A "Dialogue with a Fund Manager" Reveals a New "Detour" Strategy for a Nasdaq IPO
- FOFA
- Sep 6
- 4 min read
"We should be among the last batch."
This morning, the author's conversation with a senior Hong Kong fund manager began with his complex sigh. The "last batch" he referred to is a Hong Kong company he is assisting to go public on Nasdaq, with a fundraising amount of around $5 million. The application was submitted in June and has already successfully passed three stages of review, with success on the horizon. However, this joy has been overshadowed by a new regulation from across the Pacific.
This new regulation is the proposed amendment to its listing standards that Nasdaq announced on September 3, 2025. This is not just a minor adjustment; it is a major change that could completely alter the rules of the game for companies from China and Hong Kong, especially small and medium-sized enterprises (SMEs), seeking to raise capital in the United States.
Nasdaq's New "Wall": For Market Integrity, and Also for a Higher Bar
According to Nasdaq's announcement, the core objective of this revision is to "reinforce investor protection and uphold market integrity." Several key changes in the proposal are particularly critical for firms from China and Hong Kong:
Specific Fundraising Requirement for Chinese Companies: The proposal explicitly requires that companies principally operating in China must raise a minimum of $25 million in their Initial Public Offering (IPO). This provision undoubtedly pulls the rug out from under the previous pathway of listing with fundraising amounts between $5 million and $10 million, effectively shutting it down.
Increased Minimum Market Value of Public Float: For new companies listing under the net income standard, the minimum market value of their public float will be raised to $15 million.
Accelerated Delisting Process: Companies with a post-listing market value below $5 million that also have other compliance deficiencies will face an accelerated process of suspension and delisting.
Nasdaq's leadership has been blunt, stating that this move is a response to evolving market dynamics and an effort to combat potential "pump-and-dump" market manipulation schemes. This means the era of relying on low barriers to entry and the concept of "shell resources" to land on the U.S. stock market is rapidly coming to an end. For countless entrepreneurs in China and Hong Kong dreaming of Wall Street, the door seems to be closing.
A Lifeline in a Desperate Situation? A Bold Idea of "Fund + Overseas M&A"
Faced with this suddenly raised wall, the traditional, direct IPO path is clearly no longer viable for most SMEs. During the conversation with the fund manager, the author couldn't help but propose an idea:
"Since the direct path to listing has narrowed, can we 'take a detour'? For instance, could we first use Hong Kong's mature Open-Ended Fund Company (OFC) structure to complete fundraising within a compliant and transparent framework? Then, use these funds to acquire promising overseas projects, completing the company's international transformation and asset restructuring. Finally, with a new, more global identity, could we knock on Nasdaq's door again?"
The logic behind this idea is as follows:
Compliant Fundraising: The OFC is a fund vehicle regulated by Hong Kong's Securities and Futures Commission (SFC). Its establishment and operation are highly standardized, making it effective for attracting professional investors and solving initial funding challenges.
Identity Transformation: By acquiring overseas assets, the company's primary business operations and profit sources would no longer be "principally in China." This could fundamentally help it bypass the stringent $25 million fundraising rule.
Value Enhancement: A successful overseas acquisition can not only expand the company's business footprint but also tell a grander, more imaginative capital story to global investors, thereby increasing its overall valuation.
The fund manager on the other end of the line pondered for a moment before giving a reply that was both exciting and thought-provoking:
"I'm afraid this is the only, and also the most effective, way out for the future."
From "Listing for Fundraising" to "Fundraising for Listing": A Fundamental Shift in Mindset
The fund manager's affirmation reveals a profound paradigm shift: the path to global capital for Chinese and Hong Kong enterprises must evolve from the old mindset of "listing in order to raise funds" to a new one of "first raise funds, then build a strategy, and then list."
This new "Fund + overseas M&A" path is by no means a simple circumvention tactic; it is a strategic route that places higher demands on entrepreneurs and founding teams. It requires:
Stronger Capital Operation Skills: Founding teams need to understand how to design a fund structure and attract seed capital.
A Broader International Vision: They must have the ability to identify and evaluate high-quality M&A targets on a global scale.
Superior Integration Capabilities: After a successful acquisition, how to efficiently integrate domestic and overseas businesses, teams, and cultures is the key to success.
Although this path is more winding, a company that successfully navigates it will no longer be a "China concept stock" that relies solely on a single-market story. Instead, it will be a truly global corporation. Such a company will have a more solid foundation, stronger risk resilience, and will naturally be more favored by mainstream international investors, enabling it to confidently meet Nasdaq's increasingly strict standards.
Challenge as Opportunity
Nasdaq's new regulation, which may seem like a cold "expulsion order," is in fact a "touchstone" for filtering out high-quality enterprises. It forces all market participants to abandon speculation and return to the fundamental principle of value creation. For visionary and capable entrepreneurs from China and Hong Kong, behind this narrowing "gate," there may lie a broader and more stable new continent of globalization. And the combination of the OFC structure and overseas M&A could very well be the "Noah's Ark" sailing toward that new continent.
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