A Look Ahead in Commercial and Corporate Finance Transactions

Michael Fung, a partner at Loeb & Loeb, has focused his practice on corporate finance and securities law in Hong Kong for close to 20 years, handling complex initial public offerings for China-based clients seeking to list on the Hong Kong Stock Exchange (HKEX). In addition to his corporate finance practice, Michael regularly advises clients on mergers and acquisitions, corporate restructurings, and regulatory compliance, including matters concerning Hong Kong Listing Rules and the Code on Takeovers and Mergers. He has worked with companies across a variety of industries, including life sciences, electronics, energy, manufacturing, entertainment and communications. 

What’s next for your industry in Hong Kong?  

Right now, the global pandemic is changing the way we do business. For example, the HKEX has told companies seeking to list to disclose the impact of the coronavirus on their businesses and outline plans to mitigate the effects. So we are seeing changes in the way companies are preparing to list themselves.

Parallel with the pandemic, the securities industry has always been intimately tied to politics and international relations, so what’s next is somewhat complicated. Generally speaking, all transactions, including M&A, investments and listings, are affected by trade relations between China and the rest of the world. When trade tensions arise between China and others, we face uncertainty and must work, with more diligence than ever, to figure out how to handle cross-border transactions. In particular, this means working closely with Chinese enterprises to understand their concerns and helping them find the most attractive and suitable place to raise funds and conduct business in the context of a broad range of political considerations. 

Hong Kong can easily become the focal point of political tensions between the West and China and, given its special two-system feature, can face internal conflicts as well. In the next three to five years, depending on where trade relations stand globally, companies that are seeking to raise funds might be driven to consider places other than Hong Kong. Nonetheless, given the maturity of its securities markets, Hong Kong largely remains a stable place for Chinese enterprises to conduct business and investment activity.

What trends are you seeing on the Hong Kong Stock Exchange?

In 2018, the HKEX made a historic change to its listing regime by opening the doors to pre-revenue biotech companies and new economy companies with nonstandard share structures for the first time. Because of this, we have been seeing more biotech companies, as well as innovative life sciences and pharmaceutical companies, come to Hong Kong to explore the vast potential in raising funds through IPOs. The new listing regime has diversified the HKEX in terms of sectors represented and open to investment. Last time I checked, within a year after the launch of the new regime, a total of 40 new economy companies had gone public in Hong Kong, raising HK$150.4 billion. I have colleagues at Loeb who are very experienced in life science work and working closely with players who are taking advantage of the new listing regime in Hong Kong, and we partner closely. 

Are there specific listings you’ve seen and are excited about? 

I think the continued listings of life sciences companies will be great for the Hong Kong market. In addition, Alibaba came to Hong Kong for a dual listing late in 2019. This deal solidified Hong Kong as a major market in Greater China — a very mature one with fantastic infrastructure that can facilitate the trading of shares on a worldwide basis. The fact that Hong Kong was able to attract Alibaba to HKEX sets a very exciting precedent for other Chinese enterprises listed, or to be listed, on major U.S. exchanges to follow.  

Given that these deals are tied so closely to whatever the current political climate is, it may be that we see other Chinese companies follow the same steps as Alibaba – that is, pursuing a dual listing in Hong Kong and another jurisdiction, or considering privatization of their listing in the U.S. and then moving their listing status to Hong Kong. This could help bring more established companies with strong financial and business prospects like Alibaba to the Hong Kong market and further solidify the region’s standing.

What makes Loeb a leader in this space? 

The Hong Kong market is smaller than others, and the competition is fierce. Loeb has been very successful here and in Beijing because we have a niche strength and focus on capital and corporate markets. That precise focus here makes us different from bigger players in the U.S. or internationally.

In addition, it’s the people who make the difference. In Loeb’s Hong Kong and Beijing offices, and under Loeb leadership, the resources I have access to for my clients are incredible. Lawyers across the firm share information and resources so we can help clients efficiently and effectively, whether a client is seeking a Hong Kong or a U.S. listing. That’s the most important part — management knows and provides what we need to really develop and strengthen our practice. It’s what I like about the firm and the reason I returned to practice here in 2017. Clients like this, too — we can afford to put in the resources and help them all the way, from start to finish, in a very focused manner. 

What makes your practice or approach different?

For my clients, the best thing I can do is remain objective and offer a clear perspective. Clients often look to their lawyer as both a legal counsel and something of a psychologist. In the end, a client will make the final decisions, but along the way, in addition to legal advice, good legal counsel can provide wider perspective on the commercial arenas. I like to think I offer clients a practical perspective that is conducive to their analysis and decision-making. Because I can be more objective, I help them approach issues from other angles and provide more business and legal options for them to consider so they can weigh different factors and make the best possible decision. 

What excites you most about working as a corporate and capital markets lawyer, and what drew you to this area of law?

It was sheer luck in the beginning. I feel blessed to have joined this practice since day one of my legal career and blessed as well that I have not practiced in any other area. I’ve enjoyed it from the start, and so I’ve continued. The work excites me, and, naturally, it’s challenging, too, with long hours and hard work. In addition, the astronomical funds being raised in the deals create huge pressure to meet strict deadlines and give the best possible services to the clients. Maybe I take that hardship as excitement — this business is partially about the adrenaline of striving to succeed and doing so! 

I also enjoy that I get to interact with and meet people from different areas of a company. Prior to a listing, you meet the boss, who is a very successful entrepreneur, the midlevel manager and many other stakeholders. They each share with you a different perspective, and that is what I treasure most — no one and no level of the organization thinks alike, and it’s always valuable to have visibility into so many different perspectives.