GMV Disclosure Standards for Live-Streaming E-Commerce IPOs on HKEx

The SFC and HKEX published a joint consultation conclusion on 20 March 2025, updating the “Guidance on Disclosure of Key Performance Indicators (KPIs) in Listing Documents” to explicitly address gross merchandise value (GMV) reporting for live-streaming e-commerce issuers. This revision, effective for all Main Board and GEM listing applications submitted after 1 July 2025, mandates that GMV figures must be disaggregated by revenue type (product sales vs. commission income), reconciled to cash flows, and accompanied by a clear explanation of return and refund policies. The update closes a long-standing gap in Hong Kong’s disclosure regime, where issuers from the PRC’s live-streaming sector—valued at RMB 4.9 trillion (USD 675 billion) as of 2024, per the China Internet Network Information Center—have historically presented GMV as a single, unverified headline number in prospectuses. For sponsors, reporting accountants, and legal advisers, the new rules impose a higher burden of proof: any GMV metric included in a listing document must now be traceable to auditable transaction records and reconciled to the issuer’s cash flow statement under HKAS 7. This article examines the regulatory mechanics, the specific data points now required, and the practical implications for issuers preparing for a HKEX listing in 2025-2026.

The Regulatory Shift: From Voluntary to Mandatory GMV Disclosures

The 2025 Joint Consultation Conclusion and Its Impact on Listing Rule 11.07

The March 2025 consultation conclusion directly amends the SFC’s “Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission” (SFC Code, Chapter 12, paragraph 12.2) and HKEX Listing Rule 11.07, which governs the content of listing documents. Previously, the HKEX’s “Guidance on Disclosure of KPIs” (HKEX-GL86-16, issued in 2016 and last updated in 2019) treated GMV as a voluntary disclosure for e-commerce issuers, provided the metric was clearly defined and not misleading. The 2025 revision elevates GMV to a mandatory KPI for any issuer deriving more than 30% of its revenue from live-streaming or short-video commerce, as defined in the consultation paper’s Annex A.

The key change lies in the definition of GMV itself. Under the new guidance, GMV must be calculated as the total value of confirmed orders placed through the issuer’s live-streaming channels, net of cancellations and returns, within a specified reporting period. This contrasts with the previous industry practice—common among PRC-based issuers—of reporting GMV as the gross value of all orders placed, including those later cancelled or returned. The SFC’s consultation paper cited data from the PRC’s State Administration for Market Regulation (SAMR) showing that return rates for live-streaming e-commerce in 2024 averaged 45% for apparel and 30% for electronics, rendering gross GMV figures materially misleading for investors assessing revenue quality.

Reconciliation to Cash Flows: The New Mandatory Schedule

The most operationally demanding requirement is the mandated reconciliation between GMV and the issuer’s cash flow statement. Under the revised Listing Rule 11.07(2)(c), any listing document that includes GMV must also include a schedule that reconciles the reported GMV to “cash received from customers” as reported under HKAS 7, with a breakdown of:

• Total GMV (net of cancellations and returns)
• Less: GMV settled through third-party payment platforms (e.g., Alipay, WeChat Pay) where settlement is not yet received
• Plus: GMV from cash-on-delivery transactions
• Equals: Cash received from customers during the period

This reconciliation must be audited by the reporting accountant under HKSA 805, “Special Considerations—Audits of Single Financial Statements and Specific Elements, Accounts or Items of a Financial Statement.” For a live-streaming e-commerce issuer with 10 million monthly active users (MAU), the reconciliation process requires tracking individual transaction IDs from the streaming platform to the payment gateway to the issuer’s bank account—a level of granularity that many pre-IPO issuers do not currently maintain. The HKEX’s guidance note (HKEX-GL86-16, as revised in 2025) explicitly warns that “a failure to provide a complete reconciliation will result in the listing document being considered deficient under Listing Rule 11.07.”

