Is Pre-IPO Share Plan Adoption Becoming the New Standard for Hong Kong IPOs?

Over the past decade, approximately 67% of newly listed Hong Kong companies adopted share schemes prior to IPO. Adoption accelerated further in 2024 and 2025, with rates exceeding 70% in both years. This shows that equity incentives are becoming a more common part of private companies’ talent and growth strategies, before they reach the IPO stage.

The employee incentive landscape is also evolving in structure. There has been a shift toward share award schemes and hybrid scheme that combine both share options and awards. Compared with options, share awards are often viewed as offering potential retention benefits and aligning employees more directly with ownership. Hybrid structures allow companies to adopt a more balanced approach for talent retention with cost efficiency.

Technology, consumer discretionary, and healthcare companies demonstrate some of the highest rates of pre-IPO plan adoption, exceeding 80%. These three sectors also account for a significant proportion of newly listed companies in Hong Kong. As high-growth sectors, they face sustained competition for experienced management and specialised talent well ahead of listing. In this context, equity incentive plans are an effective tool for creating a sense of ownership and supporting retention during the critical pre-listing phase.

As competition for executive talent intensifies, companies may face greater expectations to demonstrate stronger management alignment and long-term incentive structures. Pre-IPO share plans help support team stability and align employee interests with broader company objectives and success.

Pre-IPO share plans have become a well-established practice in Hong Kong’s IPO market. As issuers and advisers gain more experience with plan design and implementation, equity incentive has become more familiar in the market, supporting their wider use among private companies ahead of listing.

With pre-IPO share plans now widely regarded as a common feature, issuers often follow prevailing market practice to remain competitive. The use of established scheme vehicles, such as trust structures, further supports implementation efficiency and streamlined administration ahead of listing.

Although Chapter 17 of the HKEX Listing Rules applies to listed issuers, its clearer guidance on scheme design, limits, and disclosure has indirectly influenced pre-IPO scheme planning. Greater regulatory transparency reduces compliance uncertainty, making companies more comfortable implementing share plans ahead of IPO.