Document and Entity Information
Document and Entity Information | 12 Months Ended |
Dec. 31, 2019shares | |
Document Information [Line Items] | |
Document Type | 20-F |
Document Registration Statement | false |
Document Annual Report | true |
Document Transition Report | false |
Document Shell Company Report | false |
Entity Registrant Name | Futu Holdings Ltd |
Entity Central Index Key | 0001754581 |
Current Fiscal Year End Date | --12-31 |
Document Fiscal Year Focus | 2019 |
Document Fiscal Period Focus | FY |
Amendment Flag | false |
Document Period End Date | Dec. 31, 2019 |
Entity Filer Category | Non-accelerated Filer |
Entity Voluntary Filers | No |
Entity Well Known Seasoned Issuer | No |
Entity Interactive Data Current | Yes |
Entity Current Reporting Status | Yes |
Entity Shell Company | false |
Entity Emerging Growth Company | true |
Entity Ex Transition Period | true |
Class A ordinary shares | |
Document Information [Line Items] | |
Entity Common Stock, Shares Outstanding | 459,090,941 |
Class B ordinary shares | |
Document Information [Line Items] | |
Entity Common Stock, Shares Outstanding | 544,552,051 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS $ in Thousands | Dec. 31, 2019USD ($) | Dec. 31, 2019HKD ($) | Dec. 31, 2018HKD ($) |
ASSETS | |||
Cash and cash equivalents | $ 46,547 | $ 362,574,000 | $ 215,617,000 |
Cash held on behalf of clients | 1,866,750 | 14,540,863,000 | 11,771,487,000 |
Available-for-sale financial securities | 12,039 | 93,773,000 | 59,348,000 |
Equity method investment | 792 | 6,166,000 | 0 |
Loans and advances | 537,742 | 4,188,689,000 | 3,086,904,000 |
Receivables: | |||
Clients | 31,712 | 247,017,000 | 120,256,000 |
Brokers | 157,438 | 1,226,348,000 | 425,849,000 |
Clearing organization | 39,038 | 304,080,000 | 175,955,000 |
Interest | 2,169 | 16,892,000 | 49,427,000 |
Prepaid assets | 1,601 | 12,470,000 | 8,810,000 |
Operating lease right-of-use assets | 20,748 | 161,617,000 | |
Other assets | 30,739 | 239,435,000 | 149,279,000 |
Total assets | 2,747,315 | 21,399,924,000 | 16,062,932,000 |
LIABILITIES | |||
Amounts due to related parties | 4,317 | 33,628,000 | 8,591,000 |
Payables: | |||
Clients | 1,982,037 | 15,438,879,000 | 12,304,717,000 |
Brokers | 190,547 | 1,484,243,000 | 920,871,000 |
Interest | 67 | 519,000 | 2,405,000 |
Borrowings | 188,408 | 1,467,586,000 | 1,576,251,000 |
Securities sold under agreement to repurchase | 204 | 1,590,000 | |
Operating lease liabilities | 22,141 | 172,466,000 | |
Accrued expenses and other liabilities | 32,411 | 252,460,000 | 149,818,000 |
Total liabilities | 2,420,132 | 18,851,371,000 | 14,962,653,000 |
Contingencies (Note 27) | |||
MEZZANINE EQUITY | |||
Total mezzanine equity | 1,250,472,000 | ||
SHAREHOLDERS' (DEFICIT)/EQUITY | |||
Ordinary shares | 31,000 | ||
Additional paid-in capital | 325,594 | 2,536,182,000 | |
Accumulated other comprehensive loss | (570) | (4,446,000) | (1,299,000) |
(Accumulated deficit)/Retained earnings | 2,149 | 16,739,000 | (148,925,000) |
Total shareholders' (deficit)/equity | 327,183 | 2,548,553,000 | (150,193,000) |
Total liabilities, mezzanine equity and shareholders' (deficit)/equity | 2,747,315 | 21,399,924,000 | 16,062,932,000 |
Series A convertible redeemable preferred shares | |||
MEZZANINE EQUITY | |||
Total mezzanine equity | 68,072,045 | ||
Series A-1 convertible redeemable preferred shares | |||
MEZZANINE EQUITY | |||
Total mezzanine equity | 14,586,871 | ||
Series B convertible redeemable preferred shares | |||
MEZZANINE EQUITY | |||
Total mezzanine equity | 282,627,380 | ||
Series C convertible redeemable preferred shares | |||
MEZZANINE EQUITY | |||
Total mezzanine equity | 777,835,453 | ||
Series C-1 convertible redeemable preferred shares | |||
MEZZANINE EQUITY | |||
Total mezzanine equity | $ 107,351,218 | ||
Class A ordinary shares | |||
SHAREHOLDERS' (DEFICIT)/EQUITY | |||
Ordinary shares | 5 | 36,000 | |
Total shareholders' (deficit)/equity | 36,000 | ||
Class B ordinary shares | |||
SHAREHOLDERS' (DEFICIT)/EQUITY | |||
Ordinary shares | $ 5 | 42,000 | |
Total shareholders' (deficit)/equity | $ 42,000 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Dec. 31, 2019 | Dec. 31, 2018 |
Ordinary shares, par value | $ 0.00001 | $ 0.00001 |
Ordinary shares, shares authorized | 0 | 4,622,068,906 |
Ordinary shares, shares issued | 0 | 403,750,000 |
Ordinary shares, shares outstanding | 0 | 403,750,000 |
Series A convertible redeemable preferred shares | ||
Mezzanine equity, par value | $ 0.00001 | $ 0.00001 |
Mezzanine equity, shares authorized | 0 | 125,000,000 |
Mezzanine equity, shares issued | 0 | 125,000,000 |
Mezzanine equity, shares outstanding | 0 | 125,000,000 |
Series A-1 convertible redeemable preferred shares | ||
Mezzanine equity, par value | $ 0.00001 | $ 0.00001 |
Mezzanine equity, shares authorized | 0 | 23,437,500 |
Mezzanine equity, shares issued | 0 | 23,437,500 |
Mezzanine equity, shares outstanding | 0 | 23,437,500 |
Series B convertible redeemable preferred shares | ||
Mezzanine equity, par value | $ 0.00001 | $ 0.00001 |
Mezzanine equity, shares authorized | 0 | 88,423,500 |
Mezzanine equity, shares issued | 0 | 88,423,500 |
Mezzanine equity, shares outstanding | 0 | 88,423,500 |
Series C convertible redeemable preferred shares | ||
Mezzanine equity, par value | $ 0.00001 | $ 0.00001 |
Mezzanine equity, shares authorized | 0 | 128,844,812 |
Mezzanine equity, shares issued | 0 | 128,844,812 |
Mezzanine equity, shares outstanding | 0 | 128,844,812 |
Series C-1 convertible redeemable preferred shares | ||
Mezzanine equity, par value | $ 0.00001 | $ 0.00001 |
Mezzanine equity, shares authorized | 0 | 12,225,282 |
Mezzanine equity, shares issued | 0 | 12,225,282 |
Mezzanine equity, shares outstanding | 0 | 12,225,282 |
Class A ordinary shares | ||
Ordinary shares, par value | $ 0.00001 | $ 0.00001 |
Ordinary shares, shares authorized | 48,700,000,000 | 0 |
Ordinary shares, shares issued | 459,090,941 | 0 |
Ordinary shares, shares outstanding | 459,090,941 | 0 |
Class B ordinary shares | ||
Ordinary shares, par value | $ 0.00001 | $ 0.00001 |
Ordinary shares, shares authorized | 800,000,000 | 0 |
Ordinary shares, shares issued | 544,552,051 | 0 |
Ordinary shares, shares outstanding | 544,552,051 | 0 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS)/INCOME $ in Thousands, $ in Thousands | 12 Months Ended | |||
Dec. 31, 2019USD ($)$ / sharesshares | Dec. 31, 2019HKD ($)$ / sharesshares | Dec. 31, 2018HKD ($)$ / sharesshares | Dec. 31, 2017HKD ($)$ / sharesshares | |
Revenues | ||||
Brokerage commission and handling charge income | $ 65,649 | $ 511,365 | $ 407,990 | $ 184,918 |
Interest income | 59,684 | 464,903 | 360,585 | 105,872 |
Other income | 10,949 | 85,287 | 42,768 | 20,873 |
Total revenues | 136,282 | 1,061,555 | 811,343 | 311,663 |
Costs | ||||
Interest expenses | (11,456) | (89,238) | (95,624) | (19,879) |
Processing and servicing costs | (11,800) | (91,916) | (73,843) | (52,446) |
Total costs | (36,165) | (281,704) | (249,594) | (109,102) |
Total gross profit | 100,117 | 779,851 | 561,749 | 202,561 |
Operating expenses | ||||
Research and development expenses | (33,680) | (262,345) | (151,097) | (95,526) |
Selling and marketing expenses | (21,144) | (164,701) | (98,062) | (41,446) |
General and administrative expenses | (21,164) | (164,850) | (103,831) | (57,293) |
Total operating expenses | (75,988) | (591,896) | (352,990) | (194,265) |
Others, net | (1,215) | (9,462) | (7,959) | (4,918) |
Income before income tax expenses | 22,914 | 178,493 | 200,800 | 3,378 |
Income tax expenses | (1,577) | (12,286) | (62,288) | (11,480) |
Net loss from equity method investments | (70) | (543) | ||
Net (loss)/income | 21,267 | 165,664 | 138,512 | (8,102) |
Preferred shares redemption value accretion | (1,580) | (12,309) | (66,998) | (47,715) |
Income allocation to participating preferred shareholders | (1,309) | (10,196) | (34,576) | |
Net (loss)/income attributable to ordinary shareholder of the Company | 18,378 | 143,159 | 36,938 | (55,817) |
Net (loss)/income | 21,267 | 165,664 | 138,512 | (8,102) |
Other comprehensive income/(loss), net of tax | ||||
Foreign currency translation adjustment | (404) | (3,147) | 754 | 3,366 |
Total comprehensive (loss)/income | $ 20,863 | $ 162,517 | $ 139,266 | $ (4,736) |
Net (loss)/income per share attributable to ordinary shareholder of the Company | ||||
Basic | (per share) | $ 0.02 | $ 0.17 | $ 0.09 | $ (0.14) |
Diluted | (per share) | 0.02 | 0.16 | $ 0.07 | $ (0.14) |
Net (loss)/income per ADS | ||||
Basic | (per share) | 0.18 | 1.38 | ||
Diluted | (per share) | $ 0.16 | $ 1.25 | ||
Weighted average number of ordinary shares used in computing net (loss)/income per share | ||||
Basic | 832,790,329 | 832,790,329 | 403,750,000 | 403,750,000 |
Diluted | 917,897,426 | 917,897,426 | 511,536,122 | 403,750,000 |
Brokerage commission and handling charge | ||||
Costs | ||||
Total costs | $ (12,909) | $ (100,550) | $ (80,127) | $ (36,777) |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' (DEFICIT)/EQUITY $ in Thousands, $ in Thousands | Ordinary sharesHKD ($)shares | Additional Paid-in CapitalHKD ($) | Accumulated other comprehensive (loss)/incomeHKD ($) | (Accumulated deficit)/Retained EarningsHKD ($) | Class A ordinary sharesHKD ($)shares | Class B ordinary sharesHKD ($)shares | USD ($) | HKD ($) |
Beginning balance at Dec. 31, 2016 | $ 31 | $ 2,500 | $ (5,419) | $ (187,331) | $ (190,219) | |||
Beginning balance (in shares) at Dec. 31, 2016 | shares | 403,750,000 | |||||||
Profit / Loss for the year | (8,102) | (8,102) | ||||||
Share-based compensation | 9,769 | 9,769 | ||||||
Preferred shares redemption value accretion | (12,269) | (35,446) | (47,715) | |||||
Foreign currency translation adjustment, net of tax | 3,366 | 3,366 | ||||||
Ending balance at Dec. 31, 2017 | $ 31 | (2,053) | (230,879) | (232,901) | ||||
Ending balance (in shares) at Dec. 31, 2017 | shares | 403,750,000 | |||||||
Profit / Loss for the year | 138,512 | 138,512 | ||||||
Share-based compensation | 10,440 | 10,440 | ||||||
Preferred shares redemption value accretion | (10,440) | (56,558) | (66,998) | |||||
Foreign currency translation adjustment, net of tax | 754 | 754 | ||||||
Ending balance at Dec. 31, 2018 | $ 31 | (1,299) | (148,925) | (150,193) | ||||
Ending balance (in shares) at Dec. 31, 2018 | shares | 403,750,000 | |||||||
Profit / Loss for the year | 165,664 | $ 21,267 | 165,664 | |||||
Share-based compensation | 15,967 | 15,967 | ||||||
Preferred shares redemption value accretion | (12,309) | (1,580) | (12,309) | |||||
Conversion and redesignation of preferred shares into ordinary shares | 1,262,751 | $ 19 | $ 11 | 1,262,781 | ||||
Conversion and redesignation of preferred shares into ordinary shares (In shares) | shares | 237,129,043 | 140,802,051 | ||||||
Issuance of ordinary shares upon Initial Public Offering ("IPO") | 1,259,308 | $ 9 | 1,259,317 | |||||
Issuance of ordinary shares upon Initial Public Offering ("IPO") (in shares) | shares | 115,666,666 | |||||||
Redesignation of ordinary shares into Class B ordinary shares | $ (31) | $ 31 | ||||||
Redesignation of ordinary shares into Class B ordinary shares (in shares) | shares | (403,750,000) | 403,750,000 | ||||||
Shares issued upon exercise of employee share options | 10,465 | $ 8 | 10,473 | |||||
Shares issued upon exercise of employee share options (in shares) | shares | 106,295,232 | |||||||
Foreign currency translation adjustment, net of tax | (3,147) | (404) | (3,147) | |||||
Ending balance at Dec. 31, 2019 | $ 2,536,182 | $ (4,446) | $ 16,739 | $ 36 | $ 42 | $ 327,183 | $ 2,548,553 | |
Ending balance (in shares) at Dec. 31, 2019 | shares | 459,090,941 | 544,552,051 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS $ in Thousands, $ in Thousands | 12 Months Ended | |||
Dec. 31, 2019USD ($) | Dec. 31, 2019HKD ($) | Dec. 31, 2018HKD ($) | Dec. 31, 2017HKD ($) | |
Cash flows from operating activities | ||||
Net (loss)/income | $ 21,267 | $ 165,664 | $ 138,512 | $ (8,102) |
Adjustments for: | ||||
Depreciation and amortization | 2,124 | 16,547 | 8,327 | 4,300 |
Net loss from equity method investments | 70 | 543 | ||
Foreign exchange losses/(gains) | 968 | 7,539 | (7,457) | (21,625) |
Share-based compensation | 2,050 | 15,967 | 10,440 | 9,769 |
Realized gain from available-for-sale financial securities | (91) | (707) | (83) | (12) |
Deferred income tax expenses/(benefit) | (202) | (1,576) | 15,507 | 5,194 |
Amortization of right-of-use assets | 8,313 | 49,553 | ||
Changes in operating assets: | ||||
Net (increase)/decrease in amounts due from related parties | 6,541 | (5,535) | ||
Net increase in loans and advances | (141,447) | (1,101,785) | (178,937) | (2,781,804) |
Net (increase)/decrease in accounts receivable from clients and brokers | (119,041) | (927,260) | (221,067) | 477,360 |
Net increase in accounts receivable from clearing organization | (16,449) | (128,125) | (120,063) | (46,278) |
Net (increase)/decrease in interest receivable | 4,177 | 32,535 | (42,386) | (5,971) |
Net (increase)/decrease in prepaid assets | (470) | (3,660) | (5,164) | 1,286 |
Net (increase)/decrease in other assets | 2,678 | 20,860 | (89,543) | (19,159) |
Changes in operating liabilities: | ||||
Net increase/(decrease) in amounts due to related parties | 3,214 | 25,037 | (6,096) | 8,208 |
Net increase in accounts payable to clients and brokers | 474,688 | 3,697,534 | 4,955,073 | 4,131,287 |
Net increase/(decrease) in accounts payable to clearing organization | (82,878) | 72,437 | ||
Net increase in payroll and welfare payable | 4,364 | 33,990 | 17,121 | 22,838 |
Net increase/(decrease) in interest payable | (242) | (1,886) | 339 | (415) |
Net increase in operating lease liabilities | (6,921) | (38,704) | ||
Net increase in securities sold under agreements to repurchase | 204 | 1,590 | ||
Net increase in other liabilities | 13,580 | 105,778 | 71,981 | 11,550 |
Net cash generated from operating activities | 252,834 | 1,969,434 | 4,470,167 | 1,855,328 |
Cash flows from investing activities | ||||
Proceeds from disposal of property and equipment and intangible assets | 1 | 9 | 4 | 20 |
Purchase of property and equipment and intangible assets | (15,193) | (118,341) | (18,791) | (7,413) |
Purchase of available-for-sale financial securities | (36,689) | (285,784) | (123,260) | |
Proceeds from disposal of available-for-sale financial securities | 32,103 | 250,061 | 63,912 | 2,236 |
Realized gain received from available-for-sale financial securities | 91 | 707 | 83 | 12 |
Acquisition of equity method investments | (861) | (6,709) | ||
Net cash used in investing activities | (20,548) | (160,057) | (78,052) | (5,145) |
Cash flows from financing activities | ||||
Proceeds from issuance of Series C preferred shares and Series C-1 preferred shares | 620,625 | |||
Proceeds from borrowings | 868,427 | 6,764,524 | 6,078,979 | 2,518,185 |
Repayment of borrowings | (882,377) | (6,873,188) | (6,043,289) | (982,964) |
Proceeds from initial public offering, net of issuance costs | 161,671 | 1,259,317 | ||
Proceeds from exercise of share options | 124 | 969 | ||
Net cash generated from financing activities | 147,845 | 1,151,622 | 35,690 | 2,155,846 |
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (5,734) | (44,666) | 7,457 | 21,625 |
Net increase in cash, cash equivalents and restricted cash | 374,397 | 2,916,333 | 4,435,262 | 4,027,654 |
Cash, cash equivalents and restricted cash at beginning of the year | 1,538,900 | 11,987,104 | 7,551,842 | 3,524,188 |
Cash, cash equivalents and restricted cash at end of the year | 1,913,297 | 14,903,437 | 11,987,104 | 7,551,842 |
Cash, cash equivalents and restricted cash | ||||
Cash and cash equivalents | 46,547 | 215,617 | 375,263 | |
Cash held on behalf of clients | 1,866,750 | 11,771,487 | 7,176,579 | |
Non-cash financing activities | ||||
Accretion to preferred shares redemption value | 1,580 | 12,309 | 66,998 | 47,715 |
Issuance of Series C preferred shares from conversion of the convertible notes | 32,345 | |||
Issuance of Series C preferred shares from repayment of short-term borrowings | 153,896 | |||
Supplemental disclosure | ||||
Interest paid | (11,456) | (89,238) | (95,285) | (20,294) |
Income tax paid | (1,941) | (15,117) | $ (18,734) | $ (8,693) |
Cash paid for amounts include in operating lease liabilities | $ (6,500) | $ (50,629) |
ORGANIZATION AND PRINCIPAL ACTI
ORGANIZATION AND PRINCIPAL ACTIVITIES | 12 Months Ended |
Dec. 31, 2019 | |
ORGANIZATION AND PRINCIPAL ACTIVITIES | |
ORGANIZATION AND PRINCIPAL ACTIVITIES | 1. ORGANIZATION AND PRINCIPAL ACTIVITIES Principal activities Futu Holdings Limited (the “Company”) is an investment holding company incorporated in the Cayman Islands with limited liability and conducts its business mainly through its subsidiaries, variable interest entity (“VIE”) and subsidiary of the VIE (collectively referred to as the “Group”). The Group principally engages in online financial services including securities and derivative trades brokerage, margin financing and wealth management services based on independently developed software and websites like “Futu NiuNiu” mobile app. The Group also provides financial information and online community services, etc. The Company completed its IPO on March 8, 2019 on the Nasdaq Global Market. Each American Depositary Shares ("ADSs") of the Company represents eight Class A ordinary shares. As of December 31, 2019, the Company’s principal subsidiaries, consolidated VIE and subsidiary of VIE are as follows: Percentage of Direct or Date of Place of Indirect Incorporation/ Incorporation/ Economic Subsidiaries Establishment/ Establishment Interest Principal Activities Futu Securities International (Hong Kong) Limited (“Futu Securities” or the “Operating Company”) April 17, 2012 Hong Kong 100 % Financial services Futu Securities (Hong Kong) Limited May 2, 2014 Hong Kong 100 % Investment holding Futu Network Technology Limited May 17, 2015 Hong Kong 100 % Research and development and technology services Futu Network Technology (Shenzhen) Co., Ltd. October 14, 2015 Shenzhen, PRC 100 % Research and development and technology services Shen Si Network Technology (Beijing) Co., Ltd. (“Shen Si”) September 15, 2014 Beijing, PRC 100 % No substantial business Futu Inc. December 17, 2015 Delaware, USA 100 % Financial services VIE Shenzhen Futu Network Technology Co., Ltd. (1) (“Shenzhen Futu”) December 18, 2007 Shenzhen, PRC 100 % Research and development and technology services Subsidiary of the VIE Beijing Futu Network Technology Co., Ltd. April 4, 2014 Beijing, PRC 100 % No substantial business Note: (1) Mr. Leaf Hua Li and Ms. Lei Li are beneficiary owners of the Company and held 85% and 15% equity interest in Shenzhen Futu, respectively. Mr. Leaf Hua Li is the founder, chairman and chief executive officer of the Company, and Ms. Lei Li is Mr. Leaf Hua Li’s spouse. Initial Public Offering On March 8, 2019, the Compangy completed its IPO on the Nasdaq Global Market. In the offering, 8,625,000 ADSs (including 1,125,000 ADSs sold upon the full exercise of the underwriters’ over-allotment option), representing 69,000,000 Class A ordinary shares, were issued and sold to the public at a price of US$12 per ADS. Concurrently with the IPO, 46,666,666 Class A ordinary shares were issued and sold to General Atlantic Singapore FT Pte. Ltd. at a price per share equal to the IPO price per share (“Concurrent Private Placement”). The net proceeds to the Company from the IPO and Concurrent Private Placement, after deducting commissions and offering expenses, were approximately US$161.7 million (HK$1,259,317,000). Upon the completion of the IPO, all 377,931,094 issued and outstanding preferred shares were converted into ordinary shares immediately as of the same date. In accordance to the written resolutions passed by the Board of Directors of the Company and its shareholders in December 2018, upon the completion of the IPO, the Company completed the redesignation on a one-for-one basis of: (i) all of 403,750,000 original ordinary shares ultimately held by the Company’s founder, chairman of the board of directors and chief executive officer, Mr. Leaf Hua Li and 140,802,051 shares (including ordinary shares resulting from the conversion and re-designation of preferred shares) held by Qiantang River Investment Limited into Class B ordinary shares; (ii) all of remaining ordinary shares (including 237,129,043 ordinary shares resulting from the conversion and re-designation of preferred shares) into Class A ordinary shares. In respect of all matters subject to shareholders’ vote, each holder of Class A ordinary share is entitled to one and each holder of Class B ordinary share is entitled to twenty votes. |
SIGNIFICANT ACCOUNTING POLICIES
SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2019 | |
SIGNIFICANT ACCOUNTING POLICIES | |
SIGNIFICANT ACCOUNTING POLICIES | 2. SIGNIFICANT ACCOUNTING POLICIES Basis of presentation The consolidated financial statements of the Group have been prepared in accordance with the accounting principles generally accepted in the United States of America (“U.S. GAAP”). Significant accounting policies followed by the Group in the preparation of the accompanying consolidated financial statements are summarized below. Basis of Consolidation The consolidated financial statements include the financial statements of the Company, its subsidiaries, the VIE and subsidiary of the VIE for which the Company or its subsidiary is the primary beneficiary. A subsidiary is an entity in which the Company, directly or indirectly, controls more than one half of the voting power; or has the power to appoint or remove the majority of the members of the board of directors; or to cast a majority of votes at the meeting of directors; or has the power to govern the financial and operating policies of the investee under a statute or agreement among the shareholders or equity holders. A consolidated VIE is an entity in which the Company, or its subsidiary, through contractual arrangements, has the power to direct the activities that most significantly impact the entity’s economic performance, bears the risks of and enjoys the rewards normally associated with ownership of the entity, and therefore the Company or its subsidiary is the primary beneficiary of the entity. All transactions and balances among the Company, its subsidiaries, the VIE and subsidiary of the VIE have been eliminated upon consolidation. VIE Companies 1) Contractual Agreements with VIE The following is a summary of the contractual agreements (collectively, “Contractual Agreements”) between the Company’s PRC subsidiary, Shen Si, and the VIE, Shenzhen Futu. Through the Contractual Agreements, the VIE is effectively controlled by the Company. Shareholders’ Voting Rights Proxy Agreements. Pursuant to the Shareholders’ Voting Rights Proxy Agreements, each shareholder of Shenzhen Futu irrevocably authorized Shen Si or any person(s) designated by Shen Si to exercise such shareholder’s rights in Shenzhen Futu, including without limitation, the power to participate in and vote at shareholder’s meetings, the power to nominate and appoint the directors, senior management, and other shareholders’ voting right permitted by the Articles of Association of Shenzhen Futu. The shareholders’ voting rights proxy agreement remains irrevocable and continuously valid from the date of execution until the expiration of the business term of Shen Si and can be renewed upon request by Shen Si. Business Operation Agreement. Pursuant to the Business Operation Agreement, Shenzhen Futu and its shareholders undertake that without Shen Si’s prior written consent, Shenzhen Futu shall not enter into any transactions that may have a material effect on Shenzhen Futu’s assets, business, personnel, obligations, rights or business operations. Shenzhen Futu and its shareholders shall elect directors nominated by Shen Si and such directors shall nominate officers designated by Shen Si. The business operation agreement will remain effective until the end of Shen Si’s business term, which will be extended if Shen Si’s business term is extended or as required by Shen Si. Equity Interest Pledge Agreements. Pursuant to the Equity Interest Pledge Agreements, each shareholder of Shenzhen Futu agrees that, during the term of the Equity Interest Pledge Agreements, he or she will not dispose of the pledged equity interests or create or allow any encumbrance on the pledged equity interests without the prior written consent of Shen Si. The Equity Interest Pledge Agreements remain effective until the latter of the full payment of all secured debt under the equity interest pledge agreements and Shenzhen Futu and its shareholders discharge all their obligations under the contractual arrangements. Exclusive Technology Consulting and Services Agreement. Under the Exclusive Technology Consulting and Services Agreement between Shen Si and Shenzhen Futu, Shen Si has the exclusive right to provide Shenzhen Futu with technology consulting and services related to, among other things, technology research and development, technology application and implementation, maintenance of software and hardware. Without Shen Si’s written consent, Shenzhen Futu shall not accept any technology consulting and services covered by this agreement from any third party. Shenzhen Futu agrees to pay a service fee at an amount equivalent to all of its net profit to Shen Si. Unless otherwise terminated in accordance with the terms of this agreement or otherwise agreed with Shen Si, this agreement will remain effective until the expiration of Shen Si’s business term, and will be renewed if Shen Si’s business term is extended. Exclusive Option Agreement. Pursuant to the Exclusive Option Agreement, each shareholder of Shenzhen Futu has irrevocably granted Shen Si an exclusive option, to the extent permitted by PRC laws, to purchase, or have its designated person or persons to purchase, at its discretion, all or part of the shareholder’s equity interests in Shenzhen Futu. Unless PRC laws and/or regulations require valuation of the equity interests, the purchase price shall be RMB1.00 or the lowest price permitted by the applicable PRC laws, whoever is higher. Each shareholder of Shenzhen Futu undertakes that, without the prior written consent of Shen Si, he or she will not, among other things, (i) create any pledge or encumbrance on his or her equity interests in Shenzhen Futu, (ii) transfer or otherwise dispose of his or her equity interests in Shenzhen Futu, (iii) change Shenzhen Futu’s registered capital, (iv) amend Shenzhen Futu’s articles of association, (v) liquidate or dissolve Shenzhen Futu, or (vi) distribute dividends to the shareholders of Shenshen Futu. In addition, Shenzhen Futu undertakes that, without the prior written consent of Shen Si, it will not, among other things, dispose of Shenzhen Futu’s material assets, provide any loans to any third parties, enter into any material contract with a value of more than RMB500,000, or create any pledge or encumbrance on any of its assets, or transfer or otherwise dispose of its material assets. Unless otherwise terminated by Shen Si, this agreement will remain effective until the expiration of Shen Si’s business term, and will be renewed if Shen Si’s business term is extended. 2) Risks in relation to the VIE structure The following table sets forth the assets, liabilities, results of operations and changes in cash and cash equivalents of the VIE and its subsidiary taken as a whole, which were included in the Group’s consolidated financial statements with intercompany balances and transactions eliminated between the VIE and its subsidiary: As of December 31, 2018 2019 (HK$in thousands) Total assets 57,213 68,480 Total liabilities 74,904 73,271 Year ended December 31, 2017 2018 2019 (HK$in thousands) Total operating revenue 50,020 68,888 65,681 Net income 18,458 21,262 8,807 Year ended December 31, 2017 2018 2019 (HK$in thousands) Net cash (used in)/generated from operating activities (4,613) 1,664 (2,502) Net cash generated from investing activities — — 2,233 Net (decrease)/increase in cash and cash equivalents (4,613) 1,664 (269) Cash and cash equivalents at beginning of the year 4,699 86 1,750 Cash and cash equivalents at end of the year 86 1,750 1,481 Under the Contractual Agreements with the VIE, the Company has the power to direct activities of the VIE and VIE’s subsidiary, and can have assets transferred out of the VIE and VIE’s subsidiary. Therefore, the Company considers itself the ultimate primary beneficiary of the VIE and there is no asset of the VIE that can only be used to settle obligations of the VIE and VIE’s subsidiary, except for registered capital of the VIE and its subsidiary amounting to RMB10 million as of December 31, 2017, 2018 and 2019, respectively. Since the VIE are incorporated as limited liability companies under the PRC Company Law, creditors of the VIE do not have recourse to the general credit of the Company. There is currently no contractual arrangement that would require the Company to provide additional financial support to the VIE. However, as the Company is conducting certain businesses through its VIE and VIE’s subsidiary, the Company may provide such support on a discretionary basis in the future, which could expose the Company to a loss. In the opinion of the Company’s management, the contractual arrangements among its subsidiary, the VIE and its respective Nominee Shareholders are in compliance with current PRC laws and are legally binding and enforceable. However, uncertainties in the interpretation and enforcement of the PRC laws, regulations and policies could limit the Company’s ability to enforce these contractual arrangements. As a result, the Company may be unable to consolidate the VIE and VIE’s subsidiary in the consolidated financial statements. On March 15, 2019, the Foreign Investment Law was formally passed by the thirteenth National People's Congress and it will take effect on January 1, 2020. The Foreign Investment Law will replace the Law on Sino-Foreign Equity Joint Ventures, the Law on Sino-Foreign Cooperative Joint Ventures and the Law on Foreign-Capital Enterprises to become the legal foundation for foreign investment in the PRC. The Foreign Investment Law stipulates certain forms of foreign investment. However, the Foreign Investment Law does not explicitly stipulate contractual arrangements such as those we rely on as a form of foreign investment. Notwithstanding the above, the Foreign Investment Law stipulates that foreign investment includes "foreign investors investing through any other methods under laws, administrative regulations or provisions prescribed by the State Council.'' Future laws, administrative regulations or provisions prescribed by the State Council may possibly regard Contractual Arrangements as a form of foreign investment. If this happens, it is uncertain whether the Contractual Arrangements with the VIE and its shareholders would be recognized as foreign investment, or whether the Contractual Arrangements would be deemed to be in violation of the foreign investment access requirements. As well as the uncertainty on how the Contractual Arrangements will be handled, there is substantial uncertainty regarding the interpretation and the implementation of the Foreign Investment Law. The relevant government authorities have broad discretion in interpreting the law. Therefore, there is no guarantee that the Contractual Arrangements, the business of the VIE and financial conditions of the Company will not be materially and adversely affected. The Company’s ability to control the VIE also depends on the power of attorney Shen Si has to vote on all matters requiring shareholders’ approvals in the VIE. As noted above, the Company believes these power of attorney are legally binding and enforceable but may not be as effective as direct equity ownership. In addition, if the Group’s corporate structure or the contractual arrangements with the VIE were found to be in violation of any existing PRC laws and regulations, the PRC regulatory authorities could, within their respective jurisdictions: · revoke the Group’s business and operating licenses; · require the Group to discontinue or restrict its operations; · restrict the Group’s right to collect revenues; · block the Group’s websites; · require the Group to restructure its operations, re-apply for the necessary licenses or relocate the Group’s businesses, staff and assets; · impose