Exercise price of share option under a share option scheme of a Hong Kong listed company
Andy Lau has substantial experience representing pe/vc funds, investment banks and startup and growth companies in pe/vc investments, M&A, IPO and capital markets transactions. For a preliminary consultation, please email him at andy@askventure.com.
This article sets out the basis of determination of the exercise price of share options to be granted under a share option scheme of a company listed on The Stock Exchange of Hong Kong Limited (Hong Kong Stock Exchange).
Hong Kong Listing Rules
If the shares of a company is listed on the Hong Kong Stock Exchange, then the terms of its share option scheme are subject to Chapter 17 of the Rules Governing The Listing of Securities on The Stock Exchange of Hong Kong Limited (Hong Kong Listing Rules).
Basis of determination of exercise price of share option
Note (1) to Rule 17.03(9) of the Hong Kong listing rules sets out the basis of determination of the exercise price:
“The exercise price must be at least the higher of:
(i) the closing price of the securities as stated in the Exchange’s daily quotations sheet on the date of grant, which must be a business day; and
(ii) the average closing price of the securities as stated in the Exchange’s daily quotations sheets for the five business days immediately preceding the date of grant.
For the purpose of calculating the exercise price where an issuer has been listed for less than five business days, the new issue price shall be used as the closing price for any business day falling within the period before listing.”
What is a business day?
For the purpose of interpreting the Hong Kong Listing Rules, a business day is any day on which the Hong Kong Stock Exchange is open for the business of dealing in securities. (Defined in Rule 1.01)
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