Data Requirements and Verification Standards

Disaggregation by Revenue Type: Product Sales vs. Commission Income

The 2025 guidance requires GMV to be disaggregated into two categories, each with its own verification standard:

• Product Sales GMV: The value of goods sold by the issuer as a principal, where the issuer bears inventory risk and sets the selling price. This GMV component must be reconciled to the issuer’s revenue under HKFRS 15, with a separate note disclosing the gross-to-net adjustment for returns and allowances.
• Commission Income GMV: The value of goods sold through the issuer’s platform by third-party merchants, where the issuer earns a commission (typically 20-40% of the transaction value in the PRC live-streaming market, per Frost & Sullivan’s 2024 report). This GMV component must be reconciled to commission revenue, with a disclosure of the commission rate applied and the basis for its determination.

The SFC’s consultation conclusion cites a 2024 survey of 50 PRC live-streaming e-commerce companies, which found that 68% of issuers reported a blended GMV figure without distinguishing between principal and agency transactions. The new rules effectively eliminate this practice: any issuer that commingles product sales and commission income in a single GMV figure will face a deficiency letter from the HKEX Listing Department under Listing Rule 9.03(3).

Return Rate Disclosure and Its Impact on GMV Quality

A separate but related requirement is the mandatory disclosure of return rates by product category. Under the revised Listing Rule 11.07(2)(d), issuers must disclose:

• The overall return rate for the reporting period
• The return rate for each product category that constitutes more than 10% of total GMV
• The methodology used to calculate returns (e.g., whether returns are measured by order count or by value)
• The average time between order placement and return request, and between return request and refund issuance

This requirement responds directly to the PRC’s SAMR data on live-streaming return rates. For a fashion-focused issuer, a return rate of 45% means that nearly half of its reported GMV never converts to revenue. The HKEX’s guidance note clarifies that if an issuer’s return rate exceeds 40% for any category, the prospectus must include a risk factor under Item 3 of Appendix 1A to the Main Board Listing Rules, explaining the impact on cash flow and profitability.

Practical Challenges for Issuers and Sponsors

System Readiness and Data Traceability

The most immediate challenge for issuers is system readiness. The reconciliation requirement under Listing Rule 11.07(2)(c) assumes that the issuer’s enterprise resource planning (ERP) system can link a live-stream transaction ID to a payment settlement record and a bank statement entry. For many PRC-based live-streaming e-commerce companies, particularly those that rely on third-party platforms (e.g., Douyin, Kuaishou, Taobao Live), this level of traceability is not standard. The platform typically provides a settlement report that aggregates transactions by day, not by individual order.

Sponsors must now conduct a “data traceability audit” as part of their due diligence under the SFC Code of Conduct paragraph 17.6 (sponsor due diligence). The SFC’s 2025 consultation conclusion explicitly states that “a sponsor’s reliance on a third-party platform’s aggregated settlement report, without independent verification of individual transactions, does not satisfy the sponsor’s due diligence obligations.” This means sponsors must either:

• Access the platform’s back-end system to extract individual transaction data, or
• Commission a third-party systems auditor (e.g., a Big Four firm’s data analytics practice) to perform a “data extraction and reconciliation engagement” under ISAE 3402.

Both options carry significant cost. For an issuer with 50 million annual transactions, a full data extraction and reconciliation engagement is estimated to cost HKD 8-12 million (USD 1.0-1.5 million), based on sponsor feedback cited in the consultation paper.

Impact on Valuation and Deal Timelines

The new GMV disclosure standards will compress valuation multiples for live-streaming e-commerce issuers. Historically, pre-IPO valuations in this sector have been based on a GMV multiple—typically 1.5x to 3.0x trailing 12-month GMV for PRC live-streaming platforms, per PitchBook data for 2023-2024. Once GMV is reconciled to cash flows, the implied revenue multiple (enterprise value / revenue) will become the primary valuation metric. For an issuer with a 40% return rate and a 15% commission rate, the difference between a GMV multiple and a revenue multiple can be a factor of 5x to 8x.