additional conditions or requirements with which the Group may not be able to comply; or · take other regulatory or enforcement actions against the Group that could be harmful to the Group’s business. The imposition of any of these restrictions or actions may result in a material adverse effect on the Group’s ability to conduct its business. In addition, if the imposition of any of these restrictions causes the Group to lose the right to direct the activities of the VIE or the right to receive their economic benefits, the Group would no longer be able to consolidate the financial statements of the VIE. In the opinion of management, the likelihood of losing the benefits in respect of the Group’s current ownership structure or the contractual arrangements with its VIE is remote. Use of Estimates The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, related disclosures of contingent assets and liabilities at the balance sheet date, and the reported revenue, cost and expenses during the reported period in the consolidated financial statements and accompanying notes. Significant accounting estimates reflected in the Group’s consolidated financial statements mainly include, but are not limited to, assessment of whether the Group acts as a principal or an agent in different revenue streams, the determination of estimated selling prices of multiple element revenue contracts, the estimation of selling and marketing expense from incentive program, the valuation and recognition of share-based compensation arrangements, depreciable lives of property and equipment, useful life of intangible assets, assessment for impairment of loans and advances, provision of income tax and valuation allowance for deferred tax asset. Actual results could differ from those estimates. Comprehensive Income and Foreign Currency Translation The Group’s operating results are reported in the consolidated statements of comprehensive (loss)/income pursuant to FASB ASC Topic 220, “Comprehensive Income”. Comprehensive income consists of two components: net income and other comprehensive income (“OCI”). The Group’s OCI is comprised of gains and losses resulting from translating foreign currency financial statements of entities, of which functional currency is other than Hong Kong dollar which is the presentational currency of the Group, net of related income taxes, where applicable. Such subsidiaries’ assets and liabilities are translated into Hong Kong dollars at period-end exchange rates, and revenues and expenses are translated at average exchange rates prevailing during the period. Adjustments that result from translating amounts from a subsidiary’s functional currency to the Hong Kong dollar (as described above) are reported net of tax, where applicable, in accumulated OCI in the consolidated balance sheets. Convenience Translation Translations of balances in the consolidated balance sheets, consolidated statements of comprehensive (loss)/income and consolidated statements of cash flows from HK$ into US$ as of and for the year ended December 31, 2019 are solely for the convenience of the readers and were calculated at the rate of US$1.00=HK$7.7894, representing the noon buying rate set forth in the H.10 statistical release of the U.S. Federal Reserve Board on December 31, 2019. No representation is made that the HK$ amounts could have been, or could be, converted, realized or settled into US$ at that rate on December 31, 2019, or at any other rate. Cash and Cash Equivalents Cash and cash equivalents represent cash on hand, demand deposits and time deposits placed with banks or other financial institutions, which are unrestricted to withdrawal or use, and which have original maturities of three months or less. Cash Held on Behalf of Clients The Group has classified the clients’ deposits as cash held on behalf of clients under the assets section in the consolidated balance sheets and recognized the corresponding accounts payables to the respective clients under the liabilities section. Available-for-Sale Financial Securities Available-for-sale financial securities include debt securities and are measured at fair value. Investments classified as available-for-sale debt securities are reported at fair value with unrealized gains or losses, if any, recorded in accumulated other comprehensive income in the consolidated statements of changes in shareholders’ (deficit)/equity. Debt securities in this category are wealth management products with expected return rate or variable interest rate indexed to investment horizon, principal amounting to HK$59,348 thousand and HK$93,773 thousand as of December 31, 2018 and 2019, respectively. These wealth management products are issued by a commercial bank in China and the Group can redeem the units held upon request. The assessment of a decline in the fair value of an individual security is based on whether the decline is other-than-temporary. The Group assesses its available-for-sale debt securities for other-than-temporary impairment by considering factors including, but not limited to, its ability and intent to hold the individual security, severity of the impairment, expected duration of the impairment and forecasted recovery of fair values. If the Group determines a decline in fair value is other-than-temporary, the cost basis of the individual security is written down to fair value as a new cost basis and the amount of the write-down is accounted for as a realized loss charged in the consolidated statements of comprehensive (loss)/income. The fair values of the investments would not be adjusted for subsequent recoveries in fair values. As of December 31, 2018 and 2019, Group did not identify any sign for its available-for-sale debt securities to impair. Equity method investment In accordance with ASC 323 Investment-Equity Method and Joint Ventures, the Company accounts for an equity investment over which it has significant influence but does not own a majority of the equity interest or otherwise controls and the investments are either common stock or in substance common stock using the equity method. The Company's share of the investee's profit and loss is recognized in the consolidated statements of comprehensive (loss)/income of the period. In January 2019, the Company invested in Zhixiang Technology (Shenzhen) Co., Ltd, a professional stock incentive plan service company. The Company acquired 20% ordinary equity interest with a total consideration of HK$6,709 thousand. The Company exercises significant influence in Zhixiang Technology (Shenzhen) Co., Ltd and therefore accounts for this as a long-term investment using equity method. Loans and advances Loans and advances include margin loans and IPO loans extended to clients and other advances, collateralized by securities and are carried at the amortized cost, net of an allowance for doubtful accounts. IPO loans for subscription of new shares are normally settled within one week from the drawdown date. Once IPO stocks are allotted, the Operating Company requires clients to repay the IPO loans. Force liquidation action would be taken if the clients fail to settle their shortfall after the IPO allotment result is announced. There were no outstanding IPO loan balances as of December 31, 2018 and 2019. The allowance for doubtful accounts for clients and related activity was immaterial for the period presented. Other advances consist of bridge loans to enterprises which pledged unlisted or listed shares they hold as collateral. The allowance for doubtful accounts for clients and related activity was immaterial for the period presented. Loans and advances are initially recorded net of directly attributable transaction costs and are measured at subsequent reporting dates at amortized cost. Finance charges, premiums payable on settlement or redemption and direct costs are accounted for on an accrual basis to the surplus or deficit using the effective interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise. Trading Receivables from and Payables to Clients Trading receivables from and payables to clients include amounts due on brokerage transactions on a trade-date basis. Receivables from and Payables to Brokers and Clearing Organization Receivables from and payables to brokers and clearing organization include receivables and payables from unsettled trades on a trade-date basis, including amounts receivable for securities or derivatives trades not delivered by the Operating Company to the purchaser by the settlement date and cash deposits, and amounts payable for securities or derivatives trades not received by the Operating Company from a seller by the settlement date. Clearing settlement fund deposited in the clearing organization for the clearing purpose is recognized in receivables from clearing organization. The Operating Company borrowed margin loan from executing brokers in the United States, with the benchmark interest rate plus premium differentiated depending on the trading volume, and immediately lent to margin financing clients. Margin loan borrowed is recognized in the payables to brokers. Interest Receivable and Payable Interest receivable is calculated based on the contractual interest rate of bank deposit, loans and advances on an accrual basis, and is recorded as interest income as earned. Interest payable is calculated based on the contractual interest rates of borrowings on an accrual basis. Securities Borrowed and Securities Loaned Securities borrowed and securities loaned are recorded at the amount of the cash collateral advanced or received. Securities borrowed transactions require the Operating Company to provide counterparties with collateral, which may be in the form of cash, or other securities. With respect to securities loaned, the Operating Company receives collateral, which may be in the form of cash or other securities in an amount generally in excess of the fair value of the securities loaned. The Operating Company monitors the market value of securities borrowed and loaned on a daily basis, with additional collateral obtained or refunded as permitted contractually. Receivables and payables related to securities borrowed and securities loaned are included at receivables from and payables to brokers or clients in the consolidated balance sheets. Securities lending fees received and paid by the Operating Company are included in interest income and interest expense, respectively, in the consolidated statements of comprehensive (loss)/income. Securities Sold Under Agreements to Repurchase Transactions involving sales of securities under agreements to repurchase (repurchase agreements) are treated as collateralized financing transactions. Under repurchase agreements, the Operating Company receives cash from counterparties and provides securities as collateral. These agreements are carried at amounts at which the securities will subsequently be repurchased, plus accrued interest, and the interest expense incurred by the Operating Company is recorded as interest expenses on the consolidated statements of comprehensive (loss)/income. Leases On January 1, 2019, the Group adopted FASB ASC Topic 842, “Leases,” (“ASC Topic 842”) which requires that a lessee recognize in the consolidated balance sheet a lease liability and a corresponding right-of-use asset, including for those leases that the Group currently classifies as operating leases. The right-of-use asset and the lease liability was initially measured using the present value of the remaining lease payments. ASC Topic 842 was implemented using a modified retrospective approach which resulted in no cumulative-effect adjustment in the opening balance of retained earnings as of January 1, 2019. As a result, the consolidated balance sheet prior to January 1, 2019 was not restated and continues to be reported under FASB ASC Topic 840, “Leases,” (“ASC Topic 840”), which did not require the recognition of a right-of-use asset or lease liability for operating leases. As permitted under ASC Topic 842, the Group adopted the following practical expedients: (1) not to reassess whether an expired or non-lease contract that commenced before January 1, 2019 contained an embedded lease, (2) not to reassess the classification of existing leases, (3) not to determine whether initial direct costs related to existing leases should be capitalized under ASC Topic 842, and (4) not to separate lease and non-lease components. The Group reviews all relevant contracts to determine if the contract contains a lease at its inception date. A contract contains a lease if the contract conveys to the Group the right to control the use of an underlying asset for a period of time in exchange for consideration. If the Group determines that a contract contains a lease, it recognizes, in the consolidated balance sheets, a lease liability and a corresponding right-of-use asset on the commencement date of the lease. The lease liability is initially measured at the present value of the future lease payments over the lease term using the rate implicit in the lease or, if not readily determinable, the Group’s secured incremental borrowing rate. An operating lease right-of-use asset is initially measured at the value of the lease liability minus any lease incentives and initial direct costs incurred plus any prepaid rent. Each lease liability is measured using the Group’s secured incremental borrowing rate, which is based on an internally developed yield curve using interest rates of debt issued with a similar risk profile as the Group and a duration similar to the lease term. The Group’s leases have remaining terms of one to five years, and some of which include options to terminate the lease upon notice. The Group considers these options when determining the lease term used to calculate the right-of-use asset and the lease liability when the Group is reasonably certain it will exercise such option. The Group’s operating leases contain both lease components and non-lease components. Non-lease components are distinct elements of a contract that are not related to securing the use of the underlying assets, such as common area maintenance and other management costs. The Company elected to measure the lease liability by combining the lease and non-lease components as a single lease component. As such, the Company includes the fixed payments and any payments that depend on a rate or index that relate to the lease and non-lease components in the measurement of the lease liability. Some of the non-lease components are variable in nature and not based on an index or rate, and as a result, are not included in the measurement of the operating lease right-of-use assets or operating lease liability. Operating lease expense is recognized on a straight-line basis over the lease term and is included in rental and other related expenses in the Group’s consolidated statements of comprehensive (loss)/income. All of the Group’s leases are classified as operating leases and primarily consist of real estate leases for corporate offices, data centers, and other facilities. As a result of the adoption, the Group recognized approximately HK$22,312 of operating lease right-of-use assets and corresponding operating lease liabilities respectively on the consolidated balance sheets as of January 1, 2019. The adoption had no impact on the Group’s opening balance of retained earnings as of January 1, 2019. As of December 31, 2019, the weighted-average remaining lease term on these leases is approximately four years and the weighted-average discount rate used to measure the lease liabilities is approximately 4.75%. For the year ended December 31, 2019, right-of-use assets obtained under operating leases was HK$211,170 thousand. The Group’s lease agreements do not contain any residual value guarantees, restrictions or covenants. Refundable Deposit Refundable deposit is included in other assets in the consolidated balance sheets. As a clearing member firm of HKEx, the Group is also exposed to clearing member credit risk. HKEx requires member firms to deposit cash to a clearing fund. If a clearing member defaults in its obligations to the clearing organization in an amount larger than its own margin and clearing fund deposits, the shortfall is absorbed pro rata from the deposits of the other clearing members. HKEx has the authority to assess their members for additional funds if the clearing fund is depleted. A large clearing member default could result in a substantial cost if the Group is required to pay such assessments. Property and Equipment, net Property and equipment, which are included in other assets in the consolidated balance sheets are stated at historical cost less accumulated depreciation and impairment, if any. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Residual rate is determined based on the economic value of the property and equipment at the end of the estimated useful lives as a percentage of the original cost. Category Estimated useful lives Residual rate Computers equipment 3 - 5 years 5 % Furniture and fixtures 3 - 5 years 5 % Office equipment 3 - 5 years 5 % Vehicle 5 years 5 % Office building 30 years 5 % Expenditures for maintenance and repairs are expensed as incurred. Intangible Assets Intangible assets which are included in other assets in the consolidated balance sheets mainly consist of computer software and golf membership. Identifiable intangible assets are carried at acquisition cost less accumulated amortization and impairment loss, if any. Finite-lived intangible assets are tested for impairment if impairment indicators arise. Amortization of finite-lived intangible assets is computed using the straight-line method over their estimated useful lives, which are as follows: Category Estimated useful lives Computer software 5 years Golf membership 10 years Infinite-lived intangible assets mainly consist of the trading right and license. The Operating Company had hold a futures trading right as a clearing member firm of Hong Kong Exchanges and Clearing Limited (“HKEx”) in order to trade futures through the trading facilities of the Stock Exchange, and has recognized it as intangible assets. The Operating Company obtained an insurance broker license through auquiring a member of the HongKong Professional Insurance Brokers Association .The future trading right and insurance broker licence have an indefinite useful life and are carried at cost less accumulated impairment losses. The Group will not amortize the future trading right and insurance broker license until its useful life is determined to be finite. Fair Value Measurements Accounting guidance defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Group considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability. Accounting guidance establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Accounting guidance establishes three levels of inputs that may be used to measure fair value: Level 1 — Valuation techniques in which all significant inputs are unadjusted quoted prices from active markets for assets or liabilities that are identical to the assets or liabilities being measured. Level 2 — Valuation techniques in which significant inputs include quoted prices from active markets for assets or liabilities that are similar to the assets or liabilities being measured and/or quoted prices for assets or liabilities that are identical or similar to the assets or liabilities being measured from markets that are not active. Also, model-derived valuations in which all significant inputs and significant value drivers are observable in active markets are Level 2 valuation techniques. Level 3 — Valuation techniques in which one or more significant inputs or significant value drivers are unobservable. Unobservable inputs are valuation technique inputs that reflect the Group’s own assumptions about the assumptions that market participants would use in pricing an asset or liability. When available, the Group uses quoted market prices to determine the fair value of an asset or liability. If quoted market prices a |
FINANCIAL ASSETS AND FINANCIAL
FINANCIAL ASSETS AND FINANCIAL LIABILITIES | 12 Months Ended |
Dec. 31, 2019 | |
FINANCIAL ASSETS AND FINANCIAL LIABILITIES | |
FINANCIAL ASSETS AND FINANCIAL LIABILITIES | 3. FINANCIAL ASSETS AND FINANCIAL LIABILITIES Financial Assets and Liabilities Measured at Fair Value The following tables set forth, by level within the fair value hierarchy (see Note 2), financial assets measured at fair value as of December 31, 2019 and 2018. As required by ASC Topic 820, financial assets and financial liabilities are classified in their entirety based on the lowest level of input that is significant to the respective fair value measurement. Financial Assets At Fair Value as of December 31, 2019 Level 1 Level 2 Level 3 Total (HK$in thousands) Available-for-sale financial securities — 93,773 — 93,773 Financial Assets At Fair Value as of December 31, 2018 Level 1 Level 2 Level 3 Total (HK$in thousands) Available-for-sale financial securities — 59,348 — 59,348 Transfers Between Level 1 and Level 2 Transfers of financial assets and financial liabilities at fair value to or from Levels 1 and 2 arise where the market for a specific financial instrument has become active or inactive during the period. The fair values transferred are ascribed as if the financial assets or financial liabilities had been transferred as of the end of the period. During the years ended December 31, 2019 and 2018, there were no transfers between levels for financial assets and liabilities, at fair value. Financial Assets and Liabilities Not Measured at Fair Value The following tables represent the carrying value, fair value, and fair value hierarchy category of certain financial assets and liabilities that are not recorded at fair value in the Group’s consolidated balance sheets. The following table excludes all non-financial assets and liabilities: As of December 31, 2019 Carrying Fair Value Value Level 1 Level 2 Level 3 (HK$in thousands) Financial assets, not measured at fair value Cash and cash equivalents 362,574 362,574 362,574 — — Cash held on behalf of clients 14,540,863 14,540,863 14,540,863 — — Loans and advances 4,188,689 4,188,689 — 4,188,689 — Receivables: Clients 247,017 247,017 — 247,017 — Brokers 1,226,348 1,226,348 — 1,226,348 — Clearing organization 304,080 304,080 — 304,080 — Interest 16,892 16,892 — 16,892 — Other financial assets 64,184 64,184 — 64,184 — Total financial assets, not measured at fair value 20,950,647 20,950,647 14,903,437 6,047,210 — As of December 31, 2019 Carrying Fair Value Value Level 1 Level 2 Level 3 (HK$in thousands) Financial liabilities, not measured at fair value Amounts due to related parties 33,628 33,628 — 33,628 — Payables: Clients 15,438,879 15,438,879 — 15,438,879 — Brokers 1,484,243 1,484,243 — 1,484,243 — Interest 519 519 — 519 — Borrowings 1,467,586 1,467,586 — 1,467,586 — Securities sold under agreements to repurchase 1,590 1,590 — 1,590 — Operating lease liabilities 172,466 172,466 — 172,466 — Other financial liabilities 31,993 31,993 — 31,993 — Total financial liabilities, not measured at fair value 18,630,904 18,630,904 — 18,630,904 — As of December 31, 2018 Carrying Fair Value Value Level 1 Level 2 Level 3 (HK$in thousands) Financial assets, not measured at fair value Cash and cash equivalents 215,617 215,617 215,617 — — Cash held on behalf of clients 11,771,487 11,771,487 11,771,487 — — Loans and advances 3,086,904 3,086,904 — 3,086,904 — Receivables: Clients 120,256 120,256 — 120,256 — Brokers 425,849 425,849 — 425,849 — Clearing organization 175,955 175,955 — 175,955 — Interest 49,427 49,427 — 49,427 — Other financial assets 41,019 41,019 — 41,019 — Total financial assets, not measured at fair value 15,886,514 15,886,514 11,987,104 3,899,410 — As of December 31, 2018 Carrying Fair Value Value Level 1 Level 2 Level 3 (HK$ in thousands) Financial liabilities, not measured at fair value Amounts due to related parties 8,591 8,591 — 8,591 — Payables: Clients 12,304,717 12,304,717 — 12,304,717 — Brokers 920,871 920,871 — 920,871 — Interest 2,405 2,405 — 2,405 — Borrowings 1,576,251 1,576,251 — 1,576,251 — Other financial liabilities 11,503 11,503 — 11,503 — Total financial liabilities, not measured at fair value 14,824,338 14,824,338 — 14,824,338 — Netting of Financial Assets and Financial Liabilities In the tables below, the amounts of financial instruments that are not offset in the consolidated balance sheets, but could be netted against cash or financial instruments with specific counterparties under master netting agreements, according to the terms of the agreements, including clearing organization, are presented to provide financial statement readers with the Group’s net payable or receivable with counterparties for these financial instruments, as of December 31, 2019 and 2018. Effects of offsetting on the balance sheet Related amounts not offset Net Gross amounts Amounts amounts presented subject to set off in in the master Financial Gross the balance balance netting instrument Net 2019 amount sheet sheet arrangements collateral amount HK$in thousands Financial Assets Amounts due from clearing organization 2,925,936 (2,621,856) 304,080 — — 304,080 Deposit paid for securities borrowed (1) 1,126,300 — 1,126,300 — (935,443) 190,857 Financial liabilities Amounts due to clearing organization — — — — — — Deposit received for securities lent (1) 1,342,738 — 1,342,738 — (935,443) 407,295 Effects of offsetting on the balance sheet Related amounts not offset Net Gross amounts Amounts amounts presented subject to set off in in the master Financial Gross the balance balance netting instrument Net 2018 amount sheet sheet arrangements collateral amount HK$ in thousands Financial Assets Amounts due from clearing organization 1,472,596 (1,296,641) 175,955 — — 175,955 Deposit paid for securities borrowed (1) 397,675 — 397,675 — (299,173) 98,502 Financial liabilities Amounts due to clearing organization — — — — — — Deposit received for securities lent (1) 488,068 — 488,068 — (299,173) 188,895 (1) The Operating Company borrows securities from a securities lender and subsequently lends the securities to clients or vice versa under Stock Yield Enhancement Program. Under these agreements, the Operating Company receives or provides deposits for securities lending and borrowing purpose. For presentation purposes, these amounts presented are included in “Receivables from brokers/clients” and "Payables to clients/brokers" in the consolidated balance sheets. |
EQUITY METHOD INVESTMENT
EQUITY METHOD INVESTMENT | 12 Months Ended |
Dec. 31, 2019 | |
EQUITY METHOD INVESTMENT | |
EQUITY METHOD INVESTMENT | 4. EQUITY METHOD INVESTMENT As of December 31, 2018 and 2019, the Group’s investments accounted for under the equity method totaled nil and HK$6,166 thousand, respectively. The Group applies the equity method of accounting to account for its equity investments over which it has significant influence but does not own a majority equity interest or otherwise control. |
LEASE
LEASE | 12 Months Ended |
Dec. 31, 2019 | |
LEASE | |
LEASE | 5. LEASE The following table presents balances reported in the consolidated balance sheets related to the Group's leases: As at December 31, 2019 (HK$ in thousands) Operating lease right-of-use assets 161,617 Operating lease liabilities 172,466 The following table presents operating lease cost reported in the consolidated statements of comprehensive (loss)/income related to the Group's leases: Year ended December 31, 2019 (HK$ in thousands) Operating lease cost 64,756 The following table reconciles the undiscounted cash flows of the Group's leases as of December 31, 2019 to the present value of its operating lease payments: December 31, 2019 (HK$ in thousands) 2020 56,714 2021 46,968 2022 44,354 2023 40,346 Thereafter — Total undiscounted operating lease payments 188,382 Less: imputed interest (15,916) Present value of operating lease liabilities 172,466 The Group's minimum annual lease commitments as of December 31, 2018, in accordance with ASC Topic 840, were as follows: December 31, 2018 (HK$ in thousands) 2019 54,417 2020 56,705 2021 42,090 2022 46,232 2023 42,701 Thereafter — 242,145 |
LOANS AND ADVANCES
LOANS AND ADVANCES | 12 Months Ended |
Dec. 31, 2019 | |
LOANS AND ADVANCES | |
LOANS AND ADVANCES | 6. LOANS AND ADVANCES As of December 31, 2018 2019 (HK$ in thousands) Margin loans 2,886,105 4,141,962 Other advances 200,799 46,727 Total 3,086,904 4,188,689 |
PROPERTY AND EQUIPMENT, NET
PROPERTY AND EQUIPMENT, NET | 12 Months Ended |
Dec. 31, 2019 | |
PROPERTY AND EQUIPMENT, NET | |
PROPERTY AND EQUIPMENT, NET | 7. PROPERTY AND EQUIPMENT, NET As of December 31, 2018 2019 (HK$ in thousands) Gross carrying amount Computers and equipment 12,981 56,175 Furniture and fixtures 4,961 34,588 Office equipment 20,501 29,938 Office building — 28,110 Vehicle 638 634 Total of gross carrying amount 39,081 149,445 Less: accumulated depreciation Computers and equipment (4,542) (8,289) Furniture and fixtures (3,063) (6,234) Office equipment (8,204) (16,241) Office building — (519) Vehicle (414) (532) Total of accumulated depreciation (16,223) (31,815) Property and equipment, net 22,858 117,630 Depreciation expenses on property and equipment which are included in research and development expenses, selling and marketing expenses and general and administrative expenses in the consolidated statements of comprehensive (loss)/income for the years ended December 31, 2017, 2018 and 2019 were HK$3,998 thousand, HK$8,012 thousand and HK$15,647 thousand, respectively. |
INTANGIBLE ASSETS , NET
INTANGIBLE ASSETS , NET | 12 Months Ended |
Dec. 31, 2019 | |
INTANGIBLE ASSETS , NET | |
INTANGIBLE ASSETS , NET | 8. INTANGIBLE ASSETS , NET As of December 31, 2018 2019 (HK$ in thousands) Gross carrying amount Computer software 1,161 6,328 License — 2,000 Trading right 1,000 1,000 Golf membership 687 678 Total of gross carrying amount 2,848 10,006 Less: accumulated amortization Computer software (804) (1,647) Trading right (500) (500) Golf membership (133) (166) Total of accumulated amortization (1,437) (2,313) Intangible assets, net 1,411 7,693 Amortization expenses on intangible assets which are included in research and development expenses, selling and marketing expense and general and administrative expenses in the consolidated statements of comprehensive (loss)/income for the years ended December 31, 2017, 2018 and 2019 were HK$302 thousand, HK$315 thousand and HK$900 thousand, respectively. |
OTHER ASSETS
OTHER ASSETS | 12 Months Ended |
Dec. 31, 2019 | |
OTHER ASSETS | |
OTHER ASSETS | 9. OTHER ASSETS As of December 31, 2018 2019 (HK$ in thousands) Property and equipment, net (Note 7) 22,858 117,630 Staff advances 65,177 61,745 Refundable deposit 17,519 32,873 Intangible assets, net (Note 8) 1,411 7,693 Deferred tax assets (Note 24) — 1,576 Deferred IPO cost 20,948 — Others 21,366 17,918 Total 149,279 239,435 |
BORROWINGS
BORROWINGS | 12 Months Ended |
Dec. 31, 2019 | |
BORROWINGS | |
BORROWINGS | 10. BORROWINGS As of December 31, 2018 2019 (HK$ in thousands) Borrowings from: Banks (1) 1,176,251 1,467,586 Third party (2) 400,000 — Total 1,576,251 1,467,586 The Group loaned borrowings mainly to support its margin financing business in Hong Kong securities market. Those borrowings bear weighted average interest rates of 4.46% and 4.29% as of December 31, 2018 and 2019, respectively. (1) The Group has unused borrowing facilities of HK$4,190,779 thousand and HK$3,326,555 thousand from banks as of December 31, 2018 and 2019, respectively. These facilities are uncommitted and could be withdrawn upon the request of the Group. As of December 31, 2018 and 2019, the Group had an outstanding borrowing balance of HK$1,176,251 thousand and HK$1,467,586 thousand, respectively. These unused facilities were pledged by margin clients’ shares as the primary source of credit risk mitigation of the lenders, and bear floating interest rates based on various benchmarks including Hong Kong Prime Rate, Hong Kong Interbank Offered Rate (“HIBOR”), CHN HIBOR, etc. (2) The Group has an unused facility of HK$1,100,000 thousand and nil from a third party as of December 31, 2018 and 2019, respectively. |
ACCRUED EXPENSES AND OTHER LIAB
ACCRUED EXPENSES AND OTHER LIABILITIES | 12 Months Ended |
Dec. 31, 2019 | |
ACCRUED EXPENSES AND OTHER LIABILITIES | |
