an introduction listing application for its wholly-owned subsidiary. Previous examples include Haidilao's spin-off of Tehai International and Kangzhe Pharmaceutical's proposed spin-off of Demei Pharmaceutical.

3. "In-Specie Distribution + Global Offering"

This hybrid model is represented by Xinyi Glass and 3SBio, though with different details. Xinyi Glass primarily used in-specie distribution, allocating 80% of shares to shareholders, combined with a 14% sale of existing shares and a 6% new share issuance for the global offering. 3SBio distributed 87.16% of Mandi International's equity entirely to shareholders, retaining no interest post-spin-off.

Expert Analysis of Model Pros and Cons

According to Zhang Yirui, each model has clear advantages and disadvantages:

• Traditional equity carve-out IPO: Strongest fundraising capacity, can attract strategic and cornerstone investors, but dilutes parent company equity and carries pricing discount and IPO breakage risks. Suitable for capital-intensive companies needing substantial funds for rapid expansion.

• "In-specie distribution + introduction listing": No dilution of parent company equity, no need for a public offering, high certainty of execution, but cannot raise capital. Existing shareholders receiving distributed shares may sell in bulk, creating liquidity pressure. Suitable for companies with self-sustaining subsidiaries focused on business restructuring and rewarding shareholders.

• "In-specie distribution + global offering": Balances existing shareholder rights with new financing needs, but the transaction structure is complex and offering results depend on market conditions. Suitable for companies with high parent company shareholding and solid fundamentals, aiming to stabilize existing shareholders while introducing incremental capital to subsidiaries.

Guan Tianjie, Co-Director of Investment Banking at Qingke International, noted that companies often choose in-specie distribution to ensure smooth spin-off progress: first, it allows for guaranteed quotas, making it easier to secure shareholder meeting approval; second, it helps diversify subsidiary shareholders, meeting HKEX's 25% public float listing requirement.

Chang Cheng cautioned that not all businesses are suitable for spin-offs. Companies should evaluate three key factors: whether the business can operate independently after separation from the parent; whether independent listing can achieve better valuation and financing conditions; and the quality of assets retained by the parent post-spin-off. If only high-quality assets are stripped for listing, the parent company's quality may decline, which may not benefit existing shareholders.

Spin-offs Are Not a Panacea

Despite the rising popularity of spin-off listings, experts caution that spin-offs are not a universal solution, and companies must balance capital market demands with business realities.

Zhang Yirui believes that the normalization of spin-off listings is a market trend. Capital markets are increasingly stringent in evaluating return on capital and cash flow quality, and the approach of simply pursuing scale is fading. For large conglomerates and industry leaders, spin-offs enable refined business division and clearer valuation—a natural choice as companies enter mature cycles.

Chang Cheng stated that while spin-offs will become more common, they will not become a "standard practice" for HKEX-listed companies. Having diversified business lines under a group is normal; spin-offs are only appropriate when a business has independent operational, financing, and valuation capabilities. However, investors should not simply equate spin-offs with positive news. They need to assess the quality of assets being divested, assets retained by the parent, the parent's shareholding ratio, and the profitability and growth prospects of the new company.

"Spin-offs themselves do not create value out of thin air; they merely separate packaged assets for market reassessment. Investment value ultimately depends on the assets themselves," Chang Cheng said.

Chen Jiahe, Chief Investment Officer at Jiuyuan Qingquan Technology, analyzed from a valuation perspective. Many companies initiate spin-offs because the overall group valuation is low. Listing high-quality businesses separately allows the market to price them independently. "There is no absolute best or worst spin-off plan; each must be customized based on the company's specific situation and investment bank recommendations. Investors still need to evaluate each business segment's operations and valuation individually."

Market Reactions Not Always Positive

Market reactions to spin-off announcements have not always been favorable. On the day Genscript Biotech announced its proposed spin-off of ProBioGen, its share price fell over 13%. After Jiangxi Copper reviewed its spin-off plan for Jiangxi Copper Copper Foil, both its A-shares and H-shares weakened, reflecting market caution toward spin-offs of new energy upstream assets. Additionally, liquidity differentiation on the HKEX is significant, with some post-spin-off subsidiaries experiencing low trading volumes or even losing liquidity.

Regulatory Requirements

Under HKEX Listing Rules, Practice Note 15 sets strict thresholds for spin-offs, requiring parent companies to retain sufficient business and assets post-spin-off to prevent the same assets from supporting two listed companies. Therefore, when planning spin-offs, companies must consider business independence, the parent company's ability to continue operations, and shareholder interests, avoiding the trap of "spin-offs for the sake of spin-offs."

(Source: Securities Times)