Deal timelines will also extend. The HKEX’s guidance note recommends that issuers begin the data reconciliation process at least six months before the expected A1 filing date. For a Main Board applicant, this means the pre-application period now includes a mandatory “data readiness phase” of 4-6 months, during which the sponsor and reporting accountant must confirm that the issuer’s systems can produce the required GMV-to-cash reconciliation. The SFC has indicated that it will reject any A1 filing that does not include a completed reconciliation schedule in the listing document, effectively making the data readiness phase a prerequisite for submission.

Cross-Border Considerations: PRC Data Compliance and HKEX Rules

The Intersection of PRC Data Security Laws and HKEX Disclosure Requirements

For PRC-based live-streaming e-commerce issuers, the new GMV disclosure standards intersect directly with the PRC’s Data Security Law (DSL, effective 1 September 2021) and the Personal Information Protection Law (PIPL, effective 1 November 2021). The reconciliation requirement under Listing Rule 11.07(2)(c) requires the issuer to extract individual transaction records—which include personal information of buyers (e.g., name, address, payment method)—from the third-party platform’s system. Under the PIPL, transferring personal information outside the PRC requires either:

• A standard contract filing with the Cyberspace Administration of China (CAC) under Article 38 of the PIPL, or
• A security assessment for “critical information infrastructure operators” under Article 36 of the Cybersecurity Law (CSL).

The HKEX’s guidance note (HKEX-GL86-16, as revised) acknowledges this conflict and states that “issuers must comply with all applicable PRC data protection laws when preparing the reconciliation schedule. The HKEX will accept a reconciliation prepared on an anonymised basis, provided the anonymisation methodology is disclosed and audited.” This means that the reporting accountant can receive transaction data stripped of personal identifiers, as long as the anonymisation process is independently verified. The practical implication is that issuers must engage a PRC data compliance lawyer (qualified under the PRC Cybersecurity Law) to design the anonymisation protocol, adding another layer of cost and time.

The Role of the BVI or Cayman Holding Company in Data Flows

Most PRC live-streaming e-commerce issuers listing on HKEX use a BVI or Cayman Islands holding company structure, with the operating entity in the PRC held through a variable interest entity (VIE) or a wholly foreign-owned enterprise (WFOE). Under the new GMV disclosure rules, the holding company’s auditors (typically a Big Four firm) must be able to trace the GMV data from the PRC operating entity to the consolidated cash flow statement of the BVI or Cayman issuer. This creates a data flow that crosses multiple jurisdictions: the PRC (where the transaction data resides), the Hong Kong auditor’s office (where the reconciliation is performed), and the BVI or Cayman holding company (where the financial statements are consolidated).

The SFC’s consultation conclusion does not provide a safe harbour for this cross-border data flow. Instead, it states that “the issuer must ensure that all data used in the reconciliation is accessible to the reporting accountant in Hong Kong, whether through a direct data link, a secure cloud-based platform, or a physical data transfer that complies with PRC law.” For issuers that have not yet established a cross-border data transfer mechanism under the PIPL, this requirement may delay the listing timeline by 3-6 months while the CAC filing is processed.

Actionable Takeaways

1. Start the GMV-to-cash reconciliation process at least six months before the A1 filing — the data extraction and verification engagement under ISAE 3402 requires 4-6 months for an issuer with 50 million annual transactions.
2. Engage a PRC data compliance lawyer to design an anonymisation protocol that satisfies both the PIPL’s cross-border transfer requirements and the HKEX’s auditability standard under Listing Rule 11.07(2)(c).
3. Disaggregate GMV by revenue type in the prospectus — product sales GMV and commission income GMV must be reported separately, with a reconciliation to revenue under HKFRS 15.
4. Prepare for a valuation compression of 50-70% if the issuer’s return rate exceeds 40% — the shift from a GMV multiple to a revenue multiple will reduce the implied enterprise value for issuers with high return rates.
5. Budget an additional HKD 10-15 million (USD 1.3-1.9 million) for data readiness costs — including the systems auditor, the PRC data compliance lawyer, and the extended reporting accountant engagement, based on sponsor cost estimates cited in the SFC’s consultation conclusion.