ACCRUED EXPENSES AND OTHER LIABILITIES | 11. ACCRUED EXPENSES AND OTHER LIABILITIES As of December 31, 2018 2019 (HK$ in thousands) Accrued employee welfare expense 65,027 100,228 Tax payables 48,841 50,803 Payables to fund management companies — 26,381 Payables to corporate clients in relation to ESOP management services — 16,492 Refund from depositary bank — 12,689 Accrued advertising and promotion fee Accrued professional fee 772 5,710 Accrued market information and data fee Stamp duty, trading levy and trading fee payables 3,540 5,612 Contract liabilities 4,774 2,126 Accrued IPO fees and costs 18,138 — Others 4,389 15,911 Total 149,818 252,460 |
ORDINARY SHARES
ORDINARY SHARES | 12 Months Ended |
Dec. 31, 2019 | |
ORDINARY SHARES | |
ORDINARY SHARES | 12. ORDINARY SHARES The Company’s original Memorandum and Articles of Association authorizes the Company to issue 807,500 ordinary shares with a par value of US$0.0050 per share. After a share split effective on September 22, 2016, the Company’s amended Memorandum and Articles of Association authorizes the Company to issue 403,750,000 ordinary shares with a par value of US$0.00001 per share. Each ordinary share is entitled to one vote. The holders of ordinary shares are also entitled to receive dividends whenever funds are legally available and when declared by the Board of Directors, subject to prior rights of holders of all other classes of shares outstanding. Dividend distribution Dividend distribution to the Company’s shareholder is recognized as a liability in the Group’s consolidated financial statements in the period in which the dividends are approved by the Group’s shareholders or directors, where appropriate. Cash dividend on ordinary shares, if any, will be paid in U.S. dollars. Variation of share capital On March 8, 2019, the Company completed its IPO on the Nasdaq Global Market. In the offering, 8,625,000 ADSs (including 1,125,000 ADSs sold upon the full exercise of the underwriters' over-allotment option), representing 69,000,000 Class A ordinary shares, were issued and sold to the public at a price of US$12 per ADS. Concurrently with the IPO, 46,666,666 Class A ordinary shares were issued and sold to General Atlantic Singapore FT Pte. Ltd. at a price per share equal to the IPO price per share. The net proceeds to the Company from the IPO and Concurrent Private Placement, after deducting commissions and offering expenses, were approximately US$161.7 million (HK$1,259,317,000). Upon the completion of the IPO, all 377,931,094 issued and outstanding preferred shares were converted into ordinary shares immediately as of the same date. Concurrently the Company completed the redesignation on a one-for-one basis of: (i) all of 403,750,000 original ordinary shares ultimately held by the Company’s founder, chairman of the board of directors and chief executive officer, Mr. Leaf Hua Li and 140,802,051 shares (including ordinary shares resulting from the conversion and re-designation of preferred shares) held by Qiantang River Investment Limited into Class B ordinary shares; (ii) all of remaining ordinary shares (including 237,129,043 ordinary shares resulting from the conversion and re-designation of preferred shares) into Class A ordinary shares. The Group concluded that the adoption of dual-class share structure did not have a material impact on its consolidated financial statements. In respect of all matters subject to shareholders’ vote, each holder of Class A ordinary share is entitled to one and each holder of Class B ordinary share is entitled to twenty votes. During year ended December 31, 2019, 106,295,232 shares of Class A Ordinary Shares were issued upon exercise of outstanding stock options under the Group’s share-based incentive plans (Note 14). |
REDEEMABLE CONVERTIBLE PREFERRE
REDEEMABLE CONVERTIBLE PREFERRED SHARES | 12 Months Ended |
Dec. 31, 2019 | |
REDEEMABLE CONVERTIBLE PREFERRED SHARES | |
REDEEMABLE CONVERTIBLE PREFERRED SHARES | 13. REDEEMABLE CONVERTIBLE PREFERRED SHARES From 2014 to 2017, the Group issued several rounds of Preferred Shares to certain investors. All series of Preferred Shares had the same par value of US$0.00001 per share. Upon the completion of the Company's IPO in March 2019, all of the issued and outstanding Preferred Shares were automatically converted and redesignated into Class A or Class B Ordinary Shares on a one-for-one basis. Prior to the automatic conversion into Class A Ordinary Shares, the Preferred Shares were entitled to certain preferences with respect to conversion, dividend, liquidation and redemption. The holders of Preferred Shares were entitled to vote together with the holders of ordinary shares on all matters submitted to a vote of the shareholders of the Company on an as-if-converted basis and not as a separate class. Immediately prior to the IPO, the Preferred Shares comprised the following: In October 2014, the Group issued 250,000 Series A Convertible Redeemable Preferred Shares (“Series A Preferred Shares”) for an aggregate purchase price of US$7,000 thousand and 46,875 Series A‑1 Convertible Redeemable Preferred Shares (“Series A‑1 Preferred Shares”) for an aggregate purchase price of US$1,500 thousand. In May 2015, the Group issued 176,847 Series B Convertible Redeemable Preferred Shares (“Series B Preferred Shares”) for an aggregate purchase price of US$30,000 thousand. All the Series A, Series A‑1 and Series B Preferred Shares were issued for cash consideration and have the same par value of US$0.005 per share at each issuance date. After a share split effective on September 22, 2016, the number of shares of Series A, Series A‑1 and Series B Preferred Shares were proportionally split with par value of US$0.00001 per share. 125,000,000 Series A Preferred Shares, 23,437,500 Series A‑1 Preferred Shares and 88,423,500 Series B Preferred Shares were issued in the Company’s amended Memorandum and Articles of Association. In May 2017, the Group issued 128,844,812 Series C Convertible Redeemable Preferred Shares (“Series C Preferred Shares”) for an aggregate purchase price of US$91,362 thousand and 12,225,282 Series C‑1 Convertible Redeemable Preferred Shares (“Series C‑1 Preferred Shares”) for an aggregate purchase price of US$12,609 thousand. Out of the total Series C Preferred Shares, i) 95,094,173 Series C Preferred Shares were issued for cash consideration of US$67,430 thousand; ii) 5,878,794 Series C Preferred Shares were converted from the convertible note with the principal amount of US$3,855 thousand plus accrued but unpaid interest of US$314 thousand at the price per share of US$0.71; and iii) 27,871,845 Series C Preferred Shares were issued from the repayment of an outstanding principal amount of US$19,274 thousand plus accrued but unpaid interest of US$490 thousand loaned by the fellow subsidiary of the investor of Series C Preferred Shares to the Company. The total Series C‑1 Preferred Shares were issued for cash consideration. The Series A, Series A‑1, Series B, Series C and Series C‑1 Preferred Shares are collectively referred to as the “Preferred Shares”. All series of Preferred Shares have the same par value of US$0.00001 per share. Accounting of the Preferred Shares The Company classified the Preferred Shares as mezzanine equity in the consolidated balance sheets because they were redeemable at the holders’ option any time after a certain date and were contingently redeemable upon the occurrence of certain liquidation events outside of the Company’s control. The Preferred Shares are recorded initially at fair value, net of issuance costs. The Group determined that the embedded conversion features and the redemption features do not require bifurcation as they either are clearly and closely related to the Preferred Shares or do not meet the definition of a derivative. The Group has determined that there was no embedded beneficial conversion feature attributable to the Preferred Shares. In making this determination, the Group compared the initial effective conversion prices of the Preferred Shares and the fair values of the Group’s ordinary shares determined by the Group at the issuance dates. The initial effective conversion prices were greater than the fair values of the ordinary shares to which the Preferred Shares are convertible into at the issuance dates. In March, 2019, all 377,931,094 issued and outstanding preferred shares were converted into Class A or Class B ordinary shares upon the completion of the IPO. The Group’s Preferred Shares activities for the years ended December 31, 2017, 2018, 2019 are summarized below: Series A Series A-1 Series B Series C Series C-1 Preferred Shares Preferred Shares Preferred Shares Preferred Shares Preferred Shares No. of Amount in No. of Amount in No. of Amount in No. of Amount in No. of Amount in shares HK$ shares HK$ shares HK$ shares HK$ shares HK$ Balances at December 31, 2016 125,000,000 61,506,395 23,437,500 13,179,946 88,423,500 254,488,880 — — — — Issuance of Preferred Shares — — — — — — 128,844,812 708,765,649 12,225,282 97,818,708 Preferred Shares redemption value accretion — 3,273,858 — 701,541 — 14,030,820 — 26,106,072 — 3,602,966 Balances at December 31, 2017 125,000,000 64,780,253 23,437,500 13,881,487 88,423,500 268,519,700 128,844,812 734,871,721 12,225,282 101,421,674 Preferred Shares redemption value accretion — 3,291,792 — 705,384 — 14,107,680 — 42,963,732 — 5,929,544 Balances at December 31, 2018 125,000,000 68,072,045 23,437,500 14,586,871 88,423,500 282,627,380 128,844,812 777,835,453 12,225,282 107,351,218 Preferred Shares redemption value accretion — 604,779 — 129,595 — 2,591,909 — 7,893,436 — 1,089,395 Conversion and redesignation of Preferred Shares (125,000,000) (68,676,824) (23,437,500) (14,716,466) (88,423,500) (285,219,289) (128,844,812) (785,728,889) (12,225,282) (108,440,613) Balances at December 31, 2019 — — — — — — — — — — |
SHARE-BASED COMPENSATION
SHARE-BASED COMPENSATION | 12 Months Ended |
Dec. 31, 2019 | |
SHARE-BASED COMPENSATION | |
SHARE-BASED COMPENSATION | 14. SHARE-BASED COMPENSATION Share-based compensation was recognized in operating expenses for the years ended December 31, 2017, 2018 and 2019 as follows: Year ended December 31, 2017 2018 2019 (HK$ in thousands) Research and development expenses 8,854 9,223 12,055 General and administrative expenses 754 1,113 3,374 Selling and marketing expenses 161 104 538 Total share-based compensation expenses 9,769 10,440 15,967 Share Options In October 2014, the Board of Directors of the Group approved the establishment of 2014 Share Incentive Plan, the purpose of which is to provide an incentive for employees contributing to the Group. The 2014 Share Incentive Plan shall be valid and effective until October 30, 2024. The maximum number of shares that may be issued pursuant to all awards (including incentive share options) under 2014 Share Incentive Plan shall be 135,032,132 shares. Option awards are granted with an exercise price determined by the Board of Directors. Those option awards generally vest over a period of four or five years and expire in ten years. In October 2019, the Company adopted its 2019 Share Incentive Plan, pursuant to which the maximum number of shares of the Company available for issuance shall be a number of up to 2% of the total number of shares issued and outstanding on September 29, 2019 as determined by the Board, plus an annual increase on each September 30 during the term of this 2019 Share Incentive Plan commencing on September 30, 2020, by an amount determined by the Board; provided, however, that (i) the number of shares increased in each year shall not be more than 2% of the total number of shares issued and outstanding on September 29 of the same year and (ii) the aggregate number of shares initially reserved and subsequently increased during the term of this 2019 Share Incentive Plan shall not be more than 8% of the total number of shares issued and outstanding on September 29, 2019 immediately preceding the most recent increase. On December 30, 2019, the Company modified the exercise price of 8,113,145 stock options granted under 2014 Share Incentive Plan to US$0.60. The incremental compensation expenses of HK$3 million (US$0.4 million) was equal to the excess of the fair value of the modified award immediately after the modification over the fair value of the original award immediately before the modification. For the years ended December 31, 2017, 2018 and 2019, the Group granted 217,455, 9,625,690 and 9,791,200 stock options to employees pursuant to the 2014 Share Incentive Plan and 2019 Share Incentive Plan. A summary of the stock option activity under the 2014 and 2019 Share Incentive Plan for the years ended December 31, 2017, 2018 and 2019 is included in the table below. Options granted Weighted average share Number exercise price (US$) Outstanding at January 1, 2017 111,407,320 0.0168 Granted 217,455 0.9188 Outstanding at December 31, 2017 111,624,775 0.0186 Granted 9,625,690 1.1065 Cancelled/forfeited (42,627) 0.2000 Outstanding at December 31, 2018 121,207,838 0.1049 Exercised (106,295,232) 0.0126 Granted 9,791,200 0.6500 Cancelled/forfeited (985,180) Outstanding at December 31, 2019 23,718,626 The following table summarizes information regarding the share options outstanding as of December 31, 2019 and exercise prices and aggregate instrinsic value have been adjusted according to the modification of exercise price in December 2019: As of December 31, 2019 Weighted- Weighted-average average remaining exercise Options exercise price contractual life Aggregate number per option (years) intrinsic value US$ US$ in thousand Options Outstanding 23,718,626 0.5161 18,356 Exercisable 2,802,821 0.4061 2,459 Expected to vest 20,915,805 0.5307 15,897 The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the fair value of the underlying stock at December 31, 2019. The weighted average grant date fair value of options granted for the years ended December 31, 2017, 2018 and 2019 were US$0.0998, US$0.6010 and US$0.7345 per option, respectively. Options exercised for the years ended December 31, 2017, 2018 and 2019 were nil, nil and 106,295,232, respectively. The total intrinsic value of options exercised during year ended December 31, 2019 was approximately HK$1,094 million (US$140 million). The fair value of each option granted during 2017, 2018 and 2019 was estimated on the date of each grant using the binomial option pricing model with the assumptions (or ranges thereof) in the following table: 2017 2018 2019 Exercise price (US$) 0.8-1.03 0.3-1.2 0.65 Fair value of the ordinary shares on the date of option grant (US$) 0.4220 1.2820 1.2460 Risk-free interest rate 1.30 % 2.33 % 1.67 % Expected term (in years) 7.3 5.98 5.00 Expected dividend yield 0 % 0 % 0 % Expected volatility 46 % 44 % 45 % Expected forfeiture rate (post-vesting) 15 % 15 % 15 % Risk-free interest rate is estimated based on the yield curve of US Sovereign Bond as of the option valuation date. The expected volatility at the grant date and each option valuation date is estimated based on annualized standard deviation of daily stock price return of comparable companies with a time horizon close to the expected expiry of the term of the options. The Company has never declared or paid any cash dividends on its capital stock, and the Group does not anticipate any dividend payments in the foreseeable future. Expected term is the contract life of the options. As of December 31, 2019, there was HK$100,437 thousand (US$12,894 thousand) of unrecognized compensation expenses related to the options, adjusted for estimated forfeitures, which is expected to be recognized over a weighted-average period of 4.44 years, respectively, and may be adjusted for future changes in estimated forfeitures. |
NET (LOSS)_INCOME PER SHARE
NET (LOSS)/INCOME PER SHARE | 12 Months Ended |
Dec. 31, 2019 | |
NET (LOSS)/INCOME PER SHARE | |
NET (LOSS)/INCOME PER SHARE | 15. NET (LOSS)/INCOME PER SHARE For the years ended December 31, 2017, 2018 and 2019, the Group has determined that its all classes of convertible redeemable preferred shares are participating securities as they participate in undistributed earnings on an as-if-converted basis. The holders of the Preferred Shares are entitled to receive dividends on a pro rata basis, as if their shares had been converted into ordinary shares. Accordingly, the Group uses the two-class method of computing net (loss)/income per share, for ordinary shares and preferred shares according to the participation rights in undistributed earnings. Basic net (loss)/income per share and diluted net (loss)/income per share have been calculated in accordance with ASC 260 on computation of earnings per share for the years ended December 31, 2017, 2018 and 2019 as follows: Year ended December 31, 2017 2018 2019 (HK$ in thousands, except for share and per share data) Basic net (loss)/income per share calculation: Numerator: Net (loss)/income attributable to ordinary shareholder of the Company (55,817) 36,938 143,159 Denominator: Weighted average ordinary shares outstanding - basic 403,750,000 403,750,000 832,790,329 Net (loss)/income per share attributable to ordinary shareholder - basic (0.14) 0.09 0.17 Diluted net (loss)/income per share calculation: Numerator: Net (loss)/income attributable to ordinary Shareholder of the Company (55,817) 36,938 143,159 Denominator: Weighted average ordinary shares outstanding - basic 403,750,000 403,750,000 832,790,329 Dilutive effect of share options — 107,786,122 85,107,097 Weighted average ordinary shares outstanding - diluted 403,750,000 511,536,122 917,897,426 Net (loss)/income per share attributable to ordinary shareholder - diluted (0.14) 0.07 0.16 For the years ended December 31, 2017, 2018 and 2019, options to purchase ordinary shares that were anti-dilutive and excluded from the calculation of diluted net (loss)/income per share were 99,355,769, 3,418,090 and 3,747,975 shares on a weighted average basis, respectively. For the years ended December 31, 2017, 2018 and 2019, the preferred shares convertible into ordinary shares that were anti-dilutive and excluded from the calculation of diluted net (loss)/income per share of the Company were 323,435,523, 377,931,094 and nil shares on a weighted average basis, respectively. |
COLLATERALIZED TRANSACTIONS
COLLATERALIZED TRANSACTIONS | 12 Months Ended |
Dec. 31, 2019 | |
COLLATERALIZED TRANSACTIONS | |
COLLATERALIZED TRANSACTIONS | 16. COLLATERALIZED TRANSACTIONS The Operating Company engages in margin financing transactions with its clients. Client receivables generated from margin lending activity are collateralized by cash and/or client-owned securities held by the Operating Company. In addition, the Operating Company repledge the clients owned securities to collateralize its margin loans. Clients' required margin levels and established credit limits are monitored continuously by risk management staff using automated systems. Pursuant to the Operating Company's policy and as enforced by such systems, clients are required to deposit additional collateral or reduce positions, when necessary to avoid forced liquidation of their positions. Margin loans are extended to clients on a demand basis and are not committed facilities. Underlying collateral for margin loans is evaluated with respect to the liquidity of the collateral positions, valuation of securities, volatility analysis and an evaluation of industry concentrations. Adherence to the Operating Company’s collateral policies significantly limits the Operating Company’s credit exposure to margin loans in the event of a client’s default. As of December 31, 2018 and 2019, approximately HK$2,886,105 thousand and HK$4,141,962 thousand, respectively, of client margin loans were outstanding. The following table summarizes the amounts related to collateralized transactions of margin financing as of December 31, 2018 and 2019: As of December 31, 2018 2019 HK$ in thousands HK$ in thousands Permitted to Permitted to repledge Repledged repledge Repledged Market value of collateral 9,214,950 1,904,545 19,503,649 3,031,767 The Operating Company also enters into securities borrowing and lending transactions and agreements to repurchase securities. As at December 31, 2019, the total fair value of securities borrowed was HK$935,443 thousand, while the total fair value of securities lent was HK$935,443 thousand, and the Operating Company provided and received cash collateral of HK$1,126,300 thousand and HK$1,342,738 thousand, respectively, in relations to the securities borrowing and lending transactions. As at December 31, 2018, the total fair value of securities borrowed was HK$299,173 thousand, while the total fair value of securities lent was HK$299,173 thousand, and the Operating Company provided and received cash collateral of HK$397,675 thousand and HK$488,068 thousand, respectively, in relations to the securities borrowing and lending transactions. |
BROKERAGE COMMISSION AND HANDLI
BROKERAGE COMMISSION AND HANDLING CHARGE INCOME | 12 Months Ended |
Dec. 31, 2019 | |
BROKERAGE COMMISSION AND HANDLING CHARGE INCOME | |
BROKERAGE COMMISSION AND HANDLING CHARGE INCOME | 17. BROKERAGE COMMISSION AND HANDLING CHARGE INCOME Year ended December 31, 2017 2018 2019 (HK$ in thousands) Brokerage commission income 101,275 276,097 352,625 Handling charge income 83,643 131,893 158,740 Total 184,918 407,990 511,365 |
INTEREST INCOME
INTEREST INCOME | 12 Months Ended |
Dec. 31, 2019 | |
INTEREST INCOME | |
INTEREST INCOME | 18. INTEREST INCOME Year ended December 31, 2017 2018 2019 (HK$ in thousands) Interest income from: Margin financing 62,165 211,762 221,648 Bank deposits 34,050 123,775 187,223 Bridge loan 863 7,827 6,172 IPO financing 5,470 2,921 12,658 Securities lending 3,324 14,300 37,202 Total 105,872 360,585 464,903 |
OTHER INCOME
OTHER INCOME | 12 Months Ended |
Dec. 31, 2019 | |
OTHER INCOME | |
OTHER INCOME | 19. OTHER INCOME Year ended December 31, 2017 2018 2019 (HK$ in thousands) IPO subscription service charge income 6,570 16,139 26,537 Underwriting fee income 1,599 10,494 19,579 Enterprise public relations service charge income 6,717 9,187 16,156 Currency exchange service income 2,954 2,711 4,670 Client referral income from brokers 1,934 2,166 1,451 Market information and data income 311 1,465 2,692 Funds distribution service income — — 10,447 ESOP management service income — 270 1,275 Other 788 336 2,480 Total 20,873 42,768 85,287 |
INTEREST EXPENSES
INTEREST EXPENSES | 12 Months Ended |
Dec. 31, 2019 | |
INTEREST EXPENSES | |
INTEREST EXPENSES | 20 . INTEREST EXPENSES Year ended December 31, 2017 2018 2019 (HK$in thousands) Interest expenses for margin financing Borrowings from banks 7,189 37,983 36,206 Borrowings from other licensed financial institutions 5,142 24,194 28,636 Borrowings from other parties 5,276 28,771 3,930 Interest expenses for securities borrowed Borrowings from clients — — 1,298 Borrowings from brokers 1,151 1,814 9,077 Interest expenses for IPO financing Borrowings from banks 1,121 2,862 10,091 Total 19,879 95,624 89,238 |
NON-INTEREST COST AND EXPENSES
NON-INTEREST COST AND EXPENSES BY NATURE | 12 Months Ended |
Dec. 31, 2019 | |
NON-INTEREST COST AND EXPENSES BY NATURE | |
NON-INTEREST COST AND EXPENSES BY NATURE | 21. NON-INTEREST COST AND EXPENSES BY NATURE Year ended December 31, 2017 2018 2019 (HK$ in thousands) Employee compensation and benefits 134,468 211,978 327,441 Marketing and branding 30,369 79,891 130,528 Brokerage commission and handling charge expenses(Note22) 36,777 80,127 100,550 Processing and servicing costs(Note23) 52,446 73,843 91,916 Rental and other related expenses 10,847 21,256 64,756 Depreciation and amortization 4,300 8,327 16,547 Professional services 5,239 18,724 28,757 Others 9,042 12,814 23,867 Total 283,488 506,960 784,362 |
BROKERAGE COMMISSION AND HAND_2
BROKERAGE COMMISSION AND HANDLING CHARGE EXPENSES | 12 Months Ended |
Dec. 31, 2019 | |
BROKERAGE COMMISSION AND HANDLING CHARGE EXPENSES | |
BROKERAGE COMMISSION AND HANDLING CHARGE EXPENSES | 22. BROKERAGE COMMISSION AND HANDLING CHARGE EXPENSES Year ended December 31, 2017 2018 2019 (HK$in thousands) Commission, handling and settlement expenses 35,643 78,581 95,064 IPO subscription service charge expenses 1,134 1,546 5,486 Total 36,777 80,127 100,550 |
PROCESSING AND SERVICING COSTS
PROCESSING AND SERVICING COSTS | 12 Months Ended |
Dec. 31, 2019 | |
PROCESSING AND SERVICING COSTS | |
PROCESSING AND SERVICING COSTS | 23. PROCESSING AND SERVICING COSTS Year ended December 31, 2017 2018 2019 (HK$in thousands) Market information and data fee 37,482 46,669 54,282 Cloud service fee 7,636 14,081 16,729 Data transmission fee 5,822 9,145 13,890 System cost — 949 4,334 SMS service fee 1,148 1,834 1,523 Others 358 1,165 1,158 Total 52,446 73,843 91,916 |
TAXATION
TAXATION | 12 Months Ended |
Dec. 31, 2019 | |
TAXATION | |
TAXATION | 24. TAXATION Income Tax 1) Cayman Islands The Group was incorporated in the Cayman Islands. Under the current laws of the Cayman Islands, the Company is not subject to tax on either income or capital gain. Additionally, the Cayman Islands does not impose a withholding tax on payments of dividends to shareholders. 2) The Group's subsidiaries, incorporated in the United States are subject to statutory income tax at a rate up to 35% for taxable income earned in the United States. On December 22, 2017, the Tax Cuts and Jobs Act (the "Tax Act") was enacted, significantly revising the U.S corporate income tax law. Changes include a reduction in the federal corporate tax, changes to operating loss carry-forwards and carrybacks, and a repeal of the corporate alternative minimum tax. This legislation resulted in a reduction of the U.S. federal corporate income tax rates from a maximum of 35% to 21%, to which the subsidiaries incorporated in the United States are subject. 3) Hong Kong Under the current Hong Kong Inland Revenue Ordinance, Installment Hong Kong is subject to 16.5% income tax rate on its taxable income generated from operations in Hong Kong. Additionally, payments of dividends by the subsidiaries incorporated in Hong Kong to the Company are not subject to any Hong Kong withholding tax. 4) China The Group's subsidiaries, consolidated VIE and subsidiary of the VIE established in the PRC are subject to statutory income tax at a rate of 25%, unless preferential tax rates were applicable. The Enterprise Income Tax (“EIT”) Law and its implementing rules permit High and New Technology Enterprise” (“HNTE”) to enjoy a reduced 15% EIT rate. One of the Group’s subsidiary, Futu Network Technology (Shenzhen) Co., Ltd., obtained the qualification certificate of High and New Technology Enterprise under the EIT Law in 2019, subject to the tax rate of 15% with a valid period of three years starting from December 2019. According to the relevant EIT Laws jointly promulgated by the Ministry of Finance of the PRC, State Tax Bureau of the PRC, and Ministry of Science of the PRC that became effective from 2018 onwards, enterprises engaging in research and development activities are entitled to claim 175% of their research and development expenses so incurred as tax deductible expenses when deterning their assessable profites for that year (“Super Deduction”). Under the EIT Law enacted by the National People’s Congress of PRC on March 16, 2007 and its implementation rules which became effective on January 1, 2008, dividends generated after January 1, 2008 and payable by FIEs in the PRC to its foreign investors who are non-resident enterprises are subject to a 10% withholding tax, unless any such foreign investor’s jurisdiction of incorporation has a tax treaty with the PRC that provides for a different withholding arrangement. Under the taxation arrangement between the PRC and Hong Kong, a qualified Hong Kong tax resident which is the “beneficial owner” and directly holds 25% or more of the equity interest in a PRC resident enterprise is entitled to a reduced withholding tax rate of 5%. The Cayman Islands, where the Company was incorporated, does not have a tax treaty with PRC. The EIT Law includes a provision specifying that legal entities organized outside of the PRC will be considered resident enterprises for the PRC income tax purposes if the place of effective management or control is within the PRC. The implementation rules to the EIT Law provide that non-resident legal entities will be considered as PRC resident enterprises if substantial and overall management and control over the manufacturing and business operations, personnel, accounting, properties, etc., occurs within the PRC. Despite the present uncertainties resulting from the limited PRC tax guidance on the issue, the Group does not believe that the Group’s entities organized outside of the PRC should be treated as resident enterprises for the PRC income tax purposes. If the PRC tax authorities subsequently determine that the Company and its subsidiary registered outside the PRC should be deemed resident enterprises, the Company and its subsidiary registered outside the PRC will be subject to the PRC income tax, at a rate of 25%. Composition of income tax expense The following table sets forth current and deferred portion of income tax (benefit)/expense: Year ended December 31, 2017 2018 2019 (HK$in thousands) Current income tax expense 6,286 46,781 13,858 Deferred income tax (benefit)/expense 5,194 15,507 (1,572) Income tax expense 11,480 62,288 12,286 Tax Reconciliation Reconciliation between the income tax expenses computed by applying the Hong Kong enterprise tax rate to income before income taxes and actual provision were as follows: Year ended December 31, 2017 2018 2019 (HK$in thousands) Income before income tax 3,378 200,800 178,493 Tax expense at Hong Kong profit tax rate of 16.5% 557 33,132 29,451 Changes of valuation allowance 4,464 9,735 30,172 Tax effect of permanence differences 7,333 6,825 5,486 Effect of income tax in jurisdictions other than Hong Kong (898) 12,670 (4,143) Super deduction of research and development expenses — — (19,277) Final settlement differences — — (18,038) Income not subject to tax (1) — — (11,365) Others 24 (74) — Income tax expense 11,480 62,288 12,286 (1) This amount represents tax exemption relating to the offshore income of the Operating Company. The brokerage commission income derived from executing the clients' orders of US listed securities was treated as offshore-sourced and non-taxable on the basis that these transactions were executed outside Hong Kong. Deferred Tax Assets Deferred income tax expense reflects the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The components of the deferred tax assets are as follows: As of December 31, 2018 2019 (HK$in thousands) Deferred tax assets Net operating loss carryforwards 19,084 42,736 Accrued expenses and others 4,165 12,261 Less: valuation allowance (23,249) (53,421) Net deferred tax assets — 1,576 Movement of Valuation Allowance Year ended December 31, 2017 2018 2019 (HK$in thousands) Balance at beginning of the year 9,050 13,514 23,249 Additions 4,464 9,735 30,188 Reversals — — (16) Balance at end of the year 13,514 23,249 53,421 Valuation allowance is provided against deferred tax assets when the Group determines that it is more-likely-than-not that the deferred tax assets will not be utilized in the future. The Group considers positive and negative evidence to determine whether some portion or all of the deferred tax assets will be more-likely-than-not realized. This assessment considers, among other matters, the nature, frequency and severity of recent losses and forecasts of future profitability. These assumptions require significant judgment and the forecasts of future taxable income are consistent with the plans and estimates the Group is using to manage the underlying businesses. The statutory rate of 25%, 21%, 16.5% or the preferential tax rate of 15%, depending on which entity, was applied when calculating deferred tax assets. As of December 31, 2018 and 2019, the Group had net operating loss carryforwards of approximately HK$89,534 thousand and HK$223,629 thousand, respectively, which arose from the subsidiaries, VIE and the VIE’s subsidiary established in Hong Kong, the U.S and PRC. As of December 31, 2018 and 2019, of the net operating loss carryforwards, HK$89,534 thousand and HK$217,999 thousand was provided for valuation allowance against deferred tax assets in entities where it was determined it was more likely than not that the benefits of the deferred tax assets of accrued expenses and others will not be realized. While the remaining nil and HK$5,630 is expected to be utilized prior to expiration considering future taxable income for respective entities. The Company intends to indefinitely reinvest all the undistributed earnings of the Company’s VIE and subsidiary of the VIE in China, and does not plan to have any of its PRC subsidiaries to distribute any dividend; therefore no withholding tax is expected to be incurred in the foreseeable future. Accordingly, no income tax is accrued on the undistributed earnings of the Company's VIE and subsidiary of the VIE as of December 31, 2018 and 2019. As of December 31, 2018 and 2019, most of the Group's PRC subsidiaries were still in accumulated non-taxable position. Uncertain Tax Position The Group evaluates the level of authority for each uncertain tax position (including the potential application of interest and penalties) based on the technical merits, and measures the unrecognized benefits associated with the tax positions. As of December 31, 2018 and 2019, the Group did not have any significant unrecognized uncertain tax positions. |
