Dropping the Green Shoe Emerges as Trend: A+H Firms Prioritize First-Day Stock Connect Access

In May 2025, Jihong Co., Ltd. became the first A+H issuer to abandon the green shoe mechanism, achieving H‑share listing and immediate inclusion in Stock Connect on the same day. Since then, more companies have adopted this approach, and by 2026 several A‑share firms issuing H‑shares in Hong Kong, including Zhaowei Electromechanical, Guanghe Technology, and Nationz Technologies, have followed the same path. Many prospective issuers have also stated in their offering plans that they intend to forgo the green shoe mechanism.

The choice to abandon the green shoe in favor of immediate Stock Connect inclusion directly impacts listing schedules and fundraising outcomes, while also reflecting liquidity conditions and pricing mechanisms in Hong Kong. On May 27, 2025, Jihong Co., Ltd., a cross‑border social e‑commerce enterprise, listed on the Hong Kong Exchange without a green shoe, becoming the first to achieve same‑day inclusion. Under the Shanghai and Shenzhen exchanges’ rules, A+H companies’ H‑shares are exempt from market‑cap and index requirements, and if no stabilization period is set, they can be included in Stock Connect on the first trading day.

By early 2026, seven companies had adopted this model. Guoen Technology, listed on February 4, explicitly stated it would not use a green shoe, achieving same‑day inclusion to broaden its shareholder base and increase liquidity. Wolong Electric, Zhaowei Electromechanical, Megvii Intelligence, Guanghe Technology, and Nationz Technologies also adopted the model. These firms are A‑share listed leaders in technology manufacturing, spanning new materials, precision transmission, intelligent modules, computing PCBs, and security chips. Their H‑share offerings carried discounts of 30%–60% compared with A‑shares, reducing reliance on green‑shoe stabilization.

Other issuers preparing Hong Kong listings, including TGOOD and Changyuan Lithium Technology under China Minmetals, have announced plans to adopt the same strategy. Hong Kong Grand Capital International CEO Wen Tianna noted that what was once an exception has become increasingly common, as issuers trade regulatory concessions for immediate liquidity from southbound funds. Deloitte China partner Ji Wenhe emphasized that whether to use a green shoe depends on market demand during global roadshows, with strong demand justifying its omission.

The green shoe mechanism traditionally stabilizes prices by allowing underwriters to repurchase shares if they fall below issue price. Abandoning it permits immediate Stock Connect inclusion and rapid access to southbound liquidity, but increases volatility and risk of breaking issue price. CIC Consulting managing director Zhang Yirui described the decision as a balance between liquidity, stabilization needs, investor composition, and trading activity. For strong A+H leaders, the arrangement is often positively interpreted, while for others the benefits depend on fundamentals and market conditions.

Market data show that companies adopting the model experienced broad first‑day gains, mid‑term divergence, and significantly improved liquidity. Guanghe Technology’s H‑shares surged 33.56% on debut, intraday gains exceeded 100%, and the stock remains 94.77% above issue price. Nationz Technologies opened 32.41% higher but closed with a 4.17% gain. First‑day turnover was elevated, with Guanghe Technology at HKD 2.776 billion and Guoen Technology at HKD 1.146 billion, and subsequent daily turnover ranging from HKD 70 million to HKD 530 million.

The practice raises questions about whether southbound funds’ pricing influence will grow. Wen Tianna affirmed that it strengthens southbound pricing power, accelerating AH price convergence and reshaping Hong Kong’s new‑issue ecosystem. Zhang Yirui cautioned that while influence will increase, long‑term valuation remains anchored in fundamentals, industry attributes, liquidity, and investor recognition. Wind data show variation in southbound holdings: Jihong Co., Ltd. at 58.56%, Megvii Intelligence at 26.18%, Nationz Technologies at 25.78%, and others between 10% and 20%. Excluding Jihong, the six companies adopting the model in 2026 had an average southbound holding ratio of 19.08%, compared with 6.88% for nine contemporaneous A+H listings using the green shoe mechanism, confirming faster southbound participation under the new approach.