The Hong Kong Stock Exchange has determined that a proposed consolidation by MSCTECH (01632) constitutes an arrangement to circumvent the reverse takeover rules and the new listing requirements under Chapter 8 of the Listing Rules, effectively facilitating a backdoor listing for MinShang Zhi Hui.

The Exchange has decided to exercise its rights under Rule 2.04 to impose additional conditions, treating the company as a new listing applicant and requiring it to comply with the additional reverse takeover provisions (including the new listing requirements) under Rules 14.54 to 14.57.

It is the Exchange's view that MinShang Zhi Hui does not meet the track record requirements for a new listing and, consequently, the company is no longer suitable for listing following the consolidation. Therefore, trading in its shares should be suspended pursuant to Rule 6.01(4).

In reaching this conclusion, the Exchange considered several key factors. Firstly, it deemed the company to be effectively a listed shell at the time of the proposed consolidation. Its information technology solutions business, the sole revenue-generating operation since the 2023 fiscal year, had been deteriorating and was generating no revenue at the consolidation date. Its renewable energy technology business remains under development with an uncertain timeline for generating income.

Secondly, the scale of MinShang Zhi Hui is significantly larger than that of the existing group. MinShang Zhi Hui generated revenue ranging from HK$272 million to HK$502.9 million from FY2023 to FY2025, compared to the group's own IT solutions business which generated only HK$200,000 to HK$60.1 million in the same period. Post-consolidation, the company's revenue for the first half of FY2026 surged to HK$19.4 million, entirely contributed by MinShang Zhi Hui.

Thirdly, the Exchange disagreed with the company's assertion that the consolidation was a continuation of its existing IT solutions business, citing fundamental differences in the business models, nature, and scale of the two operations. The group's IT business primarily derived revenue from one-off IT projects, whereas MinShang Zhi Hui is an e-commerce service provider, with over 95% of its revenue over the past three years coming from product sales and event management. Platform development and operation fees accounted for less than 5% of its revenue.

Finally, regarding the quality of the target, the Exchange noted that MinShang Zhi Hui has been operating at a loss in recent years, seemingly failing to meet new listing standards. Apart from a net profit of HK$22.2 million in FY2023, it recorded net losses in FY2024 and FY2025, with a total net loss of HK$71.1 million.

The Exchange concluded that, although the consolidation does not technically involve an asset acquisition and thus may not fall within the scope of the reverse takeover rules under Chapter 14, it is the result of an arrangement (including amendments to the articles of association and the appointment of a majority of MinShang Zhi Hui's board members) that allows the company to gain control of a new business and circumvent the reverse takeover rules and new listing requirements.

Given the severity of the circumstances, the Exchange has imposed the aforementioned conditions. As MinShang Zhi Hui lacks a qualifying track record, the company is deemed unsuitable for listing post-consolidation.

Under Chapter 2B of the Listing Rules, the company has the right to request a review of the decision by the Listing Committee. Any request for a review must be delivered to the Secretary of the Listing Committee within seven business days from the date of the decision. The company's shares will be suspended from trading upon the expiry of seven business days from the decision date (i.e., June 24, 2026), unless the company applies for a review of the decision.

The company is reviewing the letter and considering the decision. The Board intends to submit a written request to refer the decision to the Listing Committee, subject to seeking professional advice regarding its review rights. Shareholders and potential investors are reminded that the company has not yet decided whether to request a review, and if a request is made, the outcome of the Listing Committee's review is uncertain.