DEFINED CONTRIBUTION PLAN
DEFINED CONTRIBUTION PLAN | 12 Months Ended |
Dec. 31, 2019 | |
DEFINED CONTRIBUTION PLAN | |
DEFINED CONTRIBUTION PLAN | 25. DEFINED CONTRIBUTION PLAN Full-time employees of the Group in the PRC are entitled to welfare benefits including pension insurance, medical insurance, unemployment insurance, maternity insurance, on-the-job injury insurance, and housing fund plans through a PRC government-mandated defined contribution plan. Chinese labor regulations require that the Group makes contributions to the government for these benefits based on certain percentages of the employees’ salaries, up to a maximum amount specified by the local government. The Group has no legal obligation for the benefits beyond the contributions. Total contributions by the Group for such employee benefits were RMB20,038 thousand and RMB32,556 thousand for the years ended December 31, 2018 and 2019, respectively. For the employees in Hong Kong, the Group pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual basis. The Group has no further payment obligations once the contributions have been paid. The contributions are recognized as employee benefit expense when they are due. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in the future payments is available. Included in employee compensation and benefits expenses in the consolidated statements of comprehensive (loss)/income were HK$938 thousand and HK$1,044 thousand of plan contributions for the years ended December 31, 2018 and 2019, respectively. |
REGULATORY REQUIREMENTS
REGULATORY REQUIREMENTS | 12 Months Ended |
Dec. 31, 2019 | |
REGULATORY REQUIREMENTS | |
REGULATORY REQUIREMENTS | 26. REGULATORY REQUIREMENTS The Group's broker-dealer subsidiaries, Futu Securities, Futu Inc. and Futu clearing Inc., are subject to capital requirements determined by its respective regulators. Futu Securities, the Group's subsidiary located in Hong Kong, was subject to Securities and Futures (Financial Resources) Rules and the Securities and Futures Ordinance, Futu Securities is required to maintain minimum paid-up share capital and liquid capital. Futu Inc. and Futu clearing Inc., the Group's subsidiaries located in the United States, were subject to the Uniform Net Capital Rule (Rule 15c3-1) under the Exchange Act, which requires the maintenance of minimum net capital. The tables below summaries the net capital, the requirement and the excess capital for the Group's broker-dealer subsidiaries as of December 31, 2019: As of December 31, 2019 Net Capital/ Eligible Equity Requirement Excess (HK$ in thousands) Futu Securities 1,469,200 235,481 1,233,719 Futu Inc. 15,832 1,947 13,885 Futu Clearing Inc. 72,908 1,947 70,961 Total 1,557,940 239,375 1,318,565 Regulatory capital requirements could restrict the operating subsidiaries from expanding their business and declaring dividends if their net capital does not meet regulatory requirements. As of December 31, 2018 and 2019, all of the regulated operating subsidiaries were in compliance with their respective regulatory capital requirements. |
CONTINGENCIES
CONTINGENCIES | 12 Months Ended |
Dec. 31, 2019 | |
CONTINGENCIES | |
CONTINGENCIES | 27. CONTINGENCIES The financial services industry is highly regulated. From time to time, the licensed companies in the financial industry may be required to assist in and/or are subject to inquiries and/or examination by the regulatory authorities of the jurisdiction where they operate. As of the date of this report, the Operating Company is involved in ongoing regulatory inquiries by the regulator where no conclusion has not been reached. The Operating Company has procedures for evaluating whether potential regulatory fines are probable, estimable and material and for updating its contingency reserves and disclosures accordingly. For the years ended December 31, 2018 and 2019, the Group did not make any accrual for the aforementioned loss contingency. |
RELATED PARTY BALANCES AND TRAN
RELATED PARTY BALANCES AND TRANSACTIONS | 12 Months Ended |
Dec. 31, 2019 | |
RELATED PARTY BALANCES AND TRANSACTIONS | |
RELATED PARTY BALANCES AND TRANSACTIONS | 28. RELATED PARTY BALANCES AND TRANSACTIONS The table below sets forth major related parties of the Group and their relationships with the Group: Entity of individual name Relationship with the Group Mr. Leaf Hua Li and his spouse Principal shareholder and member of his immediate families Tencent Holdings Limited and its subsidiaries(“Tencent Group”) Principal shareholder Individual directors and officers and their spouses Directors or officers of the Group and members of their immediate families (a) Cash and cash equivalent As of December 31, 2018 2019 (HK$ in thousands) Cash and cash equivalent 260 240 The balance represents the cash deposited by the Group in various payment channels of Tencent Group for funding marketing campaigns, of which could be withdrawn on demand. (b) Short-term borrowings and interest expenses As of December 31, 2018 2019 (HK$ in thousands) Short-term borrowings — — Year ended December 31, 2017 2018 2019 (HK$ in thousands) Interest expenses 3,457 17,129 — (c) Amounts Due to Related Parties As of December 31, 2018 2019 (HK$ in thousands) Payable in relation to cloud equipment and services from Tencent Group 8,409 33,153 SMS channel services from Tencent Group 182 475 8,591 33,628 (d) Transactions with Related Parties Year ended December 31, 2017 2018 2019 (HK$ in thousands) Equipment purchased — — 40,218 Cloud service fee 7,636 14,081 16,729 SMS channel service fee 1,148 1,834 1,523 Advertising expenses — 112 682 ESOP management service income — 202 550 8,784 16,229 59,702 The Group utilizes the cloud services and equipment provided by Tencent Group to process large amount of complicated data in-house, which reduces the risks involved in data storage and transmission. SMS channel services is provided by Tencent Group, including verification code, notification and marketing message services for the Group to reach its end users. Tencent Group provides advertising services to the Group via Tencent Group’s social media. The Group also earns revenue from Tencent Group by providing ESOP management service. (e) Traded related transactions with Related Parties Included in payables to clients in the consolidated balance sheets as of December 31, 2018 and 2019, were payables of HK$308,073 thousand and HK$19,553 thousand, respectively. Revenue earned by providing brokerage services and margin loans to directors and officers and their spouses amounts to HK$3,040 thousand, HK$6,797 thousand and HK$2,211 thousand for the years ended December 31, 2017, 2018 and 2019, respectively. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2019 | |
SUBSEQUENT EVENTS | |
SUBSEQUENT EVENTS | 29. SUBSEQUENT EVENTS With respect to the outbreak of the coronavirus (COVID-19) and significant volatility in the global financial markets, the Group has experienced some delay of new products and services launch, as well as increase in credit risk in the margin loan portfolio during the subsequent period up to the date of the audit report. Despite the events mentioned, the Group has assessed and preliminarily concluded that there was no significant negative impact to the financial performance, financial position and cash flow of the Group subsequent to the year ended December 31, 2019 and up to the date of this report. The Group will keep continuous attention on the situation of the COVID-19 and financial market conditions to react actively to its impacts to the Group. |
SIGNIFICANT ACCOUNTING POLICI_2
SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2019 | |
SIGNIFICANT ACCOUNTING POLICIES | |
Basis of presentation | Basis of presentation The consolidated financial statements of the Group have been prepared in accordance with the accounting principles generally accepted in the United States of America (“U.S. GAAP”). Significant accounting policies followed by the Group in the preparation of the accompanying consolidated financial statements are summarized below. |
Basis of Consolidation | Basis of Consolidation The consolidated financial statements include the financial statements of the Company, its subsidiaries, the VIE and subsidiary of the VIE for which the Company or its subsidiary is the primary beneficiary. A subsidiary is an entity in which the Company, directly or indirectly, controls more than one half of the voting power; or has the power to appoint or remove the majority of the members of the board of directors; or to cast a majority of votes at the meeting of directors; or has the power to govern the financial and operating policies of the investee under a statute or agreement among the shareholders or equity holders. A consolidated VIE is an entity in which the Company, or its subsidiary, through contractual arrangements, has the power to direct the activities that most significantly impact the entity’s economic performance, bears the risks of and enjoys the rewards normally associated with ownership of the entity, and therefore the Company or its subsidiary is the primary beneficiary of the entity. All transactions and balances among the Company, its subsidiaries, the VIE and subsidiary of the VIE have been eliminated upon consolidation. |
VIE Companies | VIE Companies 1) Contractual Agreements with VIE The following is a summary of the contractual agreements (collectively, “Contractual Agreements”) between the Company’s PRC subsidiary, Shen Si, and the VIE, Shenzhen Futu. Through the Contractual Agreements, the VIE is effectively controlled by the Company. Shareholders’ Voting Rights Proxy Agreements. Pursuant to the Shareholders’ Voting Rights Proxy Agreements, each shareholder of Shenzhen Futu irrevocably authorized Shen Si or any person(s) designated by Shen Si to exercise such shareholder’s rights in Shenzhen Futu, including without limitation, the power to participate in and vote at shareholder’s meetings, the power to nominate and appoint the directors, senior management, and other shareholders’ voting right permitted by the Articles of Association of Shenzhen Futu. The shareholders’ voting rights proxy agreement remains irrevocable and continuously valid from the date of execution until the expiration of the business term of Shen Si and can be renewed upon request by Shen Si. Business Operation Agreement. Pursuant to the Business Operation Agreement, Shenzhen Futu and its shareholders undertake that without Shen Si’s prior written consent, Shenzhen Futu shall not enter into any transactions that may have a material effect on Shenzhen Futu’s assets, business, personnel, obligations, rights or business operations. Shenzhen Futu and its shareholders shall elect directors nominated by Shen Si and such directors shall nominate officers designated by Shen Si. The business operation agreement will remain effective until the end of Shen Si’s business term, which will be extended if Shen Si’s business term is extended or as required by Shen Si. Equity Interest Pledge Agreements. Pursuant to the Equity Interest Pledge Agreements, each shareholder of Shenzhen Futu agrees that, during the term of the Equity Interest Pledge Agreements, he or she will not dispose of the pledged equity interests or create or allow any encumbrance on the pledged equity interests without the prior written consent of Shen Si. The Equity Interest Pledge Agreements remain effective until the latter of the full payment of all secured debt under the equity interest pledge agreements and Shenzhen Futu and its shareholders discharge all their obligations under the contractual arrangements. Exclusive Technology Consulting and Services Agreement. Under the Exclusive Technology Consulting and Services Agreement between Shen Si and Shenzhen Futu, Shen Si has the exclusive right to provide Shenzhen Futu with technology consulting and services related to, among other things, technology research and development, technology application and implementation, maintenance of software and hardware. Without Shen Si’s written consent, Shenzhen Futu shall not accept any technology consulting and services covered by this agreement from any third party. Shenzhen Futu agrees to pay a service fee at an amount equivalent to all of its net profit to Shen Si. Unless otherwise terminated in accordance with the terms of this agreement or otherwise agreed with Shen Si, this agreement will remain effective until the expiration of Shen Si’s business term, and will be renewed if Shen Si’s business term is extended. Exclusive Option Agreement. Pursuant to the Exclusive Option Agreement, each shareholder of Shenzhen Futu has irrevocably granted Shen Si an exclusive option, to the extent permitted by PRC laws, to purchase, or have its designated person or persons to purchase, at its discretion, all or part of the shareholder’s equity interests in Shenzhen Futu. Unless PRC laws and/or regulations require valuation of the equity interests, the purchase price shall be RMB1.00 or the lowest price permitted by the applicable PRC laws, whoever is higher. Each shareholder of Shenzhen Futu undertakes that, without the prior written consent of Shen Si, he or she will not, among other things, (i) create any pledge or encumbrance on his or her equity interests in Shenzhen Futu, (ii) transfer or otherwise dispose of his or her equity interests in Shenzhen Futu, (iii) change Shenzhen Futu’s registered capital, (iv) amend Shenzhen Futu’s articles of association, (v) liquidate or dissolve Shenzhen Futu, or (vi) distribute dividends to the shareholders of Shenshen Futu. In addition, Shenzhen Futu undertakes that, without the prior written consent of Shen Si, it will not, among other things, dispose of Shenzhen Futu’s material assets, provide any loans to any third parties, enter into any material contract with a value of more than RMB500,000, or create any pledge or encumbrance on any of its assets, or transfer or otherwise dispose of its material assets. Unless otherwise terminated by Shen Si, this agreement will remain effective until the expiration of Shen Si’s business term, and will be renewed if Shen Si’s business term is extended. 2) Risks in relation to the VIE structure The following table sets forth the assets, liabilities, results of operations and changes in cash and cash equivalents of the VIE and its subsidiary taken as a whole, which were included in the Group’s consolidated financial statements with intercompany balances and transactions eliminated between the VIE and its subsidiary: As of December 31, 2018 2019 (HK$in thousands) Total assets 57,213 68,480 Total liabilities 74,904 73,271 Year ended December 31, 2017 2018 2019 (HK$in thousands) Total operating revenue 50,020 68,888 65,681 Net income 18,458 21,262 8,807 Year ended December 31, 2017 2018 2019 (HK$in thousands) Net cash (used in)/generated from operating activities (4,613) 1,664 (2,502) Net cash generated from investing activities — — 2,233 Net (decrease)/increase in cash and cash equivalents (4,613) 1,664 (269) Cash and cash equivalents at beginning of the year 4,699 86 1,750 Cash and cash equivalents at end of the year 86 1,750 1,481 Under the Contractual Agreements with the VIE, the Company has the power to direct activities of the VIE and VIE’s subsidiary, and can have assets transferred out of the VIE and VIE’s subsidiary. Therefore, the Company considers itself the ultimate primary beneficiary of the VIE and there is no asset of the VIE that can only be used to settle obligations of the VIE and VIE’s subsidiary, except for registered capital of the VIE and its subsidiary amounting to RMB10 million as of December 31, 2017, 2018 and 2019, respectively. Since the VIE are incorporated as limited liability companies under the PRC Company Law, creditors of the VIE do not have recourse to the general credit of the Company. There is currently no contractual arrangement that would require the Company to provide additional financial support to the VIE. However, as the Company is conducting certain businesses through its VIE and VIE’s subsidiary, the Company may provide such support on a discretionary basis in the future, which could expose the Company to a loss. In the opinion of the Company’s management, the contractual arrangements among its subsidiary, the VIE and its respective Nominee Shareholders are in compliance with current PRC laws and are legally binding and enforceable. However, uncertainties in the interpretation and enforcement of the PRC laws, regulations and policies could limit the Company’s ability to enforce these contractual arrangements. As a result, the Company may be unable to consolidate the VIE and VIE’s subsidiary in the consolidated financial statements. On March 15, 2019, the Foreign Investment Law was formally passed by the thirteenth National People's Congress and it will take effect on January 1, 2020. The Foreign Investment Law will replace the Law on Sino-Foreign Equity Joint Ventures, the Law on Sino-Foreign Cooperative Joint Ventures and the Law on Foreign-Capital Enterprises to become the legal foundation for foreign investment in the PRC. The Foreign Investment Law stipulates certain forms of foreign investment. However, the Foreign Investment Law does not explicitly stipulate contractual arrangements such as those we rely on as a form of foreign investment. Notwithstanding the above, the Foreign Investment Law stipulates that foreign investment includes "foreign investors investing through any other methods under laws, administrative regulations or provisions prescribed by the State Council.'' Future laws, administrative regulations or provisions prescribed by the State Council may possibly regard Contractual Arrangements as a form of foreign investment. If this happens, it is uncertain whether the Contractual Arrangements with the VIE and its shareholders would be recognized as foreign investment, or whether the Contractual Arrangements would be deemed to be in violation of the foreign investment access requirements. As well as the uncertainty on how the Contractual Arrangements will be handled, there is substantial uncertainty regarding the interpretation and the implementation of the Foreign Investment Law. The relevant government authorities have broad discretion in interpreting the law. Therefore, there is no guarantee that the Contractual Arrangements, the business of the VIE and financial conditions of the Company will not be materially and adversely affected. The Company’s ability to control the VIE also depends on the power of attorney Shen Si has to vote on all matters requiring shareholders’ approvals in the VIE. As noted above, the Company believes these power of attorney are legally binding and enforceable but may not be as effective as direct equity ownership. In addition, if the Group’s corporate structure or the contractual arrangements with the VIE were found to be in violation of any existing PRC laws and regulations, the PRC regulatory authorities could, within their respective jurisdictions: · revoke the Group’s business and operating licenses; · require the Group to discontinue or restrict its operations; · restrict the Group’s right to collect revenues; · block the Group’s websites; · require the Group to restructure its operations, re-apply for the necessary licenses or relocate the Group’s businesses, staff and assets; · impose additional conditions or requirements with which the Group may not be able to comply; or · take other regulatory or enforcement actions against the Group that could be harmful to the Group’s business. The imposition of any of these restrictions or actions may result in a material adverse effect on the Group’s ability to conduct its business. In addition, if the imposition of any of these restrictions causes the Group to lose the right to direct the activities of the VIE or the right to receive their economic benefits, the Group would no longer be able to consolidate the financial statements of the VIE. In the opinion of management, the likelihood of losing the benefits in respect of the Group’s current ownership structure or the contractual arrangements with its VIE is remote. |
Use of Estimates | Use of Estimates The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, related disclosures of contingent assets and liabilities at the balance sheet date, and the reported revenue, cost and expenses during the reported period in the consolidated financial statements and accompanying notes. Significant accounting estimates reflected in the Group’s consolidated financial statements mainly include, but are not limited to, assessment of whether the Group acts as a principal or an agent in different revenue streams, the determination of estimated selling prices of multiple element revenue contracts, the estimation of selling and marketing expense from incentive program, the valuation and recognition of share-based compensation arrangements, depreciable lives of property and equipment, useful life of intangible assets, assessment for impairment of loans and advances, provision of income tax and valuation allowance for deferred tax asset. Actual results could differ from those estimates. |
Comprehensive Income and Foreign Currency Translation | Comprehensive Income and Foreign Currency Translation The Group’s operating results are reported in the consolidated statements of comprehensive (loss)/income pursuant to FASB ASC Topic 220, “Comprehensive Income”. Comprehensive income consists of two components: net income and other comprehensive income (“OCI”). The Group’s OCI is comprised of gains and losses resulting from translating foreign currency financial statements of entities, of which functional currency is other than Hong Kong dollar which is the presentational currency of the Group, net of related income taxes, where applicable. Such subsidiaries’ assets and liabilities are translated into Hong Kong dollars at period-end exchange rates, and revenues and expenses are translated at average exchange rates prevailing during the period. Adjustments that result from translating amounts from a subsidiary’s functional currency to the Hong Kong dollar (as described above) are reported net of tax, where applicable, in accumulated OCI in the consolidated balance sheets. |
Convenience Translation | Convenience Translation Translations of balances in the consolidated balance sheets, consolidated statements of comprehensive (loss)/income and consolidated statements of cash flows from HK$ into US$ as of and for the year ended December 31, 2019 are solely for the convenience of the readers and were calculated at the rate of US$1.00=HK$7.7894, representing the noon buying rate set forth in the H.10 statistical release of the U.S. Federal Reserve Board on December 31, 2019. No representation is made that the HK$ amounts could have been, or could be, converted, realized or settled into US$ at that rate on December 31, 2019, or at any other rate. |
Cash and Cash Equivalents | Cash and Cash Equivalents Cash and cash equivalents represent cash on hand, demand deposits and time deposits placed with banks or other financial institutions, which are unrestricted to withdrawal or use, and which have original maturities of three months or less. |
Cash Held on Behalf of Clients | Cash Held on Behalf of Clients The Group has classified the clients’ deposits as cash held on behalf of clients under the assets section in the consolidated balance sheets and recognized the corresponding accounts payables to the respective clients under the liabilities section. |
Available-for-Sale Financial Securities | Available-for-Sale Financial Securities Available-for-sale financial securities include debt securities and are measured at fair value. Investments classified as available-for-sale debt securities are reported at fair value with unrealized gains or losses, if any, recorded in accumulated other comprehensive income in the consolidated statements of changes in shareholders’ (deficit)/equity. Debt securities in this category are wealth management products with expected return rate or variable interest rate indexed to investment horizon, principal amounting to HK$59,348 thousand and HK$93,773 thousand as of December 31, 2018 and 2019, respectively. These wealth management products are issued by a commercial bank in China and the Group can redeem the units held upon request. The assessment of a decline in the fair value of an individual security is based on whether the decline is other-than-temporary. The Group assesses its available-for-sale debt securities for other-than-temporary impairment by considering factors including, but not limited to, its ability and intent to hold the individual security, severity of the impairment, expected duration of the impairment and forecasted recovery of fair values. If the Group determines a decline in fair value is other-than-temporary, the cost basis of the individual security is written down to fair value as a new cost basis and the amount of the write-down is accounted for as a realized loss charged in the consolidated statements of comprehensive (loss)/income. The fair values of the investments would not be adjusted for subsequent recoveries in fair values. As of December 31, 2018 and 2019, Group did not identify any sign for its available-for-sale debt securities to impair. |
Equity method investment | Equity method investment In accordance with ASC 323 Investment-Equity Method and Joint Ventures, the Company accounts for an equity investment over which it has significant influence but does not own a majority of the equity interest or otherwise controls and the investments are either common stock or in substance common stock using the equity method. The Company's share of the investee's profit and loss is recognized in the consolidated statements of comprehensive (loss)/income of the period. In January 2019, the Company invested in Zhixiang Technology (Shenzhen) Co., Ltd, a professional stock incentive plan service company. The Company acquired 20% ordinary equity interest with a total consideration of HK$6,709 thousand. The Company exercises significant influence in Zhixiang Technology (Shenzhen) Co., Ltd and therefore accounts for this as a long-term investment using equity method. |
Loans and advances | Loans and advances Loans and advances include margin loans and IPO loans extended to clients and other advances, collateralized by securities and are carried at the amortized cost, net of an allowance for doubtful accounts. IPO loans for subscription of new shares are normally settled within one week from the drawdown date. Once IPO stocks are allotted, the Operating Company requires clients to repay the IPO loans. Force liquidation action would be taken if the clients fail to settle their shortfall after the IPO allotment result is announced. There were no outstanding IPO loan balances as of December 31, 2018 and 2019. The allowance for doubtful accounts for clients and related activity was immaterial for the period presented. Other advances consist of bridge loans to enterprises which pledged unlisted or listed shares they hold as collateral. The allowance for doubtful accounts for clients and related activity was immaterial for the period presented. Loans and advances are initially recorded net of directly attributable transaction costs and are measured at subsequent reporting dates at amortized cost. Finance charges, premiums payable on settlement or redemption and direct costs are accounted for on an accrual basis to the surplus or deficit using the effective interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise. |
Trading Receivables from and Payables to Clients | Trading Receivables from and Payables to Clients Trading receivables from and payables to clients include amounts due on brokerage transactions on a trade-date basis. |
Receivables from and Payables to Brokers and Clearing Organization | Receivables from and Payables to Brokers and Clearing Organization Receivables from and payables to brokers and clearing organization include receivables and payables from unsettled trades on a trade-date basis, including amounts receivable for securities or derivatives trades not delivered by the Operating Company to the purchaser by the settlement date and cash deposits, and amounts payable for securities or derivatives trades not received by the Operating Company from a seller by the settlement date. Clearing settlement fund deposited in the clearing organization for the clearing purpose is recognized in receivables from clearing organization. The Operating Company borrowed margin loan from executing brokers in the United States, with the benchmark interest rate plus premium differentiated depending on the trading volume, and immediately lent to margin financing clients. Margin loan borrowed is recognized in the payables to brokers. |
Interest Receivable and Payable | Interest Receivable and Payable Interest receivable is calculated based on the contractual interest rate of bank deposit, loans and advances on an accrual basis, and is recorded as interest income as earned. Interest payable is calculated based on the contractual interest rates of borrowings on an accrual basis. |
Securities Borrowed and Securities Loaned | Securities Borrowed and Securities Loaned Securities borrowed and securities loaned are recorded at the amount of the cash collateral advanced or received. Securities borrowed transactions require the Operating Company to provide counterparties with collateral, which may be in the form of cash, or other securities. With respect to securities loaned, the Operating Company receives collateral, which may be in the form of cash or other securities in an amount generally in excess of the fair value of the securities loaned. The Operating Company monitors the market value of securities borrowed and loaned on a daily basis, with additional collateral obtained or refunded as permitted contractually. Receivables and payables related to securities borrowed and securities loaned are included at receivables from and payables to brokers or clients in the consolidated balance sheets. Securities lending fees received and paid by the Operating Company are included in interest income and interest expense, respectively, in the consolidated statements of comprehensive (loss)/income. |
Securities Sold Under Agreements to Repurchase | Securities Sold Under Agreements to Repurchase Transactions involving sales of securities under agreements to repurchase (repurchase agreements) are treated as collateralized financing transactions. Under repurchase agreements, the Operating Company receives cash from counterparties and provides securities as collateral. These agreements are carried at amounts at which the securities will subsequently be repurchased, plus accrued interest, and the interest expense incurred by the Operating Company is recorded as interest expenses on the consolidated statements of comprehensive (loss)/income. |
Leases | Leases On January 1, 2019, the Group adopted FASB ASC Topic 842, “Leases,” (“ASC Topic 842”) which requires that a lessee recognize in the consolidated balance sheet a lease liability and a corresponding right-of-use asset, including for those leases that the Group currently classifies as operating leases. The right-of-use asset and the lease liability was initially measured using the present value of the remaining lease payments. ASC Topic 842 was implemented using a modified retrospective approach which resulted in no cumulative-effect adjustment in the opening balance of retained earnings as of January 1, 2019. As a result, the consolidated balance sheet prior to January 1, 2019 was not restated and continues to be reported under FASB ASC Topic 840, “Leases,” (“ASC Topic 840”), which did not require the recognition of a right-of-use asset or lease liability for operating leases. As permitted under ASC Topic 842, the Group adopted the following practical expedients: (1) not to reassess whether an expired or non-lease contract that commenced before January 1, 2019 contained an embedded lease, (2) not to reassess the classification of existing leases, (3) not to determine whether initial direct costs related to existing leases should be capitalized under ASC Topic 842, and (4) not to separate lease and non-lease components. The Group reviews all relevant contracts to determine if the contract contains a lease at its inception date. A contract contains a lease if the contract conveys to the Group the right to control the use of an underlying asset for a period of time in exchange for consideration. If the Group determines that a contract contains a lease, it recognizes, in the consolidated balance sheets, a lease liability and a corresponding right-of-use asset on the commencement date of the lease. The lease liability is initially measured at the present value of the future lease payments over the lease term using the rate implicit in the lease or, if not readily determinable, the Group’s secured incremental borrowing rate. An operating lease right-of-use asset is initially measured at the value of the lease liability minus any lease incentives and initial direct costs incurred plus any prepaid rent. Each lease liability is measured using the Group’s secured incremental borrowing rate, which is based on an internally developed yield curve using interest rates of debt issued with a similar risk profile as the Group and a duration similar to the lease term. The Group’s leases have remaining terms of one to five years, and some of which include options to terminate the lease upon notice. The Group considers these options when determining the lease term used to calculate the right-of-use asset and the lease liability when the Group is reasonably certain it will exercise such option. The Group’s operating leases contain both lease components and non-lease components. Non-lease components are distinct elements of a contract that are not related to securing the use of the underlying assets, such as common area maintenance and other management costs. The Company elected to measure the lease liability by combining the lease and non-lease components as a single lease component. As such, the Company includes the fixed payments and any payments that depend on a rate or index that relate to the lease and non-lease components in the measurement of the lease liability. Some of the non-lease components are variable in nature and not based on an index or rate, and as a result, are not included in the measurement of the operating lease right-of-use assets or operating lease liability. Operating lease expense is recognized on a straight-line basis over the lease term and is included in rental and other related expenses in the Group’s consolidated statements of comprehensive (loss)/income. All of the Group’s leases are classified as operating leases and primarily consist of real estate leases for corporate offices, data centers, and other facilities. As a result of the adoption, the Group recognized approximately HK$22,312 of operating lease right-of-use assets and corresponding operating lease liabilities respectively on the consolidated balance sheets as of January 1, 2019. The adoption had no impact on the Group’s opening balance of retained earnings as of January 1, 2019. As of December 31, 2019, the weighted-average remaining lease term on these leases is approximately four years and the weighted-average discount rate used to measure the lease liabilities is approximately 4.75%. For the year ended December 31, 2019, right-of-use assets obtained under operating leases was HK$211,170 thousand. The Group’s lease agreements do not contain any residual value guarantees, restrictions or covenants. |
Refundable Deposit | Refundable Deposit Refundable deposit is included in other assets in the consolidated balance sheets. As a clearing member firm of HKEx, the Group is also exposed to clearing member credit risk. HKEx requires member firms to deposit cash to a clearing fund. If a clearing member defaults in its obligations to the clearing organization in an amount larger than its own margin and clearing fund deposits, the shortfall is absorbed pro rata from the deposits of the other clearing members. HKEx has the authority to assess their members for additional funds if the clearing fund is depleted. A large clearing member default could result in a substantial cost if the Group is required to pay such assessments. |
Property and Equipment, net | Property and Equipment, net Property and equipment, which are included in other assets in the consolidated balance sheets are stated at historical cost less accumulated depreciation and impairment, if any. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Residual rate is determined based on the economic value of the property and equipment at the end of the estimated useful lives as a percentage of the original cost. Category Estimated useful lives Residual rate Computers equipment 3 - 5 years 5 % Furniture and fixtures 3 - 5 years 5 % Office equipment 3 - 5 years 5 % Vehicle 5 years 5 % Office building 30 years 5 % Expenditures for maintenance and repairs are expensed as incurred. |
Intangible Assets | Intangible Assets Intangible assets which are included in other assets in the consolidated balance sheets mainly consist of computer software and golf membership. Identifiable intangible assets are carried at acquisition cost less accumulated amortization and impairment loss, if any. Finite-lived intangible assets are tested for impairment if impairment indicators arise. Amortization of finite-lived intangible assets is computed using the straight-line method over their estimated useful lives, which are as follows: Category Estimated useful lives Computer software 5 years Golf membership 10 years Infinite-lived intangible assets mainly consist of the trading right and license. The Operating Company had hold a futures trading right as a clearing member firm of Hong Kong Exchanges and Clearing Limited (“HKEx”) in order to trade futures through the trading facilities of the Stock Exchange, and has recognized it as intangible assets. The Operating Company obtained an insurance broker license through auquiring a member of the HongKong Professional Insurance Brokers Association .The future trading right and insurance broker licence have an indefinite useful life and are carried at cost less accumulated impairment losses. The Group will not amortize the future trading right and insurance broker license until its useful life is determined to be finite. |
Fair Value Measurements | Fair Value Measurements Accounting guidance defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Group considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability. Accounting guidance establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Accounting guidance establishes three levels of inputs that may be used to measure fair value: Level 1 — Valuation techniques in which all significant inputs are unadjusted quoted prices from active markets for assets or liabilities that are identical to the assets or liabilities being measured. Level 2 — Valuation techniques in which significant inputs include quoted prices from active markets for assets or liabilities that are similar to the assets or liabilities being measured and/or quoted prices for assets or liabilities that are identical or similar to the assets or liabilities being measured from markets that are not active. Also, model-derived valuations in which all significant inputs and significant value drivers are observable in active markets are Level 2 valuation techniques. Level 3 — Valuation techniques in which one or more significant inputs or significant value drivers are unobservable. Unobservable inputs are valuation technique inputs that reflect the Group’s own assumptions about the assumptions that market participants would use in pricing an asset or liability. When available, the Group uses quoted market prices to determine the fair value of an asset or liability. If quoted market prices are not available, the Group will measure fair value using valuation techniques that use, when possible, current market-based or independently sourced market parameters, such as interest rates and currency rates. The carrying amount of cash and cash equivalents, cash held on behalf of clients, receivables from and payables to clients, brokers and clearing organization, amounts due to related parties, other financial assets and liabilities approximates fair value because of their short-term nature. Loans and advances and accrued interest receivable, borrowings and accrued interest payable and operating lease liabilities are carried at amortized cost. The carrying amount of loans and advances, borrowings, accrued interest receivable, accrued interest payable and operating lease liabilities approximate their respective fair value as the interest rates applied reflect the current quoted market yield for comparable financial instruments. Available-for-sale financial securities are measured at fair value. The Group's non-financial assets, such as operating lease right-of-use assets, property and equipment and intangible assets, would be measured at fair value only if they were determined to be impaired. |
Revenue Recognition | Revenue Recognition 1) Brokerage commission and handling charge income Brokerage commission income earned for executing and/or clearing transactions are accrued on a trade-date basis. Handling charge income arise from the services such as settlement services, subscription and dividend collection handling services, etc., are accrued on a trade-date basis. 2) Interest Income The Group earns interest income primarily in connection with its margin financing and securities lending services, IPO financing, bridge loan and deposits with banks, which are recorded on an accrual basis and are included in interest income in the consolidated statements of comprehensive (loss)/income. Interest income is recognized as it accrued using the effective interest method. 3) Other income Other income consists of enterprise public relations service charge income provided to corporate clients, underwriting fee income, IPO subscription service charge income, currency exchange service income from clients, income from market data service, client referral income from brokers and funds distribution service income from fund management companies, employee share option plan (“ESOP”) management service income, etc. Enterprise public relations service charge income is charged to corporate clients by providing platform to post their detailed stock information and latest news in Futu NiuNiu app, as well as providing a lively, interactive community among their potential investors to exchange investment views, share trading experience and socialize with each other. Unearned enterprise public relations service income of which the Group had received the consideration is recorded as contract liabilities (deferred revenue). IPO subscription service charge income is derived from provision of new share subscription services in relation to IPOs in the Hong Kong capital market. Underwriting fee income is generated from investment banking business primarily by providing equity sub-underwriting to corporate issuers. Funds distribution service income is charged to fund management companies for providing fund products distribution service to Futu's individual clients. The Operating Company, as an intermediary would receive subscription fees from fund management companies as agreed in the service contracts. Market information and data income are the amounts charged to Futu NiuNiu app users for market data service. Currency exchange service income are the amounts charged to the Group’s paying clients for providing currency exchange service. Client referral income from brokers is derived from referring clients to China A-share licensed brokers by embedding on the Group’s website or online platform a link which can lead clients to the account opening interface of these brokers. ESOP management service income is derived from establishing and administrating the platforms for corporate clients’ ESOP. This includes all workflow and administration surrounding ESOP fulfillment, including employee communications, records management, data protection, users and administrators education, and other upgrading and customizing services on the ESOP platforms as agreed. For enterprise public relations service charge income, funds distribution service income, market information and data income, client referral income from brokers and ESOP management service income, the service revenues are recognized ratably over the term of the service contracts. For IPO subscription service charge income, underwriting fee income and currency exchange service income, the Group recognizes the revenues upon the time when the services are rendered to customers. |
Incentives | Incentives The Group offers a self-managed client loyalty program points, which can be used in mobile app and website to redeem a variety of concessions or service, such as commission-deduction coupon, Level 2 A shares securities market data card and etc. Clients have a variety of ways to obtain the points. The major accounting policy for the points program is described as follows: 1) Sales contracts related scenarios The sales contracts related scenarios include client entering into the first Hong Kong brokerage transaction, first US brokerage transaction, IPO stock brokerage transactions, and currency exchange services. The Group concludes the points offered linked to the purchase transaction of these scenarios is a material right and accordingly a separate performance obligation according to ASC 606, and should be taken into consideration when allocating the transaction price of the sales. The Group determines the value of each point based on fair value of the concessions and services that can be redeemed with points. The Group also estimates the probability of the points redemption when performing the allocation. Since there is no lapse requirement of the points and no historical of forfeitures observed, coupled with the fact that most services can be redeemed without requiring a significant amount of points comparing with the amount of points provided to users, the Group believes it is reasonable to assume all points will be redeemed and no forfeiture is estimated currently. The Group will apply and update the estimated redeem rate and the estimated value of each point at each reporting period. The amount allocated to the points as separate performance obligation is recorded as contract liabilities (deferred revenue) and revenue should be recognized when future concessions or services are transferred. For the years ended December 31, 2017, 2018 and 2019, the revenue portion allocated to the points as separate performance obligation were HK$2,042 thousand, HK$1,865 thousand and HK$1,059 thousand, respectively, which is recorded as contract liabilities (deferred revenue). For the years ended December 31, 2017, 2018 and 2019, the total points recorded as a reduction of revenue were HK$330 thousand, HK$275 thousand and HK$187 thousand, respectively. As of December 31, 2018 and 2019, contract liabilities recorded related to unredeemed points were HK$3,022 thousand and HK$2,126 thousand, respectively. 2) Other scenarios Clients or the users of the mobile application can also obtain points through other ways such as log-ins to the mobile application, opening a trade account and inviting friends, etc. The Group believes these points are to encourage user engagement and generate market awareness. As a result, the Group accounts for such points as selling and marketing expenses with a corresponding liability recorded under accrued expenses and other liabilities of its consolidated balance sheets upon the points offering. The Group estimates liabilities under the client loyalty program based on cost of the concessions or services that can be redeemed, and its estimate of full redemption. At the time of redemption, the Group records a reduction of accrued expenses and other liabilities. For the years ended December 31, 2017, 2018 and 2019, the total redeemed points recorded as selling and marketing expenses were HK$198 thousand, HK$220 thousand and HK$1,604 thousand, respectively. As of December 31, 2018 and 2019, liabilities recorded related to unredeemed points in other scenarios were HK$485 thousand and HK$3,518 thousand, respectively. |
Brokerage Commission and Handling Charge Expenses | Brokerage Commission and Handling Charge Expenses Commission expenses for executing and/or clearing transactions are accrued on a trade-date basis. The commission expenses are charged by executing brokers for securities and derivative trades in the United States stock and derivative markets as the Operating Company makes securities and derivative trades with these brokers as principal. Handling and settlement fee is charged by HKEx or executing brokers for clearing and settlement services, are accrued on a trade-date basis. IPO subscription service charge expenses are charged by commercial banks in connection with new share subscription services in relation to IPOs in the Hong Kong capital market. |
Interest Expenses | Interest Expenses Interest Expenses primarily consists of interest expenses of borrowings from banks, other licensed financial institutions and other parties paid to fund the Operating Company’s margin financing business and IPO financing business. |
Processing and Servicing Costs | Processing and Servicing Costs Processing and servicing costs consists of market data and information fee, data transmission fee, cloud service fee, system cost, and SMS service fee, etc. The nature of market information and data fee mainly represents for information and data fee paid to stock exchanges like HKEx, NASDAQ, and New York stock exchange, etc. Data transmission fee is the fee of data transmission among cloud server and data centers located in Shenzhen, PRC and Hong Kong, etc. Cloud service fee and SMS service fee mainly represent the data storage and computing service and the SMS channel service fee. The nature of system cost mainly represents for the fee to access and use the systems paid to software providers. |
Research and Development Expenses | Research and Development Expenses Research and development expenses consist of expenses related to developing transaction platform and website like Futu NiuNiu app and other products, including payroll and welfare, rental expenses and other related expenses for personnel engaged in research and development activities. All research and development costs have been expensed as incurred as the costs qualifying for capitalization have been insignificant. |
Selling and Marketing Expenses | Selling and Marketing Expenses Selling and marketing expenses consist primarily of advertising and promotion costs, payroll, rental and related expenses for personnel engaged in marketing and business development activities. Advertising and promotion costs are expensed as incurred and are included within selling and marketing expenses in the consolidated statements of comprehensive (loss)/income. |
General and Administrative Expenses | General and Administrative Expenses General and administrative expenses consist of payroll, rental, and related expenses for employees involved in general corporate functions, including finance, legal and human resources; costs associated with use of facilities and equipment, such as depreciation expenses, rental and other general corporate related expenses. |
Others, net | Others, net Others, net, mainly consist of non-operating income and expenses, foreign currency gains or losses, other impairment for all periods presented. Non-operating expenses mainly consist of accrued social security underpayment surcharge. |
Foreign Currency Gains and Losses | Foreign Currency Gains and Losses Foreign currency transactions denominated in currencies other than the functional currency are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are remeasured at the applicable rates of exchange in effect at that date. Foreign currency gain or loss resulting from the settlement of such transactions and from remeasurement at period-end is recognized in "Others, net" in the consolidated statements of comprehensive (loss)/income. |
Share-Based Compensation | Share-Based Compensation The Company follows ASC 718 to determine whether a share option should be classified and accounted for as a liability award or equity award. All share-based awards to employees and directors classified as equity awards , such as stock options, are measured at the grant date based on the fair value of the awards. Share-based compensation, net of estimated forfeitures, is recognized as expenses on a straight-line method over the requisite service period, which is the vesting period. Options granted generally vest over four or five years. The modification of the terms or conditions of the existing shared-based award is treated as an exchange of the original award for a new award. The incremental compensation expenses are equal to the excess of the fair value of the modified award immediately after the modification over the fair value of the original award immediately before the modification. For stock options already vested as of the modification date, the Group immediately recognized the incremental value as compensation expenses. For stock options still unvested as of the modification date, the incremental compensation expenses are recognized over the remaining service period of these stock options. The Company utilizes the binomial option pricing model to estimate the fair value of stock options granted, with the assistance of an independent valuation firm. Prior to completion of the IPO, the Group uses the fair value of each of the Company's ordinary shares on the grant date to estimate the fair value of stock options. After the IPO, the exercise price of each granted stock option is determined by the closing price of the Company’s ordinary share on the grant date. Forfeitures are estimated at the time of grant and revised in subsequent periods if actual forfeitures differ from those estimates. The Group uses historical data to estimate pre-vesting options and records share-based compensation expenses only for those awards that are expected to vest. See Note 14 for further discussion on share-based compensation. |
Fair Value of Preferred Shares and Pre-IPO Ordinary Shares | Fair Value of Preferred Shares and Pre-IPO Ordinary Shares Shares of the Company, which did not have quoted market prices, were valued based on the income approach. The income approach involves applying the discounted cash flow analysis based on projected cash flow using the Group's best estimate as of the valuation dates. Estimating future cash flow requires the Group to analyze projected revenue growth, gross margins, effective tax rates, capital expenditures and working capital requirements. In determining an appropriate discount rate, the Group considered the cost of equity and the rate of return expected by venture capitalists. The Group also applied a discount for lack of marketability given that the shares underlying the award were not publicly traded at the time of grant. Determination of estimated fair value of the Group requires complex and subjective judgments due to its limited financial and operating history, unique business risks and limited public information on companies in China similar to the Group. Option-pricing method was used to allocate enterprise value to preferred shares and pre-IPO ordinary shares. The method treats preferred shares and pre-IPO ordinary shares as call options on the enterprise's value, with exercise prices based on the liquidation preference of the preferred shares. The strike prices of the “options” based on the characteristics of the Group's capital structure, including number of shares of each class of pre-IPO ordinary shares, seniority levels, liquidation preferences, and conversion values for the preferred shares. The option-pricing method also involves making estimates of the anticipated timing of a potential liquidity event, such as a sale of the Group or an IPO, and estimates of the volatility of the Group's equity securities. The anticipated timing is based on the plans of board of directors and management of the Group. Estimating the volatility of the share price of a privately held company is complex because there is no readily available market for the shares. Volatility is estimated based on annualized standard deviation of daily stock price return of comparable companies. |
Taxation | Taxation 1) Income tax Current income taxes are provided on the basis of net income for financial reporting purposes, adjusted for income and expense items which are not assessable or deductible for income tax purposes, in accordance with the regulations of the relevant tax jurisdictions. Deferred income taxes are accounted for using an asset and liability method. Under this method, deferred income taxes are recognized for the tax consequences of temporary differences by applying enacted statutory rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. The tax base of an asset or liability is the amount attributed to that asset or liability for tax purpose. The effect on deferred taxes of a change in tax rates is recognized in the consolidated statements of comprehensive (loss)/income in the period of change. A valuation allowance is provided to reduce the amount of deferred tax assets if it is considered more likely than not that some portion of, or all of the deferred tax assets will not be realized. 2) Uncertain tax positions The Group did not recognize any interest and penalties associated with uncertain tax positions for the years ended December 31, 2017, 2018 and 2019. As of December 31, 2018 and 2019, the Group did not have any significant unrecognized uncertain tax positions. |
Net (loss)/income per share | Net (loss)/income per share Basic net (loss)/income per share is computed by dividing net (loss)/income attributable to ordinary shareholder, considering the accretion of redemption feature and cumulative dividend related to the Company’s redeemable convertible preferred shares, and undistributed earnings allocated to redeemable convertible preferred shares by the weighted average number of ordinary shares outstanding during the period using the two-class method. Under the two-class method, net income is allocated between ordinary shares and other participating securities based on their participating rights. Net loss is not allocated to other participating securities if based on their contractual terms they are not obligated to share the losses. Diluted net (loss)/income per share is calculated by dividing net (loss)/income attributable to ordinary shareholder, as adjusted for the effect of dilutive ordinary equivalent shares, if any, by the weighted average number of ordinary and dilutive ordinary equivalent shares outstanding during the period. Ordinary equivalent shares consist of ordinary shares issuable upon the conversion of the redeemable convertible preferred shares, using the if-converted method, and shares issuable upon the exercise of share options using the treasury stock method. Ordinary equivalent shares are not included in the denominator of the diluted net (loss)/income per share calculation when inclusion of such share would be anti-dilutive. |
Segment Reporting | Segment Reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-makers has been identified as the Chief Executive Officer who allocates resources to and assesses the performance of the operating segments of an entity. The Group’s reporting segments are decided based on its operating segments while taking full consideration of various factors such as products and services, geographic location and regulatory environment related to administration of the management. Operating segments meeting the same qualifications are allocated as one reporting segment, providing independent disclosures. The Group engages primarily in online brokerage services and margin financing services. The Group does not distinguish between markets or segments for the purpose of internal reports. The Group does not distinguish revenues, costs and expenses between segments in its internal reporting, and reports costs and expenses by nature as a whole. Hence, the Group has only one reportable segment. |
Significant Risks and Uncertainties | Significant Risks and Uncertainties 1) Currency risk Currency risk arises from the possibility that fluctuations in foreign exchange rates will impact the financial instruments. The Operating Company is not exposed to significant transactional foreign currency risk since almost all of its transactions, assets and liability are denominated in Hong Kong dollars and U.S. dollars and Hong Kong dollars are pegged against U.S. dollars. The impact of foreign currency fluctuations in the Group’s earnings is included in “others, net” in the consolidated statements of comprehensive (loss)/income. At the same time, the Group is exposed to translational foreign currency risk since some of the Group's major subsidiaries have RMB as their functional currency. Therefore, RMB depreciation against Hong Kong dollars could have a material adverse impact on the foreign currency translation adjustment in the consolidated statements of comprehensive (loss)/income. As of December 31, 2018 and 2019, the Group had RMB-denominated cash of HK$12.3 million (US$1.6 million) and HK$46.7 million (US$6.0 million) respectively. We estimate that a 10% depreciation of Renminbi against the U.S. dollar based on the foreign exchange rate on December 31, 2018 and 2019 would result in a decrease of US$0.2 million and US$0.6 million, respectively, in the Group’s total assets as of December 31, 2018 and 2019, and a 10% appreciation of Renminbi against the U.S. dollar based on the foreign exchange rate on December 31, 2018 and 2019 would result in an increase of US$0.2 million and US$0.6 million, respectively, in the Group’s total assets as of December 31, 2018 and 2019. 2) Credit risk Cash held on behalf of clients are segregated and deposited in financial institutions as required by Securities and Futures Ordinance. These financial institutions are of sound credit ratings, therefore management believes that there is no significant credit risk related to cash held on behalf of clients The Group’s securities and derivative trades activities are transacted on either a cash or margin basis. The Group's credit risk is limited in that substantially all of the contracts entered into are settled directly at securities and derivatives clearing organization. In margin transactions, the Group extends credit to the client, subject to various regulatory and internal margin requirements, collateralized by cash and securities in the client’s account. IPO loans are exposed to credit risk from clients who fails to repay the loans upon IPO stock allotment. The Group monitors the clients’ collateral level and has the right to dispose the newly allotted stocks once the stocks first start trading. Bridge loans to enterprise pledged by shares are exposed to credit risk from counterparties who fail to repay the loans, the Group monitors on the collateral level of bridge loans in real time, and has the right to dispose of the pledged shares once the collateral level falls under the minimal level required to get the loans repaid. Liabilities to other brokers and dealers related to unsettled transactions are recorded at the amount for which the securities were purchased, and are paid upon receipt of the securities from other brokers or dealers. In connection with its clearing activities, the Group is obligated to settle transactions with brokers and other financial institutions even if its clients fail to meet their obligations to the Group. Clients are required to complete their transactions by the settlement date, generally two business days after the trade date. If clients do not fulfill their contractual obligations, the Group may incur losses. The Group has established procedures to reduce this risk by generally requiring that clients deposit sufficient cash and/or securities into their account prior to placing an order. For cash management purposes, the Group enters into short-term securities sold under agreements to repurchase transactions ("repos") in addition to securities borrowing and lending arrangements, all of which may result in credit exposure in the event the counterparty to a transaction is unable to fulfill its contractual obligations. Repos are collateralized by securities with a market value in excess of the obligation under the contract. Similarly, securities lending agreements are collateralized by deposits of cash or securities. The Group attempts to minimize credit risk associated with these activities by monitoring collateral values on a daily basis and requiring additional collateral to be deposited with or returned to the Group as permitted under contractual provisions. Concentrations of Credit Risk The Group's exposure to credit risk associated with its brokerage and other activities is measured on an individual counterparty basis, as well as by groups of counterparties that share similar attributes. There was no revenue from clients which individually represented greater than 10% of the total revenues for the years ended December 31, 2017, 2018 and 2019, respectively. Concentrations of credit risk can be affected by changes in political, industry, or economic factors. To reduce the potential for risk concentration, credit limits are established and exposure is monitored in light of changing counterparty and market conditions. As of December 31, 2018 and 2019, the Group did not have any material concentrations of credit risk outside the ordinary course of business. 3) Interest rate risk Fluctuations in market interest rates may negatively affect the Group’s financial condition and results of operations. The Group are exposed to floating interest rate risk on cash deposit and floating rate borrowings. We use net interest simulation modeling techniques to evaluate the effect that changes in interest rates might have on pre-tax income. The model includes all interest-sensitive assets and liabilities. The simulations involve assumptions that are inherently uncertain and, as a result, cannot precisely predict the impact that changes in interest rates will have on pre-tax income. Actual results may differ from simulated results due to differences in timing and frequency of rate changes, changes in market conditions and changes in management strategy that lead to changes in the mix of interest-sensitive assets and liabilities. The simulations assume that the asset and liability structure of the consolidated balance sheets would not be changed as a result of a simulated change in interest rates. The results of the simulations based on the Group’s financial position as of December 31, 2019 indicate that a gradual 1% (100 basis points) increase in interest rates over a 12-month period would result in approximately HK$57.9 million (US$7.4 million) pre-tax income and a gradual 1% (100 basis points) decrease in interest rates over a 12-month period would result in approximately HK$57.9 million (US$7.4 million) pre-tax loss, depending largely on the extent and timing of possible changes in floating rates. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In February 2016, the FASB issued ASU No. 2016‑02, Leases (Topic 842). The ASU is effective for reporting periods beginning after December 15, 2018 and interim periods within those fiscal years. Early adoption is permitted. The ASU will require lessees to report most leases as assets and liabilities on the balance sheet, while lessor accounting will remain substantially unchanged. The ASU requires a modified retrospective transition approach for existing leases, whereby the new rules will be applied to the earliest year presented. The Group adopted ASC Topic 842 on January 1, 2019, and the impact about adoption has been recorded on the consolidated financial statements (see Note 5). In June 2016, FASB amended guidance related to impairment of financial instruments as part of ASU 2016-13 Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which will be effective on January 1, 2020. The guidance replaces the incurred loss impairment methodology with an expected credit loss model for which a group is required to recognize an allowance based on its estimate of expected credit loss. In November 2018, FASB issued ASU No, 2018-19, Codification Improvements to Topic 326, further clarified the scope of the guidance in the amendments in ASU 2016-13. In May 2019, FASB issued ASU No.2019-05, Financial instrument—Credit Losses(Topic 326), Targeted Transition Relief, which provides an irrevocably fair value option to elect for eligible instruments. In November 2019, FASB issued ASU 2019-11 Codification Improvements to Topic 326, Financial Instruments-Credit Losses, which clarified and improved various aspects of ASU 2016-13. The ASC Topic 326 will be effective on January 1, 2020. The Group is currently evaluating the impact of this new guidance on the consolidated financial statements and expected that the adoption will not have a material impact on its consolidated financial statements, as the Group will apply the practical expedient relating to financial assets subject to collacteral maintenance provisions. In August 2018, the FASB issued ASU 2018‑13, Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. The amendments in this standard will remove, modify and add certain disclosures under ASC Topic 820, Fair Value Measurement, with the objective of improving disclosure effectiveness. ASU 2018‑13 will be effective for the Group’s fiscal year beginning January 1, 2020, with early adoption permitted. The transition requirements are dependent upon each amendment within this update and will be applied either prospectively or retrospectively. Since this update is intended to modify disclosures, the adoption of ASU 2018‑13 is not expected to have a material impact on the Group’s consolidated financial statements. In August 2018, the FASB issued ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. Under the ASU, entities should account for costs associated with implementing a cloud computing arrangement that is considered a service contract in the same way as accounting for implementation costs incurred to develop or obtain software for internal use using the guidance in ASU 350-40. The amendment address when costs should be capitalized rather than expensed, the item to use when amortizing capitalized costs, and how to evaluate the unamortized portion of these capitalized implementation costs for impairment. The ASU also includes guidance on how to present implementation costs in the financial statements and creates additional disclosure requirements. ASU 2018-15 will be effective for the Group's fiscal year beginning January 1, 2020, with early adoption permitted. The adoption of ASU 2018-15 is not expected to have a material impact on the Group's consolidated financial statements. In December 2019, FASB issued ASU 2019-12, Income taxes (Topic 740)-Simplifying the accounting for income taxes, which simplifys the accounting for income taxes by removing certain exceptions to the general principles in Topic 740, Income Taxes. The ASU will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The Group is currently evaluating the impact of this new guidance on the consolidated financial statements. In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, which eliminates, adds and modifies certain disclosure requirements for fair value measurements. Under the guidance, public companies will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. The guidance is effective for all entities for fiscal years beginning after December 15, 2019 and for interim periods within those fiscal years. The Group does not expect the adoption to have a material impact on its consolidated financial statements. |
ORGANIZATION AND PRINCIPAL AC_2
ORGANIZATION AND PRINCIPAL ACTIVITIES (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
ORGANIZATION AND PRINCIPAL ACTIVITIES | |
Schedule of principal subsidiaries, consolidated VIE and subsidiary of VIE | Percentage of Direct or Date of Place of Indirect Incorporation/ Incorporation/ Economic Subsidiaries Establishment/ Establishment Interest Principal Activities Futu Securities International (Hong Kong) Limited (“Futu Securities” or the “Operating Company”) April 17, 2012 Hong Kong 100 % Financial services Futu Securities (Hong Kong) Limited May 2, 2014 Hong Kong 100 % Investment holding Futu Network Technology Limited May 17, 2015 Hong Kong 100 % Research and development and technology services Futu Network Technology (Shenzhen) Co., Ltd. October 14, 2015 Shenzhen, PRC 100 % Research and development and technology services Shen Si Network Technology (Beijing) Co., Ltd. (“Shen Si”) September 15, 2014 Beijing, PRC 100 % No substantial business Futu Inc. December 17, 2015 Delaware, USA 100 % Financial services VIE Shenzhen Futu Network Technology Co., Ltd. (1) (“Shenzhen Futu”) December 18, 2007 Shenzhen, PRC 100 % Research and development and technology services Subsidiary of the VIE Beijing Futu Network Technology Co., Ltd. April 4, 2014 Beijing, PRC 100 % No substantial business Note: (1) Mr. Leaf Hua Li and Ms. Lei Li are beneficiary owners of the Company and held 85% and 15% equity interest in Shenzhen Futu, respectively. Mr. Leaf Hua Li is the founder, chairman and chief executive officer of the Company, and Ms. Lei Li is Mr. Leaf Hua Li’s spouse. |
SIGNIFICANT ACCOUNTING POLICI_3
SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
SIGNIFICANT ACCOUNTING POLICIES | |
Schedule of consolidated financial statements with intercompany balances and transactions eliminated between the VIE and its subsidiary | As of December 31, 2018 2019 (HK$in thousands) Total assets 57,213 68,480 Total liabilities 74,904 73,271 Year ended December 31, 2017 2018 2019 (HK$in thousands) Total operating revenue 50,020 68,888 65,681 Net income 18,458 21,262 8,807 Year ended December 31, 2017 2018 2019 (HK$in thousands) Net cash (used in)/generated from operating activities (4,613) 1,664 (2,502) Net cash generated from investing activities — — 2,233 Net (decrease)/increase in cash and cash equivalents (4,613) 1,664 (269) Cash and cash equivalents at beginning of the year 4,699 86 1,750 Cash and cash equivalents at end of the year 86 1,750 1,481 |
Schedule of property and equipment at the end of the estimated useful lives | Category Estimated useful lives Residual rate Computers equipment 3 - 5 years 5 % Furniture and fixtures 3 - 5 years 5 % Office equipment 3 - 5 years 5 % Vehicle 5 years 5 % Office building 30 years 5 % |
Schedule of finite-lived intangible assets using estimated useful lives | Category Estimated useful lives Computer software 5 years Golf membership 10 years |
FINANCIAL ASSETS AND FINANCIA_2
FINANCIAL ASSETS AND FINANCIAL LIABILITIES (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
FINANCIAL ASSETS AND FINANCIAL LIABILITIES | |
Summary of financial assets measured at fair value | Financial Assets At Fair Value as of December 31, 2019 Level 1 Level 2 Level 3 Total (HK$in thousands) Available-for-sale financial securities — 93,773 — 93,773 Financial Assets At Fair Value as of December 31, 2018 Level 1 Level 2 Level 3 Total (HK$in thousands) Available-for-sale financial securities — 59,348 — 59,348 |
Summary of carrying value, fair value, and fair value hierarchy category of certain financial assets and liabilities that are not recorded at fair value | As of December 31, 2019 Carrying Fair Value Value Level 1 Level 2 Level 3 (HK$in thousands) Financial assets, not measured at fair value Cash and cash equivalents 362,574 362,574 362,574 — — Cash held on behalf of clients 14,540,863 14,540,863 14,540,863 — — Loans and advances 4,188,689 4,188,689 — 4,188,689 — Receivables: Clients 247,017 247,017 — 247,017 — Brokers 1,226,348 1,226,348 — 1,226,348 — Clearing organization 304,080 304,080 — 304,080 — Interest 16,892 16,892 — 16,892 — Other financial assets 64,184 64,184 — 64,184 — Total financial assets, not measured at fair value 20,950,647 20,950,647 14,903,437 6,047,210 — As of December 31, 2019 Carrying Fair Value Value Level 1 Level 2 Level 3 (HK$in thousands) Financial liabilities, not measured at fair value Amounts due to related parties 33,628 33,628 — 33,628 — Payables: Clients 15,438,879 15,438,879 — 15,438,879 — Brokers 1,484,243 1,484,243 — 1,484,243 — Interest 519 519 — 519 — Borrowings 1,467,586 1,467,586 — 1,467,586 — Securities sold under agreements to repurchase 1,590 1,590 — 1,590 — Operating lease liabilities 172,466 172,466 — 172,466 — Other financial liabilities 31,993 31,993 — 31,993 — Total financial liabilities, not measured at fair value 18,630,904 18,630,904 — 18,630,904 — As of December 31, 2018 Carrying Fair Value Value Level 1 Level 2 Level 3 (HK$in thousands) Financial assets, not measured at fair value Cash and cash equivalents 215,617 215,617 215,617 — — Cash held on behalf of clients 11,771,487 11,771,487 11,771,487 — — Loans and advances 3,086,904 3,086,904 — 3,086,904 — Receivables: Clients 120,256 120,256 — 120,256 — Brokers 425,849 425,849 — 425,849 — Clearing organization 175,955 175,955 — 175,955 — Interest 49,427 49,427 — 49,427 — Other financial assets 41,019 41,019 — 41,019 — Total financial assets, not measured at fair value 15,886,514 15,886,514 11,987,104 3,899,410 — As of December 31, 2018 Carrying Fair Value Value Level 1 Level 2 Level 3 (HK$ in thousands) Financial liabilities, not measured at fair value Amounts due to related parties 8,591 8,591 — 8,591 — Payables: Clients 12,304,717 12,304,717 — 12,304,717 — Brokers 920,871 920,871 — 920,871 — Interest 2,405 2,405 — 2,405 — Borrowings 1,576,251 1,576,251 — 1,576,251 — Other financial liabilities 11,503 11,503 — 11,503 — Total financial liabilities, not measured at fair value 14,824,338 14,824,338 — 14,824,338 — |
Summary of amounts of financial instruments that are not offset in the consolidated balance sheets, but could be netted against cash or financial instruments with specific counterparties under master netting agreements | Effects of offsetting on the balance sheet Related amounts not offset Net Gross amounts Amounts amounts presented subject to set off in in the master Financial Gross the balance balance netting instrument Net 2019 amount sheet sheet arrangements collateral amount HK$in thousands Financial Assets Amounts due from clearing organization 2,925,936 (2,621,856) 304,080 — — 304,080 Deposit paid for securities borrowed (1) 1,126,300 — 1,126,300 — (935,443) 190,857 Financial liabilities Amounts due to clearing organization — — — — — — Deposit received for securities lent (1) 1,342,738 — 1,342,738 — (935,443) 407,295 Effects of offsetting on the balance sheet Related amounts not offset Net Gross amounts Amounts amounts presented subject to set off in in the master Financial Gross the balance balance netting instrument Net 2018 amount sheet sheet arrangements collateral amount HK$ in thousands Financial Assets Amounts due from clearing organization 1,472,596 (1,296,641) 175,955 — — 175,955 Deposit paid for securities borrowed (1) 397,675 — 397,675 — (299,173) 98,502 Financial liabilities Amounts due to clearing organization — — — — — — Deposit received for securities lent (1) 488,068 — 488,068 — (299,173) 188,895 (1) The Operating Company borrows securities from a securities lender and subsequently lends the securities to clients or vice versa under Stock Yield Enhancement Program. Under these agreements, the Operating Company receives or provides deposits for securities lending and borrowing purpose. For presentation purposes, these amounts presented are included in “Receivables from brokers/clients” and "Payables to clients/brokers" in the consolidated balance sheets. |
LEASE (Tables)
LEASE (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
LEASE | |
Summary of balances reported in the consolidated balance sheet related to the leases | As at December 31, 2019 (HK$ in thousands) Operating lease right-of-use assets 161,617 Operating lease liabilities 172,466 |
Summary of operating lease cost reported in the consolidated statements of comprehensive (loss)/income | Year ended December 31, 2019 (HK$ in thousands) Operating lease cost 64,756 |
Summary of undiscounted cash flows of leases to present value of operating lease payments | December 31, 2019 (HK$ in thousands) 2020 56,714 2021 46,968 2022 44,354 2023 40,346 Thereafter — Total undiscounted operating lease payments 188,382 Less: imputed interest (15,916) Present value of operating lease liabilities 172,466 |
Summary of minimum annual lease commitments in accordance with ASC Topic 840 | December 31, 2018 (HK$ in thousands) 2019 54,417 2020 56,705 2021 42,090 2022 46,232 2023 42,701 Thereafter — 242,145 |
LOANS AND ADVANCES (Tables)
LOANS AND ADVANCES (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
LOANS AND ADVANCES | |
Schedule of loans and advances | As of December 31, 2018 2019 (HK$ in thousands) Margin loans 2,886,105 4,141,962 Other advances 200,799 46,727 Total 3,086,904 4,188,689 |
PROPERTY AND EQUIPMENT, NET (Ta
PROPERTY AND EQUIPMENT, NET (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
PROPERTY AND EQUIPMENT, NET | |
Schedule of property and equipment | As of December 31, 2018 2019 (HK$ in thousands) Gross carrying amount Computers and equipment 12,981 56,175 Furniture and fixtures 4,961 34,588 Office equipment 20,501 29,938 Office building — 28,110 Vehicle 638 634 Total of gross carrying amount 39,081 149,445 Less: accumulated depreciation Computers and equipment (4,542) (8,289) Furniture and fixtures (3,063) (6,234) Office equipment (8,204) (16,241) Office building — (519) Vehicle (414) (532) Total of accumulated depreciation (16,223) (31,815) Property and equipment, net 22,858 117,630 |
INTANGIBLE ASSETS , NET (Tables
INTANGIBLE ASSETS , NET (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
INTANGIBLE ASSETS , NET | |
Schedule of Intangible assets | As of December 31, 2018 2019 (HK$ in thousands) Gross carrying amount Computer software 1,161 6,328 License — 2,000 Trading right 1,000 1,000 Golf membership 687 678 Total of gross carrying amount 2,848 10,006 Less: accumulated amortization Computer software (804) (1,647) Trading right (500) (500) Golf membership (133) (166) Total of accumulated amortization (1,437) (2,313) Intangible assets, net 1,411 7,693 |
OTHER ASSETS (Tables)
OTHER ASSETS (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
OTHER ASSETS | |
Schedule of other assets | As of December 31, 2018 2019 (HK$ in thousands) Property and equipment, net (Note 7) 22,858 117,630 Staff advances 65,177 61,745 Refundable deposit 17,519 32,873 Intangible assets, net (Note 8) 1,411 7,693 Deferred tax assets (Note 24) — 1,576 Deferred IPO cost 20,948 — Others 21,366 17,918 Total 149,279 239,435 |
BORROWINGS (Tables)
BORROWINGS (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
BORROWINGS | |
Schedule of borrowings | As of December 31, 2018 2019 (HK$ in thousands) Borrowings from: Banks (1) 1,176,251 1,467,586 Third party (2) 400,000 — Total 1,576,251 1,467,586 (1) The Group has unused borrowing facilities of HK$4,190,779 thousand and HK$3,326,555 thousand from banks as of December 31, 2018 and 2019, respectively. These facilities are uncommitted and could be withdrawn upon the request of the Group. As of December 31, 2018 and 2019, the Group had an outstanding borrowing balance of HK$1,176,251 thousand and HK$1,467,586 thousand, respectively. These unused facilities were pledged by margin clients’ shares as the primary source of credit risk mitigation of the lenders, and bear floating interest rates based on various benchmarks including Hong Kong Prime Rate, Hong Kong Interbank Offered Rate (“HIBOR”), CHN HIBOR, etc. (2) The Group has an unused facility of HK$1,100,000 thousand and nil from a third party as of December 31, 2018 and 2019, respectively. |
ACCRUED EXPENSES AND OTHER LI_2
ACCRUED EXPENSES AND OTHER LIABILITIES (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
ACCRUED EXPENSES AND OTHER LIABILITIES | |
Schedule of accrued expenses and other liabilities | As of December 31, 2018 2019 (HK$ in thousands) Accrued employee welfare expense 65,027 100,228 Tax payables 48,841 50,803 Payables to fund management companies — 26,381 Payables to corporate clients in relation to ESOP management services — 16,492 Refund from depositary bank — 12,689 Accrued advertising and promotion fee Accrued professional fee 772 5,710 Accrued market information and data fee Stamp duty, trading levy and trading fee payables 3,540 5,612 Contract liabilities 4,774 2,126 Accrued IPO fees and costs 18,138 — Others 4,389 15,911 Total 149,818 252,460 |
REDEEMABLE CONVERTIBLE PREFER_2
REDEEMABLE CONVERTIBLE PREFERRED SHARES (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
REDEEMABLE CONVERTIBLE PREFERRED SHARES | |
Schedule of group's Preferred Shares activities | The Group’s Preferred Shares activities for the years ended December 31, 2017, 2018, 2019 are summarized below: Series A Series A-1 Series B Series C Series C-1 Preferred Shares Preferred Shares Preferred Shares Preferred Shares Preferred Shares No. of Amount in No. of Amount in No. of Amount in No. of Amount in No. of Amount in shares HK$ shares HK$ shares HK$ shares HK$ shares HK$ Balances at December 31, 2016 125,000,000 61,506,395 23,437,500 13,179,946 88,423,500 254,488,880 — — — — Issuance of Preferred Shares — — — — — — 128,844,812 708,765,649 12,225,282 97,818,708 Preferred Shares redemption value accretion — 3,273,858 — 701,541 — 14,030,820 — 26,106,072 — 3,602,966 Balances at December 31, 2017 125,000,000 64,780,253 23,437,500 13,881,487 88,423,500 268,519,700 128,844,812 734,871,721 12,225,282 101,421,674 Preferred Shares redemption value accretion — 3,291,792 — 705,384 — 14,107,680 — 42,963,732 — 5,929,544 Balances at December 31, 2018 125,000,000 68,072,045 23,437,500 14,586,871 88,423,500 282,627,380 128,844,812 777,835,453 12,225,282 107,351,218 Preferred Shares redemption value accretion — 604,779 — 129,595 — 2,591,909 — 7,893,436 — 1,089,395 Conversion and redesignation of Preferred Shares (125,000,000) (68,676,824) (23,437,500) (14,716,466) (88,423,500) (285,219,289) (128,844,812) (785,728,889) (12,225,282) (108,440,613) Balances at December 31, 2019 — — — — — — — — — — |
SHARE-BASED COMPENSATION (Table
SHARE-BASED COMPENSATION (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
SHARE-BASED COMPENSATION | |
Schedule of Share-based compensation recognized in operating expenses | Year ended December 31, 2017 2018 2019 (HK$ in thousands) Research and development expenses 8,854 9,223 12,055 General and administrative expenses 754 1,113 3,374 Selling and marketing expenses 161 104 538 Total share-based compensation expenses 9,769 10,440 15,967 |
Summary of the stock option activity under the 2014 and 2019 Share Incentive Plan | Options granted Weighted average share Number exercise price (US$) Outstanding at January 1, 2017 111,407,320 0.0168 Granted 217,455 0.9188 Outstanding at December 31, 2017 111,624,775 0.0186 Granted 9,625,690 1.1065 Cancelled/forfeited (42,627) 0.2000 Outstanding at December 31, 2018 121,207,838 0.1049 Exercised (106,295,232) 0.0126 Granted 9,791,200 0.6500 Cancelled/forfeited (985,180) Outstanding at December 31, 2019 23,718,626 |
Summary of share options outstanding | As of December 31, 2019 Weighted- Weighted-average average remaining exercise Options exercise price contractual life Aggregate number per option (years) intrinsic value US$ US$ in thousand Options Outstanding 23,718,626 0.5161 18,356 Exercisable 2,802,821 0.4061 2,459 Expected to vest 20,915,805 0.5307 15,897 |
Summary of fair value of options granted using the binomial option pricing model | 2017 2018 2019 Exercise price (US$) 0.8-1.03 0.3-1.2 0.65 Fair value of the ordinary shares on the date of option grant (US$) 0.4220 1.2820 1.2460 Risk-free interest rate 1.30 % 2.33 % 1.67 % Expected term (in years) 7.3 5.98 5.00 Expected dividend yield 0 % 0 % 0 % Expected volatility 46 % 44 % 45 % Expected forfeiture rate (post-vesting) 15 % 15 % 15 % |
NET (LOSS)_INCOME PER SHARE (Ta
NET (LOSS)/INCOME PER SHARE (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
NET (LOSS)/INCOME PER SHARE | |
Schedule of earnings per share, basic and diluted | Year ended December 31, 2017 2018 2019 (HK$ in thousands, except for share and per share data) Basic net (loss)/income per share calculation: Numerator: Net (loss)/income attributable to ordinary shareholder of the Company (55,817) 36,938 143,159 Denominator: Weighted average ordinary shares outstanding - basic 403,750,000 403,750,000 832,790,329 Net (loss)/income per share attributable to ordinary shareholder - basic (0.14) 0.09 0.17 Diluted net (loss)/income per share calculation: Numerator: Net (loss)/income attributable to ordinary Shareholder of the Company (55,817) 36,938 143,159 Denominator: Weighted average ordinary shares outstanding - basic 403,750,000 403,750,000 832,790,329 Dilutive effect of share options — 107,786,122 85,107,097 Weighted average ordinary shares outstanding - diluted 403,750,000 511,536,122 917,897,426 Net (loss)/income per share attributable to ordinary shareholder - diluted (0.14) 0.07 0.16 |
COLLATERALIZED TRANSACTIONS (Ta
COLLATERALIZED TRANSACTIONS (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
COLLATERALIZED TRANSACTIONS | |
Schedule of collateralized transactions | As of December 31, 2018 2019 HK$ in thousands HK$ in thousands Permitted to Permitted to repledge Repledged repledge Repledged Market value of collateral 9,214,950 1,904,545 19,503,649 3,031,767 |
BROKERAGE COMMISSION AND HAND_3
BROKERAGE COMMISSION AND HANDLING CHARGE INCOME (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
BROKERAGE COMMISSION AND HANDLING CHARGE INCOME | |
Schedule of brokerage commission and handling charge income | Year ended December 31, 2017 2018 2019 (HK$ in thousands) Brokerage commission income 101,275 276,097 352,625 Handling charge income 83,643 131,893 158,740 Total 184,918 407,990 511,365 |
INTEREST INCOME (Tables)
INTEREST INCOME (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
INTEREST INCOME | |
Schedule of interest income | Year ended December 31, 2017 2018 2019 (HK$ in thousands) Interest income from: Margin financing 62,165 211,762 221,648 Bank deposits 34,050 123,775 187,223 Bridge loan 863 7,827 6,172 IPO financing 5,470 2,921 12,658 Securities lending 3,324 14,300 37,202 Total 105,872 360,585 464,903 |
OTHER INCOME (Tables)
OTHER INCOME (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
OTHER INCOME | |
Schedule of other income | Year ended December 31, 2017 2018 2019 (HK$ in thousands) IPO subscription service charge income 6,570 16,139 26,537 Underwriting fee income 1,599 10,494 19,579 Enterprise public relations service charge income 6,717 9,187 16,156 Currency exchange service income 2,954 2,711 4,670 Client referral income from brokers 1,934 2,166 1,451 Market information and data income 311 1,465 2,692 Funds distribution service income — — 10,447 ESOP management service income — 270 1,275 Other 788 336 2,480 Total 20,873 42,768 85,287 |
INTEREST EXPENSES (Tables)
INTEREST EXPENSES (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
INTEREST EXPENSES | |
Schedule of interest expenses | Year ended December 31, 2017 2018 2019 (HK$in thousands) Interest expenses for margin financing Borrowings from banks 7,189 37,983 36,206 Borrowings from other licensed financial institutions 5,142 24,194 28,636 Borrowings from other parties 5,276 28,771 3,930 Interest expenses for securities borrowed Borrowings from clients — — 1,298 Borrowings from brokers 1,151 1,814 9,077 Interest expenses for IPO financing Borrowings from banks 1,121 2,862 10,091 Total 19,879 95,624 89,238 |
NON-INTEREST COST AND EXPENSE_2
NON-INTEREST COST AND EXPENSES BY NATURE (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
NON-INTEREST COST AND EXPENSES BY NATURE | |
Summary of non-interest cost and expenses by nature | Year ended December 31, 2017 2018 2019 (HK$ in thousands) Employee compensation and benefits 134,468 211,978 327,441 Marketing and branding 30,369 79,891 130,528 Brokerage commission and handling charge expenses(Note22) 36,777 80,127 100,550 Processing and servicing costs(Note23) 52,446 73,843 91,916 Rental and other related expenses 10,847 21,256 64,756 Depreciation and amortization 4,300 8,327 16,547 Professional services 5,239 18,724 28,757 Others 9,042 12,814 23,867 Total 283,488 506,960 784,362 |
BROKERAGE COMMISSION AND HAND_4
BROKERAGE COMMISSION AND HANDLING CHARGE EXPENSES (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
BROKERAGE COMMISSION AND HANDLING CHARGE EXPENSES | |
Schedule of brokerage commission and handling charge expenses | Year ended December 31, 2017 2018 2019 (HK$in thousands) Commission, handling and settlement expenses 35,643 78,581 95,064 IPO subscription service charge expenses 1,134 1,546 5,486 Total 36,777 80,127 100,550 |
PROCESSING AND SERVICING COSTS
PROCESSING AND SERVICING COSTS (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
PROCESSING AND SERVICING COSTS | |
Schedule of processing and servicing costs | Year ended December 31, 2017 2018 2019 (HK$in thousands) Market information and data fee 37,482 46,669 54,282 Cloud service fee 7,636 14,081 16,729 Data transmission fee 5,822 9,145 13,890 System cost — 949 4,334 SMS service fee 1,148 1,834 1,523 Others 358 1,165 1,158 Total 52,446 73,843 91,916 |
TAXATION (Tables)
TAXATION (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
TAXATION | |
Schedule of current and deferred portion of income tax (benefit)/expense | Year ended December 31, 2017 2018 2019 (HK$in thousands) Current income tax expense 6,286 46,781 13,858 Deferred income tax (benefit)/expense 5,194 15,507 (1,572) Income tax expense 11,480 62,288 12,286 |
Schedule of reconciliation between the income tax (benefit)/expenses computed by applying the Hong Kong enterprise tax rate to income before income taxes and actual provision | Year ended December 31, 2017 2018 2019 (HK$in thousands) Income before income tax 3,378 200,800 178,493 Tax expense at Hong Kong profit tax rate of 16.5% 557 33,132 29,451 Changes of valuation allowance 4,464 9,735 30,172 Tax effect of permanence differences 7,333 6,825 5,486 Effect of income tax in jurisdictions other than Hong Kong (898) 12,670 (4,143) Super deduction of research and development expenses — — (19,277) Final settlement differences — — (18,038) Income not subject to tax (1) — — (11,365) Others 24 (74) — Income tax expense 11,480 62,288 12,286 (1) This amount represents tax exemption relating to the offshore income of the Operating Company. The brokerage commission income derived from executing the clients' orders of US listed securities was treated as offshore-sourced and non-taxable on the basis that these transactions were executed outside Hong Kong. |
Schedule of components of the deferred tax assets | As of December 31, 2018 2019 (HK$in thousands) Deferred tax assets Net operating loss carryforwards 19,084 42,736 Accrued expenses and others 4,165 12,261 Less: valuation allowance (23,249) (53,421) Net deferred tax assets — 1,576 |
Schedule of movement of valuation allowance | Year ended December 31, 2017 2018 2019 (HK$in thousands) Balance at beginning of the year 9,050 13,514 23,249 Additions 4,464 9,735 30,188 Reversals — — (16) Balance at end of the year 13,514 23,249 53,421 |
REGULATORY REQUIREMENTS (Tables
REGULATORY REQUIREMENTS (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
REGULATORY REQUIREMENTS | |
Summary of the net capital, the requirement and the excess capital for the Group's broker-dealer subsidiaries | As of December 31, 2019 Net Capital/ Eligible Equity Requirement Excess (HK$ in thousands) Futu Securities 1,469,200 235,481 1,233,719 Futu Inc. 15,832 1,947 13,885 Futu Clearing Inc. 72,908 1,947 70,961 Total 1,557,940 239,375 1,318,565 |
RELATED PARTY BALANCES AND TR_2
RELATED PARTY BALANCES AND TRANSACTIONS (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
RELATED PARTY BALANCES AND TRANSACTIONS | |
Schedule of Related Party Transactions | Entity of individual name Relationship with the Group Mr. Leaf Hua Li and his spouse Principal shareholder and member of his immediate families Tencent Holdings Limited and its subsidiaries(“Tencent Group”) Principal shareholder Individual directors and officers and their spouses Directors or officers of the Group and members of their immediate families (a) Cash and cash equivalent As of December 31, 2018 2019 (HK$ in thousands) Cash and cash equivalent 260 240 The balance represents the cash deposited by the Group in various payment channels of Tencent Group for funding marketing campaigns, of which could be withdrawn on demand. (b) Short-term borrowings and interest expenses As of December 31, 2018 2019 (HK$ in thousands) Short-term borrowings — — Year ended December 31, 2017 2018 2019 (HK$ in thousands) Interest expenses 3,457 17,129 — (c) Amounts Due to Related Parties As of December 31, 2018 2019 (HK$ in thousands) Payable in relation to cloud equipment and services from Tencent Group 8,409 33,153 SMS channel services from Tencent Group 182 475 8,591 33,628 (d) Transactions with Related Parties Year ended December 31, 2017 2018 2019 (HK$ in thousands) Equipment purchased — — 40,218 Cloud service fee 7,636 14,081 16,729 SMS channel service fee 1,148 1,834 1,523 Advertising expenses — 112 682 ESOP management service income — 202 550 8,784 16,229 59,702 |
ORGANIZATION AND PRINCIPAL AC_3
ORGANIZATION AND PRINCIPAL ACTIVITIES (Details) $ / shares in Units, $ in Millions | Mar. 08, 2019USD ($)Vote$ / sharesshares | Mar. 08, 2019HKD ($)Voteshares | Sep. 22, 2016Vote | Dec. 31, 2018shares | Dec. 31, 2019Voteshares | Mar. 31, 2019shares | Dec. 18, 2007 |
ORGANIZATION AND PRINCIPAL ACTIVITIES | |||||||
Number of shares issued and outstanding preferred shares converted into ordinary shares | 377,931,094 | 377,931,094 | |||||
Number of Votes Per Share | Vote | 1 | ||||||
IPO | |||||||
ORGANIZATION AND PRINCIPAL ACTIVITIES | |||||||
Net proceeds after deducting commissions and offering expenses | $ 161.7 | $ 1,259,317,000 | |||||
Number of shares issued and outstanding preferred shares converted into ordinary shares | 377,931,094 | ||||||
ADSs | IPO | |||||||
ORGANIZATION AND PRINCIPAL ACTIVITIES | |||||||
Number of share issued (in shares) | 8,625,000 | 8,625,000 | |||||
ADSs | Over-allotment | |||||||
ORGANIZATION AND PRINCIPAL ACTIVITIES | |||||||
Number of share issued (in shares) | 1,125,000 | 1,125,000 | |||||
Class A ordinary shares | |||||||
ORGANIZATION AND PRINCIPAL ACTIVITIES | |||||||
Number of share issued (in shares) | 69,000,000 | 69,000,000 | 115,666,666 | ||||
Price per share | $ / shares | $ 12 | ||||||
Number of shares issued and outstanding preferred shares converted into ordinary shares | 140,802,051 | 140,802,051 | |||||
Number of Votes Per Share | Vote | 1 | 1 | 1 | ||||
Class A ordinary shares | IPO | |||||||
ORGANIZATION AND PRINCIPAL ACTIVITIES | |||||||
Number of share issued (in shares) | 69,000,000 | 69,000,000 | |||||
Price per share | $ / shares | $ 12 | ||||||
Class A ordinary shares | Concurrent Private Placement | |||||||
ORGANIZATION AND PRINCIPAL ACTIVITIES | |||||||
Number of share issued (in shares) | 46,666,666 | 46,666,666 | |||||
Class B ordinary shares | |||||||
ORGANIZATION AND PRINCIPAL ACTIVITIES | |||||||
Number of shares issued and outstanding preferred shares converted into ordinary shares | 237,129,043 | 237,129,043 | |||||
Redesignation of ordinary shares into Class B ordinary shares | 403,750,000 | ||||||
Number of Votes Per Share | Vote | 20 | 20 | 20 | ||||
"Futu Securities" or the "Operating Company" | |||||||
ORGANIZATION AND PRINCIPAL ACTIVITIES | |||||||
Percentage of Direct or Indirect Economic Interest, Subsidiaries | 100.00% | ||||||
Futu Securities (Hong Kong) Limited | |||||||
ORGANIZATION AND PRINCIPAL ACTIVITIES | |||||||
Percentage of Direct or Indirect Economic Interest, Subsidiaries | 100.00% | ||||||
Futu Network Technology Limited | |||||||
ORGANIZATION AND PRINCIPAL ACTIVITIES | |||||||
Percentage of Direct or Indirect Economic Interest, Subsidiaries | 100.00% | ||||||
Futu Network Technology (Shenzhen) Co., Ltd | |||||||
ORGANIZATION AND PRINCIPAL ACTIVITIES | |||||||
Percentage of Direct or Indirect Economic Interest, Subsidiaries | 100.00% | ||||||
Shen Si | |||||||
ORGANIZATION AND PRINCIPAL ACTIVITIES | |||||||
Percentage of Direct or Indirect Economic Interest, Subsidiaries | 100.00% | ||||||
Futu Inc | |||||||
ORGANIZATION AND PRINCIPAL ACTIVITIES | |||||||
Percentage of Direct or Indirect Economic Interest, Subsidiaries | 100.00% | ||||||
Shenzhen Futu | |||||||
ORGANIZATION AND PRINCIPAL ACTIVITIES | |||||||
Percentage of Direct or Indirect Economic Interest, VIE's and Subsidiaries of VIE's | 100.00% | ||||||
Beijing Futu Network Technology Co., Ltd | |||||||
ORGANIZATION AND PRINCIPAL ACTIVITIES | |||||||
Percentage of Direct or Indirect Economic Interest, VIE's and Subsidiaries of VIE's | 100.00% | ||||||
Mr. Leaf Hua Li | Shenzhen Futu | |||||||
ORGANIZATION AND PRINCIPAL ACTIVITIES | |||||||
Percentage of equity interest (as a percent) | 85.00% | ||||||
Ms. Lei Li | Shenzhen Futu | |||||||
ORGANIZATION AND PRINCIPAL ACTIVITIES | |||||||
Percentage of equity interest (as a percent) | 15.00% |
SIGNIFICANT ACCOUNTING POLICI_4
SIGNIFICANT ACCOUNTING POLICIES - Exclusive Option Agreement (Details) | 12 Months Ended |
Dec. 31, 2019USD ($)$ / shares | |
SIGNIFICANT ACCOUNTING POLICIES | |
Purchase price for equity interests in Shenzhen Futu under exclusive option agreement | $ / shares | $ 1 |
Threshold of Shenzhen Futu disposes of Shenzhen Futu's material assets without prior written consent of Shen Si | $ | $ 500,000 |
SIGNIFICANT ACCOUNTING POLICI_5
SIGNIFICANT ACCOUNTING POLICIES - VIE Companies (Details) $ in Thousands, $ in Thousands, ¥ in Millions | 12 Months Ended | |||||||||
Dec. 31, 2019USD ($) | Dec. 31, 2019HKD ($) | Dec. 31, 2018HKD ($) | Dec. 31, 2017HKD ($) | Dec. 31, 2019CNY (¥) | Dec. 31, 2019USD ($) | Dec. 31, 2019HKD ($) | Dec. 31, 2018CNY (¥) | Dec. 31, 2018HKD ($) | Dec. 31, 2017CNY (¥) | |
Variable Interest Entity [Line Items] | ||||||||||
Total assets | $ 2,747,315 | $ 21,399,924 | $ 16,062,932 | |||||||
Total liabilities | $ 2,420,132 | 18,851,371 | 14,962,653 | |||||||
Total operating revenue | $ 136,282 | $ 1,061,555 | $ 811,343 | $ 311,663 | ||||||
Net (loss)/income | 21,267 | 165,664 | 138,512 | (8,102) | ||||||
Net cash (used in)/generated from operating activities | 252,834 | 1,969,434 | 4,470,167 | 1,855,328 | ||||||
Net cash generated from investing activities | (20,548) | (160,057) | (78,052) | (5,145) | ||||||
Net (decrease)/increase in cash and cash equivalents | 374,397 | 2,916,333 | 4,435,262 | 4,027,654 | ||||||
Cash, cash equivalents and restricted cash at beginning of the year | 1,538,900 | 11,987,104 | 7,551,842 | 3,524,188 | ||||||
Cash, cash equivalents and restricted cash at end of the year | $ 1,913,297 | 14,903,437 | 11,987,104 | 7,551,842 | ||||||
VIE and its subsidiary | ||||||||||
Variable Interest Entity [Line Items] | ||||||||||
Total assets | 68,480 | 57,213 | ||||||||
Total liabilities | $ 73,271 | $ 74,904 | ||||||||
Total operating revenue | 65,681 | 68,888 | 50,020 | |||||||
Net (loss)/income | 8,807 | 21,262 | 18,458 | |||||||
Net cash (used in)/generated from operating activities | (2,502) | 1,664 | (4,613) | |||||||
Net cash generated from investing activities | 2,233 | |||||||||
Net (decrease)/increase in cash and cash equivalents | (269) | 1,664 | (4,613) | |||||||
Cash, cash equivalents and restricted cash at beginning of the year | 1,750 | 86 | 4,699 | |||||||
Cash, cash equivalents and restricted cash at end of the year | $ 1,481 | $ 1,750 | $ 86 | |||||||
Registered capital | ¥ | ¥ 10 | ¥ 10 | ¥ 10 |
SIGNIFICANT ACCOUNTING POLICI_6
SIGNIFICANT ACCOUNTING POLICIES - Convenience Translation (Details) | Dec. 31, 2019 |
Convenience Translation | |
Exchange rate of HK$ per US$1.00 | 7.7894 |
SIGNIFICANT ACCOUNTING POLICI_7
SIGNIFICANT ACCOUNTING POLICIES - Available-for-sale Financial Securities (Details) $ in Thousands, $ in Thousands | Dec. 31, 2019USD ($) | Dec. 31, 2019HKD ($) | Dec. 31, 2018HKD ($) |
Available-for-Sale Financial Securities | |||
Available-for-sale debt securities | $ 12,039 | $ 93,773 | $ 59,348 |
SIGNIFICANT ACCOUNTING POLICI_8
SIGNIFICANT ACCOUNTING POLICIES - Equity Method Investments (Details) $ in Thousands, $ in Thousands | 12 Months Ended | |
Dec. 31, 2019USD ($) | Dec. 31, 2019HKD ($) | |
Schedule of Equity Method Investments [Line Items] | ||
Total consideration | $ 861 | $ 6,709 |
Zhixiang Technology (Shenzhen) Co., Ltd | ||
Schedule of Equity Method Investments [Line Items] | ||
Ownership interest acquired | 20.00% | 20.00% |
Total consideration | $ 6,709 |
SIGNIFICANT ACCOUNTING POLICI_9
SIGNIFICANT ACCOUNTING POLICIES - Leases (Details) $ in Thousands, $ in Thousands | 12 Months Ended | |||
Dec. 31, 2019HKD ($) | Dec. 31, 2019USD ($) | Dec. 31, 2019HKD ($) | Jan. 01, 2019HKD ($) | |
Lessee, Lease, Description [Line Items] | ||||
Operating lease right-of-use assets | $ 20,748 | $ 161,617 | ||
Operating lease liabilities | $ 22,141 | $ 172,466 | ||
Weighted-average remaining lease term | 4 years | 4 years | ||
Weighted-average discount rate | 4.75% | 4.75% | ||
Right-of-use assets obtained under operating leases | $ 211,170 | |||
ASU 2016-02 | ||||
Lessee, Lease, Description [Line Items] | ||||
Operating lease right-of-use assets | $ 22,312 | |||
Operating lease liabilities | $ 22,312 | |||
Minimum | ||||
Lessee, Lease, Description [Line Items] | ||||
Remaining terms | 1 year | |||
Maximum | ||||
Lessee, Lease, Description [Line Items] | ||||
Remaining terms | 5 years |
SIGNIFICANT ACCOUNTING POLIC_10
SIGNIFICANT ACCOUNTING POLICIES - Property and Equipment, net (Details) | 12 Months Ended |
Dec. 31, 2019 | |
Computers and equipment | |
PROPERTY AND EQUIPMENT, NET | |
Residual rate (as a percent) | 5.00% |
Computers and equipment | Minimum | |
PROPERTY AND EQUIPMENT, NET | |
Estimated useful lives | P3Y |
Computers and equipment | Maximum | |
PROPERTY AND EQUIPMENT, NET | |
Estimated useful lives | P5Y |
Furniture and fixtures | |
PROPERTY AND EQUIPMENT, NET | |
Residual rate (as a percent) | 5.00% |
Furniture and fixtures | Minimum | |
PROPERTY AND EQUIPMENT, NET | |
Estimated useful lives | P3Y |
Furniture and fixtures | Maximum | |
PROPERTY AND EQUIPMENT, NET | |
Estimated useful lives | P5Y |
Office equipment | |
PROPERTY AND EQUIPMENT, NET | |
Residual rate (as a percent) | 5.00% |
Office equipment | Minimum | |
PROPERTY AND EQUIPMENT, NET | |
Estimated useful lives | P3Y |
Office equipment | Maximum | |
PROPERTY AND EQUIPMENT, NET | |
Estimated useful lives | P5Y |
Vehicle | |
PROPERTY AND EQUIPMENT, NET | |
Estimated useful lives | P5Y |
Residual rate (as a percent) | 5.00% |
Office building | |
PROPERTY AND EQUIPMENT, NET | |
Estimated useful lives | P30Y |
Residual rate (as a percent) | 5.00% |
SIGNIFICANT ACCOUNTING POLIC_11
SIGNIFICANT ACCOUNTING POLICIES - Intangible Assets (Details) | 12 Months Ended |
Dec. 31, 2019 | |
Computer software | |
Intangible assets | |
Estimated useful lives | 5 years |
Golf membership | |
Intangible assets | |
Estimated useful lives | 10 years |
SIGNIFICANT ACCOUNTING POLIC_12
SIGNIFICANT ACCOUNTING POLICIES - Incentives (Details) - HKD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
SIGNIFICANT ACCOUNTING POLICIES | |||
Revenue portion allocated to the points as separate performance obligation | $ 1,059 | $ 1,865 | $ 2,042 |
Loyalty program points recorded as reduction of revenue | 187 | 275 | 330 |
Contract liabilities recorded related to unredeemed points | 2,126 | 3,022 | |
Loyalty program points recorded as selling and marketing expenses | 1,604 | 220 | $ 198 |
Liabilities recorded to unredeemed points in other scenarios | $ 3,518 | $ 485 |
SIGNIFICANT ACCOUNTING POLIC_13
SIGNIFICANT ACCOUNTING POLICIES - Share-Based Compensation (Details) - Share Options | 12 Months Ended |
Dec. 31, 2019 | |
Minimum | |
SHARE-BASED COMPENSATION | |
Options vesting period | 4 years |
Maximum | |
SHARE-BASED COMPENSATION | |
Options vesting period | 5 years |
SIGNIFICANT ACCOUNTING POLIC_14
SIGNIFICANT ACCOUNTING POLICIES - Taxation (Details) - HKD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Uncertain tax positions | |||
Interest and penalties associated with uncertain tax positions | $ 0 | $ 0 | $ 0 |
SIGNIFICANT ACCOUNTING POLIC_15
SIGNIFICANT ACCOUNTING POLICIES - Segment Reporting (Details) | 12 Months Ended |
Dec. 31, 2019segment | |
Segment Reporting | |
Number of reportable segments | 1 |
SIGNIFICANT ACCOUNTING POLIC_16
SIGNIFICANT ACCOUNTING POLICIES - Significant Risks and Uncertainties (Details) ¥ in Millions, $ in Millions, $ in Millions | 12 Months Ended | ||||
Dec. 31, 2019CNY (¥) | Dec. 31, 2019USD ($) | Dec. 31, 2019HKD ($) | Dec. 31, 2018USD ($) | Dec. 31, 2018HKD ($) | |
Currency risk | |||||
Gradual increase in basis | 1.00% | 1.00% | |||
pre-tax income | ¥ 57.9 | $ 7.4 | |||
Gradual decrease in basis | 1.00% | 1.00% | |||
Pre-tax loss | ¥ 57.9 | $ 7.4 | |||
China, Yuan Renminbi | |||||
Currency risk | |||||
Cash | $ 6 | $ 46.7 | $ 1.6 | $ 12.3 | |
Estimated depreciation of Renminbi against the U.S. dollar (as a percent) | 10.00% | 10.00% | 10.00% | 10.00% | |
Depreciation in our total assets | $ 0.6 | $ 0.2 | |||
Estimated appreciation of Renminbi against the U.S. dollar (as a percent) | 10.00% | 10.00% | 10.00% | 10.00% | |
Appreciation in our total assets | $ 0.6 | $ 0.2 |
FINANCIAL ASSETS AND FINANCIA_3
FINANCIAL ASSETS AND FINANCIAL LIABILITIES - Financial Assets and Liabilities Measured at value (Details) $ in Thousands, $ in Thousands | Dec. 31, 2019USD ($) | Dec. 31, 2019HKD ($) | Dec. 31, 2018HKD ($) |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Available-for-sale financial securities | $ 12,039 | $ 93,773 | $ 59,348 |
Other financial assets | 59,348 | ||
Level 2 | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Available-for-sale financial securities | $ 93,773 | ||
Other financial assets | $ 59,348 |
FINANCIAL ASSETS AND FINANCIA_4
FINANCIAL ASSETS AND FINANCIAL LIABILITIES - Transfers Between Level 1 and Level 2 (Details) - HKD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 |
FINANCIAL ASSETS AND FINANCIAL LIABILITIES | |||
Fair value asset transferred from level 1 to level 2 | $ 0 | $ 0 | $ 0 |
Fair value asset transferred from level 2 to level 1 | 0 | 0 | 0 |
Fair value liabilities transferred from level 2 to level 1 | 0 | 0 | 0 |
Fair value liabilities transferred from level 2 to level 1 | $ 0 | $ 0 | $ 0 |
FINANCIAL ASSETS AND FINANCIA_5
FINANCIAL ASSETS AND FINANCIAL LIABILITIES - Financial Assets and Liabilities Not Measured at Fair Value (Details) - HKD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Carrying Value | ||
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items] | ||
Total financial assets, not measured at fair value | $ 20,950,647 | $ 15,886,514 |
Total financial liabilities, not measured at fair value | 18,630,904 | 14,824,338 |
Fair Value | ||
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items] | ||
Total financial assets, not measured at fair value | 20,950,647 | 15,886,514 |
Total financial liabilities, not measured at fair value | 18,630,904 | 14,824,338 |
Cash and cash equivalents | Carrying Value | ||
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items] | ||
Total financial assets, not measured at fair value | 362,574 | 215,617 |
Cash and cash equivalents | Fair Value | ||
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items] | ||
Total financial assets, not measured at fair value | 362,574 | 215,617 |
Cash held on behalf of clients | Carrying Value | ||
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items] | ||
Total financial assets, not measured at fair value | 14,540,863 | 11,771,487 |
Cash held on behalf of clients | Fair Value | ||
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items] | ||
Total financial assets, not measured at fair value | 14,540,863 | 11,771,487 |
Loans and advances | Carrying Value | ||
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items] | ||
Total financial assets, not measured at fair value | 4,188,689 | 3,086,904 |
Loans and advances | Fair Value | ||
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items] | ||
Total financial assets, not measured at fair value | 4,188,689 | 3,086,904 |
Receivables: Clients | Carrying Value | ||
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items] | ||
Total financial assets, not measured at fair value | 247,017 | 120,256 |
Receivables: Clients | Fair Value | ||
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items] | ||
Total financial assets, not measured at fair value | 247,017 | 120,256 |
Receivables: Brokers | Carrying Value | ||
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items] | ||
Total financial assets, not measured at fair value | 1,226,348 | 425,849 |
Receivables: Brokers | Fair Value | ||
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items] | ||
Total financial assets, not measured at fair value | 1,226,348 | 425,849 |
Receivables: Clearing organization | Carrying Value | ||
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items] | ||
Total financial assets, not measured at fair value | 304,080 | 175,955 |
Receivables: Clearing organization | Fair Value | ||
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items] | ||
Total financial assets, not measured at fair value | 304,080 | 175,955 |
Receivables: Interest | Carrying Value | ||
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items] | ||
Total financial assets, not measured at fair value | 16,892 | 49,427 |
Receivables: Interest | Fair Value | ||
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items] | ||
Total financial assets, not measured at fair value | 16,892 | 49,427 |
Other financial assets | Carrying Value | ||
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items] | ||
Total financial assets, not measured at fair value | 64,184 | 41,019 |
Other financial assets | Fair Value | ||
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items] | ||
Total financial assets, not measured at fair value | 64,184 | 41,019 |
Amounts due to related parties | Carrying Value | ||
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items] | ||
Total financial liabilities, not measured at fair value | 33,628 | 8,591 |
Amounts due to related parties | Fair Value | ||
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items] | ||
Total financial liabilities, not measured at fair value | 33,628 | 8,591 |
Payables: Clients | Carrying Value | ||
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items] | ||
Total financial liabilities, not measured at fair value | 15,438,879 | 12,304,717 |
Payables: Clients | Fair Value | ||
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items] | ||
Total financial liabilities, not measured at fair value | 15,438,879 | 12,304,717 |
Payables: Brokers | Carrying Value | ||
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items] | ||
Total financial liabilities, not measured at fair value | 1,484,243 | 920,871 |
Payables: Brokers | Fair Value | ||
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items] | ||
Total financial liabilities, not measured at fair value | 1,484,243 | 920,871 |
Payables: Interest | Carrying Value | ||
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items] | ||
Total financial liabilities, not measured at fair value | 519 | 2,405 |
Payables: Interest | Fair Value | ||
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items] | ||
Total financial liabilities, not measured at fair value | 519 | 2,405 |
Payables: Borrowings | Carrying Value | ||
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items] | ||
Total financial liabilities, not measured at fair value | 1,467,586 | |
Payables: Borrowings | Fair Value | ||
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items] | ||
Total financial liabilities, not measured at fair value | 1,467,586 | |
Borrowings | Carrying Value | ||
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items] | ||
Total financial liabilities, not measured at fair value | 1,576,251 | |
Borrowings | Fair Value | ||
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items] | ||
Total financial liabilities, not measured at fair value | 1,576,251 | |
Securities sold under agreement to repurchase | Carrying Value | ||
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items] | ||
Total financial liabilities, not measured at fair value | 1,590 | |
Securities sold under agreement to repurchase | Fair Value | ||
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items] | ||
Total financial liabilities, not measured at fair value | 1,590 | |
Operating lease liabilities | Carrying Value | ||
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items] | ||
Total financial liabilities, not measured at fair value | 172,466 | |
Operating lease liabilities | Fair Value | ||
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items] | ||
Total financial liabilities, not measured at fair value | 172,466 | |
Other financial liabilities | Carrying Value | ||
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items] | ||
Total financial liabilities, not measured at fair value | 31,993 | 11,503 |
Other financial liabilities | Fair Value | ||
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items] | ||
Total financial liabilities, not measured at fair value | 31,993 | 11,503 |
Level 1 | ||
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items] | ||
Total financial assets, not measured at fair value | 14,903,437 | 11,987,104 |
Level 1 | Cash and cash equivalents | ||
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items] | ||
Total financial assets, not measured at fair value | 362,574 | 215,617 |
Level 1 | Cash held on behalf of clients | ||
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items] | ||
Total financial assets, not measured at fair value | 14,540,863 | 11,771,487 |
Level 2 | ||
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items] | ||
Total financial assets, not measured at fair value | 6,047,210 | 3,899,410 |
Total financial liabilities, not measured at fair value | 18,630,904 | 14,824,338 |
Level 2 | Loans and advances | ||
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items] | ||
Total financial assets, not measured at fair value | 4,188,689 | 3,086,904 |
Level 2 | Receivables: Clients | ||
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items] | ||
Total financial assets, not measured at fair value | 247,017 | 120,256 |
Level 2 | Receivables: Brokers | ||
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items] | ||
Total financial assets, not measured at fair value | 1,226,348 | 425,849 |
Level 2 | Receivables: Clearing organization | ||
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items] | ||
Total financial assets, not measured at fair value | 304,080 | 175,955 |
Level 2 | Receivables: Interest | ||
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items] | ||
Total financial assets, not measured at fair value | 16,892 | 49,427 |
Level 2 | Other financial assets | ||
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items] | ||
Total financial assets, not measured at fair value | 64,184 | 41,019 |
Level 2 | Amounts due to related parties | ||
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items] | ||
Total financial liabilities, not measured at fair value | 33,628 | 8,591 |
Level 2 | Payables: Clients | ||
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items] | ||
Total financial liabilities, not measured at fair value | 15,438,879 | 12,304,717 |
Level 2 | Payables: Brokers | ||
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items] | ||
Total financial liabilities, not measured at fair value | 1,484,243 | 920,871 |
Level 2 | Payables: Interest | ||
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items] | ||
Total financial liabilities, not measured at fair value | 519 | 2,405 |
Level 2 | Payables: Borrowings | ||
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items] | ||
Total financial liabilities, not measured at fair value | 1,467,586 | |
Level 2 | Borrowings | ||
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items] | ||
Total financial liabilities, not measured at fair value | 1,576,251 | |
Level 2 | Securities sold under agreement to repurchase | ||
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items] | ||
Total financial liabilities, not measured at fair value | 1,590 | |
Level 2 | Operating lease liabilities | ||
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items] | ||
Total financial liabilities, not measured at fair value | 172,466 | |
Level 2 | Other financial liabilities | ||
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items] | ||
Total financial liabilities, not measured at fair value | $ 31,993 | $ 11,503 |
FINANCIAL ASSETS AND FINANCIA_6
FINANCIAL ASSETS AND FINANCIAL LIABILITIES - Netting of Financial Assets (Details) - HKD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Amounts due from clearing organization | ||
Effects of offsetting on the balance sheet | ||
Gross amounts | $ 2,925,936 | $ 1,472,596 |
Gross amounts set off in the balance sheet | (2,621,856) | (1,296,641) |
Net amounts presented in the balance sheet | 304,080 | 175,955 |
Related amounts not offset | ||
Net amount | 304,080 | 175,955 |
Deposit paid for securities borrowed | ||
Effects of offsetting on the balance sheet | ||
Gross amounts | 1,126,300 | 397,675 |
Net amounts presented in the balance sheet | 1,126,300 | 397,675 |
Related amounts not offset | ||
Financial instrument collateral | (935,443) | (299,173) |
Net amount | $ 190,857 | $ 98,502 |
FINANCIAL ASSETS AND FINANCIA_7
FINANCIAL ASSETS AND FINANCIAL LIABILITIES - Netting of Financial Liabilities (Details) - Deposit received for securities lent - HKD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Effects of offsetting on the balance sheet | ||
Gross amounts | $ 1,342,738 | $ 488,068 |
Net amounts presented in the balance sheet | 1,342,738 | 488,068 |
Related amounts not offset | ||
Financial instrument collateral | (935,443) | (299,173) |
Net amount | $ 407,295 | $ 188,895 |
EQUITY BASED INVESTMENT - (Deta
EQUITY BASED INVESTMENT - (Details) $ in Thousands, $ in Thousands | Dec. 31, 2019USD ($) | Dec. 31, 2019HKD ($) | Dec. 31, 2018HKD ($) |
EQUITY METHOD INVESTMENT | |||
Equity method investment | $ 792 | $ 6,166 | $ 0 |
LEASE - Balances reported in th
LEASE - Balances reported in the consolidated balance sheets (Details) - Dec. 31, 2019 $ in Thousands, $ in Thousands | USD ($) | HKD ($) |
Balances reported in the consolidated balance sheets related to the leases | ||
Operating lease right-of-use assets | $ 20,748 | $ 161,617 |
Operating lease liabilities | $ 22,141 | $ 172,466 |
LEASE - Operating lease cost re
LEASE - Operating lease cost reported in the consolidated statements (Details) $ in Thousands | 12 Months Ended |
Dec. 31, 2019HKD ($) | |
Operating lease cost | |
Operating lease cost | $ 64,756 |
LEASE - Undiscounted cash flows
LEASE - Undiscounted cash flows of the Group's leases (Details) - Dec. 31, 2019 $ in Thousands, $ in Thousands | USD ($) | HKD ($) |
Undiscounted cash flows of the leases to the present value of its operating lease payments | ||
2020 | $ 56,714 | |
2021 | 46,968 | |
2022 | 44,354 | |
2023 | 40,346 | |
Total undiscounted operating lease payments | 188,382 | |
Less: imputed interest | (15,916) | |
Present value of operating lease liabilities | $ 22,141 | $ 172,466 |
LEASE - Minimum annual lease co
LEASE - Minimum annual lease commitments (Details) $ in Thousands | Dec. 31, 2018HKD ($) |
Minimum annual lease commitments in accordance with ASC Topic 840 | |
2019 | $ 54,417 |
2020 | 56,705 |
2021 | 42,090 |
2022 | 46,232 |
2023 | 42,701 |
Total | $ 242,145 |
LOANS AND ADVANCES (Details)
LOANS AND ADVANCES (Details) $ in Thousands, $ in Thousands | Dec. 31, 2019USD ($) | Dec. 31, 2019HKD ($) | Dec. 31, 2018HKD ($) |
Total | $ 537,742 | $ 4,188,689 | $ 3,086,904 |
Margin Loans | |||
Total | 4,141,962 | 2,886,105 | |
Other Advances | |||
Total | $ 46,727 | $ 200,799 |
PROPERTY AND EQUIPMENT, NET (De
PROPERTY AND EQUIPMENT, NET (Details) - HKD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
PROPERTY AND EQUIPMENT, NET | |||
Gross carrying amount | $ 149,445 | $ 39,081 | |
Less: accumulated depreciation | (31,815) | (16,223) | |
Property and equipment, net | 117,630 | 22,858 | |
Depreciation | 15,647 | 8,012 | $ 3,998 |
Computers and equipment | |||
PROPERTY AND EQUIPMENT, NET | |||
Gross carrying amount | 56,175 | 12,981 | |
Less: accumulated depreciation | (8,289) | (4,542) | |
Furniture and fixtures | |||
PROPERTY AND EQUIPMENT, NET | |||
Gross carrying amount | 34,588 | 4,961 | |
Less: accumulated depreciation | (6,234) | (3,063) | |
Office equipment | |||
PROPERTY AND EQUIPMENT, NET | |||
Gross carrying amount | 29,938 | 20,501 | |
Less: accumulated depreciation | (16,241) | (8,204) | |
Office building | |||
PROPERTY AND EQUIPMENT, NET | |||
Gross carrying amount | 28,110 | ||
Less: accumulated depreciation | (519) | ||
Vehicle | |||
PROPERTY AND EQUIPMENT, NET | |||
Gross carrying amount | 634 | 638 | |
Less: accumulated depreciation | $ (532) | $ (414) |
INTANGIBLE ASSETS , NET (Detail
INTANGIBLE ASSETS , NET (Details) - HKD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
INTANGIBLE ASSETS , NET | |||
Gross carrying amount | $ 10,006 | $ 2,848 | |
Less: accumulated amortization | (2,313) | (1,437) | |
Intangible assets, net | 7,693 | 1,411 | |
Amortization expense on intangible assets | 900 | 315 | $ 302 |
Computer software | |||
INTANGIBLE ASSETS , NET | |||
Gross carrying amount | 6,328 | 1,161 | |
Less: accumulated amortization | (1,647) | (804) | |
License | |||
INTANGIBLE ASSETS , NET | |||
Gross carrying amount | 2,000 | ||
Trading right | |||
INTANGIBLE ASSETS , NET | |||
Gross carrying amount | 1,000 | 1,000 | |
Less: accumulated amortization | (500) | (500) | |
Golf membership | |||
INTANGIBLE ASSETS , NET | |||
Gross carrying amount | 678 | 687 | |
Less: accumulated amortization | $ (166) | $ (133) |
OTHER ASSETS (Details)
OTHER ASSETS (Details) $ in Thousands, $ in Thousands | Dec. 31, 2019USD ($) | Dec. 31, 2019HKD ($) | Dec. 31, 2018HKD ($) |
OTHER ASSETS | |||
Property and equipment, net | $ 117,630 | $ 22,858 | |
Staff advances | 61,745 | 65,177 | |
Refundable deposit | 32,873 | 17,519 | |
Intangible assets, net | 7,693 | 1,411 | |
Deferred tax assets | 1,576 | ||
Deferred IPO cost | 20,948 | ||
Others | 17,918 | 21,366 | |
Total | $ 30,739 | $ 239,435 | $ 149,279 |
BORROWINGS (Details)
BORROWINGS (Details) $ in Thousands, $ in Thousands | Dec. 31, 2019USD ($) | Dec. 31, 2019HKD ($) | Dec. 31, 2018HKD ($) |
Borrowings | |||
Total borrowings | $ 188,408 | $ 1,467,586 | $ 1,576,251 |
Banks | |||
Borrowings | |||
Total borrowings | $ 1,467,586 | 1,176,251 | |
Third party | |||
Borrowings | |||
Total borrowings | $ 400,000 |
BORROWINGS - Additional Informa
BORROWINGS - Additional Information (Details) $ in Thousands, $ in Thousands | Dec. 31, 2019USD ($) | Dec. 31, 2019HKD ($) | Dec. 31, 2018HKD ($) |
Borrowings | |||
Borrowings weighted average interest rate | 4.29% | 4.29% | 4.46% |
Borrowings | $ 188,408 | $ 1,467,586 | $ 1,576,251 |
Banks | |||
Borrowings | |||
Unused borrowing facilities | 3,326,555 | 4,190,779 | |
Borrowings | 1,467,586 | 1,176,251 | |
Third party | |||
Borrowings | |||
Unused borrowing facilities | $ 0 | 1,100,000 | |
Borrowings | $ 400,000 |
ACCRUED EXPENSES AND OTHER LI_3
ACCRUED EXPENSES AND OTHER LIABILITIES (Details) $ in Thousands, $ in Thousands | Dec. 31, 2019USD ($) | Dec. 31, 2019HKD ($) | Dec. 31, 2018HKD ($) |
ACCRUED EXPENSES AND OTHER LIABILITIES | |||
Accrued employee welfare expense | $ 100,228 | $ 65,027 | |
Tax payables | 50,803 | 48,841 | |
Payables to fund management companies | 26,381 | ||
Payables to corporate clients in relation to ESOP management services | 16,492 | ||
Refund from depositary bank | 12,689 | ||
Accrued advertising and promotion fee | 10,862 | 1,390 | |
Accrued professional fee | 5,710 | 772 | |
Accrued market information and data fee | 5,646 | 2,947 | |
Stamp duty, trading levy and trading fee payables | 5,612 | 3,540 | |
Contract liabilities | 2,126 | 4,774 | |
Accrued IPO fees and costs | 18,138 | ||
Others | 15,911 | 4,389 | |
Total | $ 32,411 | $ 252,460 | $ 149,818 |
ORDINARY SHARES (Details)
ORDINARY SHARES (Details) $ / shares in Units, $ in Millions | Mar. 08, 2019USD ($)Vote$ / sharesshares | Mar. 08, 2019HKD ($)Voteshares | Sep. 22, 2016Vote$ / sharesshares | Dec. 31, 2019Vote$ / sharesshares | Mar. 31, 2019shares | Dec. 31, 2018$ / sharesshares | Sep. 21, 2016$ / sharesshares |
Class of Stock [Line Items] | |||||||
Ordinary shares, shares authorized | 403,750,000 | 0 | 4,622,068,906 | 807,500 | |||
Ordinary shares, par value (in dollars per share) | $ / shares | $ 0.00001 | $ 0.00001 | $ 0.00001 | $ 0.0050 | |||
Number of vote | Vote | 1 | ||||||
Number of shares issued and outstanding preferred shares converted into ordinary shares | 377,931,094 | 377,931,094 | |||||
IPO | |||||||
Class of Stock [Line Items] | |||||||
Net proceeds after deducting commissions and offering expenses | $ 161.7 | $ 1,259,317,000 | |||||
Number of shares issued and outstanding preferred shares converted into ordinary shares | 377,931,094 | ||||||
ADSs | IPO | |||||||
Class of Stock [Line Items] | |||||||
Number of share issued (in shares) | 8,625,000 | 8,625,000 | |||||
ADSs | Over-allotment | |||||||
Class of Stock [Line Items] | |||||||
Number of share issued (in shares) | 1,125,000 | 1,125,000 | |||||
Class A ordinary shares | |||||||
Class of Stock [Line Items] | |||||||
Ordinary shares, shares authorized | 48,700,000,000 | 0 | |||||
Ordinary shares, par value (in dollars per share) | $ / shares | $ 0.00001 | $ 0.00001 | |||||
Number of vote | Vote | 1 | 1 | 1 | ||||
Number of share issued (in shares) | 69,000,000 | 69,000,000 | 115,666,666 | ||||
Price per share | $ / shares | $ 12 | ||||||
Number of shares issued and outstanding preferred shares converted into ordinary shares | 140,802,051 | 140,802,051 | |||||
Shares issued upon exercise of employee share options (in shares) | 106,295,232 | ||||||
Class A ordinary shares | IPO | |||||||
Class of Stock [Line Items] | |||||||
Number of share issued (in shares) | 69,000,000 | 69,000,000 | |||||
Price per share | $ / shares | $ 12 | ||||||
Class A ordinary shares | Concurrent Private Placement | |||||||
Class of Stock [Line Items] | |||||||
Number of share issued (in shares) | 46,666,666 | 46,666,666 | |||||
Class B ordinary shares | |||||||
Class of Stock [Line Items] | |||||||
Ordinary shares, shares authorized | 800,000,000 | 0 | |||||
Ordinary shares, par value (in dollars per share) | $ / shares | $ 0.00001 | $ 0.00001 | |||||
Number of vote | Vote | 20 | 20 | 20 | ||||
Number of shares issued and outstanding preferred shares converted into ordinary shares | 237,129,043 | 237,129,043 | |||||
Redesignation of ordinary shares into Class B ordinary shares | 403,750,000 | 403,750,000 | 403,750,000 |
REDEEMABLE CONVERTIBLE PREFER_3
REDEEMABLE CONVERTIBLE PREFERRED SHARES (Details) $ / shares in Units, $ in Thousands | Sep. 22, 2016Vote$ / sharesshares | Mar. 31, 2019shares | May 31, 2017USD ($)$ / sharesshares | May 31, 2015USD ($)$ / sharesshares | Oct. 31, 2014USD ($)$ / sharesshares | Dec. 31, 2019$ / sharesshares | Dec. 31, 2017HKD ($)shares | Mar. 08, 2019shares | Dec. 31, 2018$ / sharesshares | Dec. 31, 2017$ / sharesshares | Dec. 31, 2016$ / sharesshares | Dec. 31, 2015$ / shares | Dec. 31, 2014$ / shares |
Temporary Equity [Line Items] | |||||||||||||
Preferred shares, par value | $ / shares | $ 0.00001 | $ 0.00001 | $ 0.00001 | $ 0.00001 | |||||||||
Preferred shares, conversion and redesignation, ratio | 1 | ||||||||||||
Shares issued for each shares converted | 377,931,094 | 377,931,094 | |||||||||||
Voting rights | Vote | 1 | ||||||||||||
Series A convertible redeemable preferred shares | |||||||||||||
Temporary Equity [Line Items] | |||||||||||||
Number of share issued (in shares) | 250,000 | ||||||||||||
Aggregate purchase price | $ | $ 7,000 | ||||||||||||
Par value | $ / shares | $ 0.00001 | $ 0.00001 | $ 0.005 | $ 0.00001 | $ 0.00001 | ||||||||
Shares issued (in shares) | 125,000,000 | 0 | 125,000,000 | 125,000,000 | 125,000,000 | ||||||||
Number of shares converted (in shares) | (125,000,000) | ||||||||||||
Series A-1 convertible redeemable preferred shares | |||||||||||||
Temporary Equity [Line Items] | |||||||||||||
Number of share issued (in shares) | 46,875 | ||||||||||||
Aggregate purchase price | $ | $ 1,500 | ||||||||||||
Par value | $ / shares | $ 0.00001 | 0.00001 | $ 0.005 | $ 0.00001 | $ 0.00001 | ||||||||
Shares issued (in shares) | 23,437,500 | 0 | 23,437,500 | 23,437,500 | 23,437,500 | ||||||||
Number of shares converted (in shares) | (23,437,500) | ||||||||||||
Series B convertible redeemable preferred shares | |||||||||||||
Temporary Equity [Line Items] | |||||||||||||
Number of share issued (in shares) | 176,847 | ||||||||||||
Aggregate purchase price | $ | $ 30,000 | ||||||||||||
Par value | $ / shares | $ 0.00001 | $ 0.00001 | $ 0.005 | $ 0.00001 | $ 0.00001 | ||||||||
Shares issued (in shares) | 88,423,500 | 0 | 88,423,500 | 88,423,500 | 88,423,500 | ||||||||
Number of shares converted (in shares) | (88,423,500) | ||||||||||||
Series C convertible redeemable preferred shares | |||||||||||||
Temporary Equity [Line Items] | |||||||||||||
Number of share issued (in shares) | 128,844,812 | 128,844,812 | |||||||||||
Aggregate purchase price | $ 91,362 | $ 708,765,649 | |||||||||||
Par value | $ / shares | $ 0.00001 | $ 0.00001 | $ 0.00001 | ||||||||||
Shares issued (in shares) | 0 | 128,844,812 | 128,844,812 | ||||||||||
Number of shares converted (in shares) | 5,878,794 | (128,844,812) | |||||||||||
Principal amount of convertible note | $ | $ 3,855 | ||||||||||||
Accrued but unpaid interest of convertible note | $ | $ 314 | ||||||||||||
Shares conversion price per share | $ / shares | $ 0.71 | ||||||||||||
Series C Preferred Shares, issued for cash consideration | |||||||||||||
Temporary Equity [Line Items] | |||||||||||||
Number of share issued (in shares) | 95,094,173 | ||||||||||||
Aggregate purchase price | $ | $ 67,430 | ||||||||||||
Series C Preferred Shares, issued for repayment of an outstanding loan | |||||||||||||
Temporary Equity [Line Items] | |||||||||||||
Number of share issued (in shares) | 27,871,845 | ||||||||||||
Repayments of outstanding related party debt | $ | $ 19,274 | ||||||||||||
Accrued but unpaid interest of related party debt | $ | $ 490 | ||||||||||||
Series C-1 convertible redeemable preferred shares | |||||||||||||
Temporary Equity [Line Items] | |||||||||||||
Number of share issued (in shares) | 12,225,282 | 12,225,282 | |||||||||||
Aggregate purchase price | $ 12,609 | $ 97,818,708 | |||||||||||
Par value | $ / shares | $ 0.00001 | $ 0.00001 | $ 0.00001 | ||||||||||
Shares issued (in shares) | 0 | 12,225,282 | 12,225,282 | ||||||||||
Number of shares converted (in shares) | (12,225,282) |
REDEEMABLE CONVERTIBLE PREFER_4
REDEEMABLE CONVERTIBLE PREFERRED SHARES - Group's Preferred Shares activities (Details) $ in Thousands | 1 Months Ended | 12 Months Ended | |||||
May 31, 2017USD ($)shares | May 31, 2015USD ($)shares | Oct. 31, 2014USD ($)shares | Dec. 31, 2019USD ($)shares | Dec. 31, 2019HKD ($)shares | Dec. 31, 2018HKD ($)shares | Dec. 31, 2017HKD ($)shares | |
Temporary Equity [Line Items] | |||||||
Balance at the beginning of the period | $ 1,250,472,000 | ||||||
Preferred shares redemption value accretion | $ 1,580 | 12,309,000 | $ 66,998,000 | $ 47,715,000 | |||
Conversion and redesignation of Preferred Shares | $ 1,262,781,000 | ||||||
Balance at the end of the period | $ 1,250,472,000 | ||||||
Series A convertible redeemable preferred shares | |||||||
Temporary Equity [Line Items] | |||||||
Balance at the beginning of the period | shares | 125,000,000 | 125,000,000 | 125,000,000 | 125,000,000 | |||
Issuance of Preferred Shares | shares | 250,000 | ||||||
Conversion and redesignation of preferred shares into ordinary shares (In shares) | shares | (125,000,000) | (125,000,000) | |||||
Balance at the end of the period | shares | 0 | 0 | 125,000,000 | 125,000,000 | |||
Balance at the beginning of the period | $ 68,072,045 | $ 64,780,253 | $ 61,506,395 | ||||
Issuance of Preferred Shares | $ 7,000 | ||||||
Preferred shares redemption value accretion | 604,779 | 3,291,792 | 3,273,858 | ||||
Conversion and redesignation of Preferred Shares | $ (68,676,824) | ||||||
Balance at the end of the period | $ 68,072,045 | $ 64,780,253 | |||||
Series A-1 convertible redeemable preferred shares | |||||||
Temporary Equity [Line Items] | |||||||
Balance at the beginning of the period | shares | 23,437,500 | 23,437,500 | 23,437,500 | 23,437,500 | |||
Issuance of Preferred Shares | shares | 46,875 | ||||||
Conversion and redesignation of preferred shares into ordinary shares (In shares) | shares | (23,437,500) | (23,437,500) | |||||
Balance at the end of the period | shares | 0 | 0 | 23,437,500 | 23,437,500 | |||
Balance at the beginning of the period | $ 14,586,871 | $ 13,881,487 | $ 13,179,946 | ||||
Issuance of Preferred Shares | $ 1,500 | ||||||
Preferred shares redemption value accretion | 129,595 | 705,384 | 701,541 | ||||
Conversion and redesignation of Preferred Shares | $ (14,716,466) | ||||||
Balance at the end of the period | $ 14,586,871 | $ 13,881,487 | |||||
Series B convertible redeemable preferred shares | |||||||
Temporary Equity [Line Items] | |||||||
Balance at the beginning of the period | shares | 88,423,500 | 88,423,500 | 88,423,500 | 88,423,500 | |||
Issuance of Preferred Shares | shares | 176,847 | ||||||
Conversion and redesignation of preferred shares into ordinary shares (In shares) | shares | (88,423,500) | (88,423,500) | |||||
Balance at the end of the period | shares | 0 | 0 | 88,423,500 | 88,423,500 | |||
Balance at the beginning of the period | $ 282,627,380 | $ 268,519,700 | $ 254,488,880 | ||||
Issuance of Preferred Shares | $ 30,000 | ||||||
Preferred shares redemption value accretion | 2,591,909 | 14,107,680 | 14,030,820 | ||||
Conversion and redesignation of Preferred Shares | $ (285,219,289) | ||||||
Balance at the end of the period | $ 282,627,380 | $ 268,519,700 | |||||
Series C convertible redeemable preferred shares | |||||||
Temporary Equity [Line Items] | |||||||
Balance at the beginning of the period | shares | 128,844,812 | 128,844,812 | 128,844,812 | ||||
Issuance of Preferred Shares | shares | 128,844,812 | 128,844,812 | |||||
Conversion and redesignation of preferred shares into ordinary shares (In shares) | shares | 5,878,794 | (128,844,812) | (128,844,812) | ||||
Balance at the end of the period | shares | 0 | 0 | 128,844,812 | 128,844,812 | |||
Balance at the beginning of the period | $ 777,835,453 | $ 734,871,721 | |||||
Issuance of Preferred Shares | $ 91,362 | $ 708,765,649 | |||||
Preferred shares redemption value accretion | 7,893,436 | 42,963,732 | 26,106,072 | ||||
Conversion and redesignation of Preferred Shares | $ (785,728,889) | ||||||
Balance at the end of the period | $ 777,835,453 | $ 734,871,721 | |||||
Series C-1 convertible redeemable preferred shares | |||||||
Temporary Equity [Line Items] | |||||||
Balance at the beginning of the period | shares | 12,225,282 | 12,225,282 | 12,225,282 | ||||
Issuance of Preferred Shares | shares | 12,225,282 | 12,225,282 | |||||
Conversion and redesignation of preferred shares into ordinary shares (In shares) | shares | (12,225,282) | (12,225,282) | |||||
Balance at the end of the period | shares | 0 | 0 | 12,225,282 | 12,225,282 | |||
Balance at the beginning of the period | $ 107,351,218 | $ 101,421,674 | |||||
Issuance of Preferred Shares | $ 12,609 | $ 97,818,708 | |||||
Preferred shares redemption value accretion | 1,089,395 | 5,929,544 | 3,602,966 | ||||
Conversion and redesignation of Preferred Shares | $ (108,440,613) | ||||||
Balance at the end of the period | $ 107,351,218 | $ 101,421,674 |
SHARE-BASED COMPENSATION - Shar
SHARE-BASED COMPENSATION - Share-based compensation expenses (Details) $ in Thousands, $ in Thousands | 12 Months Ended | |||
Dec. 31, 2019USD ($) | Dec. 31, 2019HKD ($) | Dec. 31, 2018HKD ($) | Dec. 31, 2017HKD ($) | |
SHARE-BASED COMPENSATION | ||||
Total share-based compensation expenses | $ 2,050 | $ 15,967 | $ 10,440 | $ 9,769 |
Research and development expenses | ||||
SHARE-BASED COMPENSATION | ||||
Total share-based compensation expenses | 12,055 | 9,223 | 8,854 | |
General and administrative expenses | ||||
SHARE-BASED COMPENSATION | ||||
Total share-based compensation expenses | 3,374 | 1,113 | 754 | |
Selling and marketing expenses | ||||
SHARE-BASED COMPENSATION | ||||
Total share-based compensation expenses | $ 538 | $ 104 | $ 161 |
SHARE-BASED COMPENSATION - Sh_2
SHARE-BASED COMPENSATION - Share Options (Details) - Share Options $ / shares in Units, $ in Millions, $ in Millions | Dec. 30, 2019USD ($)$ / sharesshares | Dec. 30, 2019HKD ($)shares | Oct. 31, 2019 | Oct. 31, 2014shares | Dec. 31, 2019$ / sharesshares | Dec. 31, 2018$ / sharesshares | Dec. 31, 2017$ / sharesshares |
Summary of the stock option activity, Options granted share Number: | |||||||
Exercisable (in shares) | (106,295,232) | 0 | 0 | ||||
Outstanding at end of year (in shares) | 23,718,626 | ||||||
Summary of the stock option activity, Weighted average exercise price: | |||||||
Outstanding at end of year (in dollars per share) | $ / shares | $ 0.5161 | ||||||
Minimum | |||||||
SHARE-BASED COMPENSATION | |||||||
Vesting period (in years) | 4 years | ||||||
Maximum | |||||||
SHARE-BASED COMPENSATION | |||||||
Vesting period (in years) | 5 years | ||||||
2014 Share Incentive Plan | |||||||
SHARE-BASED COMPENSATION | |||||||
Maximum number of shares under the plan | 135,032,132 | ||||||
Expire period | 10 years | ||||||
Modification of exercise price of number of stock options granted | 8,113,145 | 8,113,145 | |||||
Modified of exercise price of stock options granted | $ / shares | $ 0.60 | ||||||
Incremental compensation expenses | $ 0.4 | $ 3 | |||||
2014 Share Incentive Plan | Minimum | |||||||
SHARE-BASED COMPENSATION | |||||||
Vesting period (in years) | 4 years | ||||||
2014 Share Incentive Plan | Maximum | |||||||
SHARE-BASED COMPENSATION | |||||||
Vesting period (in years) | 5 years | ||||||
2019 Share Incentive Plan | Maximum | |||||||
SHARE-BASED COMPENSATION | |||||||
Maximum percentage of shares available for issuance, based on total number of shares issued and outstanding on September 29, 2019 | 2.00% | ||||||
Maximum percentage of number of shares increased in each year | 2.00% | ||||||
Maximum percentage of aggregate number of shares initially reserved and subsequently increased during the term of the total number of shares issued and outstanding on September 29 | 8.00% | ||||||
2014 Share Incentive Plan and 2019 Share Incentive Plan | |||||||
Summary of the stock option activity, Options granted share Number: | |||||||
Outstanding at beginning of year (in shares) | 121,207,838 | 111,624,775 | 111,407,320 | ||||
Exercisable (in shares) | (106,295,232) | ||||||
Granted (in shares) | 9,791,200 | 9,625,690 | 217,455 | ||||
Cancelled/forfeited (in shares) | (985,180) | (42,627) | |||||
Outstanding at end of year (in shares) | 23,718,626 | 121,207,838 | 111,624,775 | ||||
Summary of the stock option activity, Weighted average exercise price: | |||||||
Outstanding at beginning of year (in dollars per share) | $ / shares | $ 0.1049 | $ 0.0186 | $ 0.0168 | ||||
Granted (in dollars per share) | $ / shares | 0.6500 | 1.1065 | 0.9188 | ||||
Exercised (in dollars per share) | $ / shares | 0.0126 | ||||||
Cancelled/forfeited (in dollars per shares) | $ / shares | 0.8402 | 0.2000 | |||||
Outstanding at end of year (in dollars per share) | $ / shares | $ 0.5161 | $ 0.1049 | $ 0.0186 |
SHARE-BASED COMPENSATION - Sh_3
SHARE-BASED COMPENSATION - Share Options Granted (Details) - Share Options $ / shares in Units, $ in Thousands, $ in Millions | 12 Months Ended | ||||
Dec. 31, 2019USD ($)$ / sharesshares | Dec. 31, 2019HKD ($)shares | Dec. 31, 2018$ / sharesshares | Dec. 31, 2017$ / sharesshares | Dec. 31, 2019HKD ($)shares | |
SHARE-BASED COMPENSATION | |||||
Outstanding (in shares) | shares | 23,718,626 | ||||
Exercisable (in shares) | shares | 2,802,821 | ||||
Expected to vest (in shares) | shares | 20,915,805 | ||||
Outstanding (in dollars per share) | $ / shares | $ 0.5161 | ||||
Exercisable (in dollars per share) | $ / shares | 0.4061 | ||||
Expected to vest (in dollars per share) | $ / shares | $ 0.5307 | ||||
Outstanding (in years) | 4 years 10 months 2 days | 4 years 10 months 2 days | |||
Exercisable (in years) | 4 years 10 months 2 days | 4 years 10 months 2 days | |||
Expected to vest (in years) | 4 years 10 months 2 days | 4 years 10 months 2 days | |||
Outstanding (in dollars) | $ | $ 18,356 | ||||
Exercisable (in dollars) | $ | 2,459 | ||||
Expected to vest (in dollars) | $ | $ 15,897 | ||||
Weighted average grant date fair value | $ / shares | $ 0.7345 | $ 0.6010 | $ 0.0998 | ||
Shares issued upon exercise of employee share options (in shares) | shares | 106,295,232 | 106,295,232 | 0 | 0 | |
Intrinsic value of options exercised | $ 140 | $ 1,094,000 |
SHARE-BASED COMPENSATION - Fair
SHARE-BASED COMPENSATION - Fair value of options granted and compensation expenses (Details) $ / shares in Units, $ in Thousands, $ in Thousands | 12 Months Ended | |||
Dec. 31, 2019$ / shares | Dec. 31, 2018$ / shares | Dec. 31, 2017USD ($)$ / shares | Dec. 31, 2017HKD ($) | |
Fair value of options granted estimation: | ||||
Unrecognized compensation expenses | $ 12,894 | $ 100,437 | ||
Weighted-average period expected to be recognized for unrecognized compensation expense (in years) | 4 years 5 months 9 days | |||
Share Options | ||||
Fair value of options granted estimation: | ||||
Exercise price (in dollars per share) | $ 0.65 | |||
Fair value of the ordinary shares on the date of option grant (in dollars) | $ 1.2460 | $ 1.2820 | $ 0.4220 | |
Risk-free interest rate (as a percent) | 1.67% | 2.33% | 1.30% | |
Expected term (in years) | 5 years | 5 years 11 months 23 days | 7 years 3 months 18 days | |
Expected dividend yield (as a percent) | 0.00% | 0.00% | 0.00% | |
Expected volatility (as a percent) | 45.00% | 44.00% | 46.00% | |
Expected forfeiture rate (post-vesting) (as a percent) | 15.00% | 15.00% | 15.00% | |
Share Options | Minimum | ||||
Fair value of options granted estimation: | ||||
Exercise price (in dollars per share) | $ 0.3 | $ 0.8 | ||
Share Options | Maximum | ||||
Fair value of options granted estimation: | ||||
Exercise price (in dollars per share) | $ 1.2 | $ 1.03 |
NET (LOSS)_INCOME PER SHARE (De
NET (LOSS)/INCOME PER SHARE (Details) $ / shares in Units, $ / shares in Units, $ in Thousands, $ in Thousands | 12 Months Ended | |||
Dec. 31, 2019USD ($)$ / sharesshares | Dec. 31, 2019HKD ($)$ / sharesshares | Dec. 31, 2018HKD ($)$ / sharesshares | Dec. 31, 2017HKD ($)$ / sharesshares | |
Numerator: | ||||
Net (loss)/income attributable to ordinary shareholder of the Company | $ 18,378 | $ 143,159 | $ 36,938 | $ (55,817) |
Denominator: | ||||
Weighted average ordinary shares outstanding - basic | 832,790,329 | 832,790,329 | 403,750,000 | 403,750,000 |
Net (loss)/income per share attributable to ordinary shareholder - basic | (per share) | $ 0.02 | $ 0.17 | $ 0.09 | $ (0.14) |
Numerator: | ||||
Net (loss)/income attributable to ordinary shareholder of the Company | $ 18,378 | $ 143,159 | $ 36,938 | $ (55,817) |
Denominator: | ||||
Weighted average ordinary shares outstanding - basic | 832,790,329 | 832,790,329 | 403,750,000 | 403,750,000 |
Dilutive effect of share options | 85,107,097 | 85,107,097 | 107,786,122 | |
Weighted average ordinary shares outstanding - diluted | 917,897,426 | 917,897,426 | 511,536,122 | 403,750,000 |
Net (loss)/income per share attributable to ordinary shareholder - diluted | (per share) | $ 0.02 | $ 0.16 | $ 0.07 | $ (0.14) |
NET (LOSS)_INCOME PER SHARE - A
NET (LOSS)/INCOME PER SHARE - Antidilutive securities (Details) - shares | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Share Options | |||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||
Anti-dilutive shares excluded from the calculation of diluted net (loss)/income per share | 3,747,975 | 3,418,090 | 99,355,769 |
Convertible preferred shares | |||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||
Anti-dilutive shares excluded from the calculation of diluted net (loss)/income per share | 0 | 377,931,094 | 323,435,523 |
COLLATERALIZED TRANSACTIONS (De
COLLATERALIZED TRANSACTIONS (Details) $ in Thousands, $ in Thousands | Dec. 31, 2019USD ($) | Dec. 31, 2019HKD ($) | Dec. 31, 2018HKD ($) |
COLLATERALIZED TRANSACTIONS | |||
Loans and advances | $ 537,742 | $ 4,188,689 | $ 3,086,904 |
Market value of collateral, Permitted to repledge | 19,503,649 | 9,214,950 | |
Market value of collateral, Repledged | 3,031,767 | 1,904,545 | |
Total fair value of securities borrowed | 935,443 | 299,173 | |
Total fair value of securities lent | 935,443 | 299,173 | |
Cash collateral provided for borrowed securities | 1,126,300 | 397,675 | |
Cash collateral received for borrowed securities | 1,342,738 | 488,068 | |
Margin Loans | |||
COLLATERALIZED TRANSACTIONS | |||
Loans and advances | $ 4,141,962 | $ 2,886,105 |
BROKERAGE COMMISSION AND HAND_5
BROKERAGE COMMISSION AND HANDLING CHARGE INCOME (Details) $ in Thousands, $ in Thousands | 12 Months Ended | |||
Dec. 31, 2019USD ($) | Dec. 31, 2019HKD ($) | Dec. 31, 2018HKD ($) | Dec. 31, 2017HKD ($) | |
BROKERAGE COMMISSION AND HANDLING CHARGE INCOME | ||||
Total | $ 65,649 | $ 511,365 | $ 407,990 | $ 184,918 |
Brokerage commission income | ||||
BROKERAGE COMMISSION AND HANDLING CHARGE INCOME | ||||
Total | 352,625 | 276,097 | 101,275 | |
Handling and settlement fee income | ||||
BROKERAGE COMMISSION AND HANDLING CHARGE INCOME | ||||
Total | $ 158,740 | $ 131,893 | $ 83,643 |
INTEREST INCOME (Details)
INTEREST INCOME (Details) $ in Thousands, $ in Thousands | 12 Months Ended | |||
Dec. 31, 2019USD ($) | Dec. 31, 2019HKD ($) | Dec. 31, 2018HKD ($) | Dec. 31, 2017HKD ($) | |
INTEREST INCOME | ||||
Interest income from margin financing | $ 221,648 | $ 211,762 | $ 62,165 | |
Interest income from Bank deposits | 187,223 | 123,775 | 34,050 | |
Interest income from Bridge loan | 6,172 | 7,827 | 863 | |
Interest income from IPO financing | 12,658 | 2,921 | 5,470 | |
Interest income from Securities lending | 37,202 | 14,300 | 3,324 | |
Total | $ 59,684 | 464,903 | 360,585 | 105,872 |
Client Referral Income from Brokers | $ 1,451 | $ 2,166 | $ 1,934 |
OTHER INCOME (Details)
OTHER INCOME (Details) $ in Thousands, $ in Thousands | 12 Months Ended | |||
Dec. 31, 2019USD ($) | Dec. 31, 2019HKD ($) | Dec. 31, 2018HKD ($) | Dec. 31, 2017HKD ($) | |
OTHER INCOME | ||||
IPO subscription service charge income | $ 26,537 | $ 16,139 | $ 6,570 | |
Underwriting fee income | 19,579 | 10,494 | 1,599 | |
Enterprise public relations service charge income | 16,156 | 9,187 | 6,717 | |
Currency exchange service income | 4,670 | 2,711 | 2,954 | |
Client referral income from brokers | 1,451 | 2,166 | 1,934 | |
Market information and data income | 2,692 | 1,465 | 311 | |
Funds distribution service income | 10,447 | |||
ESOP management service income | 1,275 | 270 | ||
Other | 2,480 | 336 | 788 | |
Total | $ 10,949 | $ 85,287 | $ 42,768 | $ 20,873 |
INTEREST EXPENSES (Details)
INTEREST EXPENSES (Details) - HKD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
INTEREST EXPENSES | |||
Interest expenses for margin financing - Borrowings from banks | $ 36,206 | $ 37,983 | $ 7,189 |
Interest expenses for margin financing - Borrowings from other licensed financial institutions | 28,636 | 24,194 | 5,142 |
Interest expenses for margin financing - Borrowings from other parties | 3,930 | 28,771 | 5,276 |
Interest expenses for securities borrowed - Borrowings from clients | 1,298 | ||
Interest expenses for securities borrowed - Borrowings from brokers | 9,077 | 1,814 | 1,151 |
Interest expenses for IPO financing - Borrowings from banks | 10,091 | 2,862 | 1,121 |
Total | $ 89,238 | $ 95,624 | $ 19,879 |
NON-INTEREST COST AND EXPENSE_3
NON-INTEREST COST AND EXPENSES BY NATURE (Details) $ in Thousands, $ in Thousands | 12 Months Ended | |||
Dec. 31, 2019USD ($) | Dec. 31, 2019HKD ($) | Dec. 31, 2018HKD ($) | Dec. 31, 2017HKD ($) | |
NON-INTEREST COST AND EXPENSES BY NATURE | ||||
Employee compensation and benefits | $ 327,441 | $ 211,978 | $ 134,468 | |
Marketing and branding | 130,528 | 79,891 | 30,369 | |
Brokerage commission and handling charge expenses(Note22) | 100,550 | 80,127 | 36,777 | |
Processing and servicing costs(Note23) | $ 11,800 | 91,916 | 73,843 | 52,446 |
Rental and other related expenses | 64,756 | 21,256 | 10,847 | |
Depreciation and amortization | 16,547 | 8,327 | 4,300 | |
Professional services | 28,757 | 18,724 | 5,239 | |
Others | 23,867 | 12,814 | 9,042 | |
Total | $ 784,362 | $ 506,960 | $ 283,488 |
BROKERAGE COMMISSION AND HAND_6
BROKERAGE COMMISSION AND HANDLING CHARGE EXPENSES (Details) $ in Thousands, $ in Thousands | 12 Months Ended | |||
Dec. 31, 2019USD ($) | Dec. 31, 2019HKD ($) | Dec. 31, 2018HKD ($) | Dec. 31, 2017HKD ($) | |
BROKERAGE COMMISSION AND HANDLING CHARGE EXPENSES | ||||
Total | $ 36,165 | $ 281,704 | $ 249,594 | $ 109,102 |
Brokerage commission and handling charge | ||||
BROKERAGE COMMISSION AND HANDLING CHARGE EXPENSES | ||||
Total | $ 12,909 | 100,550 | 80,127 | 36,777 |
Commission, handling and settlement expenses | ||||
BROKERAGE COMMISSION AND HANDLING CHARGE EXPENSES | ||||
Total | 95,064 | 78,581 | 35,643 | |
IPO subscription service charge expenses | ||||
BROKERAGE COMMISSION AND HANDLING CHARGE EXPENSES | ||||
Total | $ 5,486 | $ 1,546 | $ 1,134 |
PROCESSING AND SERVICING COST_2
PROCESSING AND SERVICING COSTS (Details) - HKD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
PROCESSING AND SERVICING COSTS | |||
Market information and data fee | $ 54,282 | $ 46,669 | $ 37,482 |
Cloud service fee | 16,729 | 14,081 | 7,636 |
Data transmission fee | 13,890 | 9,145 | 5,822 |
System cost | 4,334 | 949 | |
SMS service fee | 1,523 | 1,834 | 1,148 |
Others | 1,158 | 1,165 | 358 |
Total | $ 91,916 | $ 73,843 | $ 52,446 |
TAXATION - Income Tax - Applica
TAXATION - Income Tax - Applicable Tax Rates (Details) | Dec. 21, 2017 | Dec. 31, 2019 |
TAXATION | ||
Withholding tax rate (as a percent) | 10.00% | |
Withholding tax rate applicable to beneficial owner ( as a percent) | 5.00% | |
The United States ("US") | ||
TAXATION | ||
Applicable tax rate (as a percent) | 35.00% | 21.00% |
Hong Kong | ||
TAXATION | ||
Applicable tax rate (as a percent) | 16.50% | |
China | ||
TAXATION | ||
Preferential tax rate (as a percent) | 15.00% | |
Super deduction of research and development expenses (as a percent) | 175.00% | |
Applicable tax rate (as a percent) | 25.00% | |
China | Futu Network Technology (Shenzhen) Co., Ltd | ||
TAXATION | ||
Preferential tax rate (as a percent) | 15.00% | |
Preferential tax rate, valid period | 3 years |
TAXATION - Composition of incom
TAXATION - Composition of income tax (benefit)/expense (Details) $ in Thousands, $ in Thousands | 12 Months Ended | |||
Dec. 31, 2019USD ($) | Dec. 31, 2019HKD ($) | Dec. 31, 2018HKD ($) | Dec. 31, 2017HKD ($) | |
TAXATION | ||||
Current income tax expense | $ 13,858 | $ 46,781 | $ 6,286 | |
Deferred income tax (benefit)/expense | (1,572) | 15,507 | 5,194 | |
Income tax expense | $ 1,577 | $ 12,286 | $ 62,288 | $ 11,480 |
TAXATION - Tax Reconciliation (
TAXATION - Tax Reconciliation (Details) $ in Thousands, $ in Thousands | 12 Months Ended | |||
Dec. 31, 2019USD ($) | Dec. 31, 2019HKD ($) | Dec. 31, 2018HKD ($) | Dec. 31, 2017HKD ($) | |
Income Tax Disclosure [Line Items] | ||||
Income before income tax | $ 178,493 | $ 200,800 | $ 3,378 | |
Tax expense at Hong Kong profit tax rate of 16.5% | 29,451 | 33,132 | 557 | |
Changes of valuation allowance | 30,172 | 9,735 | 4,464 | |
Tax effect of permanence differences | 5,486 | 6,825 | 7,333 | |
Effect of income tax in jurisdictions other than Hong Kong | (4,143) | 12,670 | (898) | |
Super deduction of research and development expenses | (19,277) | |||
Final settlement differences | (18,038) | |||
Income not subject to tax (1) | (11,365) | |||
Others | (74) | 24 | ||
Income tax expense | $ 1,577 | $ 12,286 | $ 62,288 | $ 11,480 |
Hong Kong | ||||
Income Tax Disclosure [Line Items] | ||||
Hong Kong profit tax rate (as a percent) | 16.50% | 16.50% |
TAXATION - Components of the de
TAXATION - Components of the deferred tax assets (Details) - HKD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Deferred tax assets | ||||
Net operating loss carryforwards | $ 42,736 | $ 19,084 | ||
Accrued expenses and others | 12,261 | 4,165 | ||
Less: valuation allowance | (53,421) | $ (23,249) | $ (13,514) | $ (9,050) |
Net deferred tax assets | $ 1,576 |
TAXATION - Movement of Valuatio
TAXATION - Movement of Valuation Allowance (Details) - HKD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Movement of Valuation Allowance | |||
Balance at beginning of the year | $ 23,249 | $ 13,514 | $ 9,050 |
Additions | 30,188 | 9,735 | 4,464 |
Reversals | (16) | ||
Balance at end of the year | $ 53,421 | $ 23,249 | $ 13,514 |
TAXATION - Net operating loss c
TAXATION - Net operating loss carry forwards (Details) - HKD ($) $ in Thousands | Dec. 21, 2017 | Dec. 31, 2019 | Dec. 31, 2018 |
Income Tax Disclosure [Line Items] | |||
Net operating loss carryforwards | $ 223,629 | $ 89,534 | |
Net operating loss carryforwards, expected to be utilized prior to expiration | 5,630 | 0 | |
Net operating loss carryforwards, provided for valuation allowance | 217,999 | 89,534 | |
Income tax accrued on the undistributed earnings of the Company's VIE and subsidiary of the VIE | $ 0 | $ 0 | |
The United States ("US") | |||
Income Tax Disclosure [Line Items] | |||
Applicable tax rate (as a percent) | 35.00% | 21.00% | |
Hong Kong | |||
Income Tax Disclosure [Line Items] | |||
Applicable tax rate (as a percent) | 16.50% | ||
China | |||
Income Tax Disclosure [Line Items] | |||
Preferential tax rate (as a percent) | 15.00% | ||
Applicable tax rate (as a percent) | 25.00% |
DEFINED CONTRIBUTION PLAN - Add
DEFINED CONTRIBUTION PLAN - Additional Information (Details) ¥ in Thousands, $ in Thousands | 12 Months Ended | ||||
Dec. 31, 2019CNY (¥) | Dec. 31, 2019HKD ($) | Dec. 31, 2018CNY (¥) | Dec. 31, 2018HKD ($) | Dec. 31, 2017HKD ($) | |
Defined Contribution Plan Disclosure [Line Items] | |||||
Employee compensation and benefits expenses | $ 327,441 | $ 211,978 | $ 134,468 | ||
China | |||||
Defined Contribution Plan Disclosure [Line Items] | |||||
Government-mandated defined contribution plan contributed by employer | ¥ | ¥ 32,556 | ¥ 20,038 | |||
Hong Kong | |||||
Defined Contribution Plan Disclosure [Line Items] | |||||
Employee compensation and benefits expenses | $ 1,044 | $ 938 |
REGULATORY REQUIREMENTS (Detail
REGULATORY REQUIREMENTS (Details) $ in Thousands | Dec. 31, 2019HKD ($) |
Regulatory Requirements, Disclosure [Line Items] | |
Net Capital/ Eligible Equity | $ 1,557,940 |
Requirement | 239,375 |
Excess | 1,318,565 |
Futu Securities (Hong Kong) Limited | |
Regulatory Requirements, Disclosure [Line Items] | |
Net Capital/ Eligible Equity | 1,469,200 |
Requirement | 235,481 |
Excess | 1,233,719 |
Futu Inc | |
Regulatory Requirements, Disclosure [Line Items] | |
Net Capital/ Eligible Equity | 15,832 |
Requirement | 1,947 |
Excess | 13,885 |
Futu Clearing Inc | |
Regulatory Requirements, Disclosure [Line Items] | |
Net Capital/ Eligible Equity | 72,908 |
Requirement | 1,947 |
Excess | $ 70,961 |
RELATED PARTY BALANCES AND TR_3
RELATED PARTY BALANCES AND TRANSACTION (Details) $ in Thousands, $ in Thousands | 12 Months Ended | ||||
Dec. 31, 2019HKD ($) | Dec. 31, 2018HKD ($) | Dec. 31, 2017HKD ($) | Dec. 31, 2019USD ($) | Dec. 31, 2019HKD ($) | |
Related Party Transaction [Line Items] | |||||
Cash and cash equivalent | $ 215,617 | $ 375,263 | $ 46,547 | $ 362,574 | |
Interest expenses | 17,129 | 3,457 | |||
Amounts due to related parties | 8,591 | $ 4,317 | 33,628 | ||
Tencent Group | |||||
Related Party Transaction [Line Items] | |||||
Cash and cash equivalent | 260 | 240 | |||
Transactions with Related Parties | $ 59,702 | 16,229 | 8,784 | ||
Tencent Group | Equipment purchased | |||||
Related Party Transaction [Line Items] | |||||
Services provided by related parties | 40,218 | ||||
Tencent Group | Cloud service | |||||
Related Party Transaction [Line Items] | |||||
Amounts due to related parties | 8,409 | 33,153 | |||
Services provided by related parties | 16,729 | 14,081 | 7,636 | ||
Tencent Group | SMS channel services | |||||
Related Party Transaction [Line Items] | |||||
Amounts due to related parties | 182 | $ 475 | |||
Services provided by related parties | 1,523 | 1,834 | $ 1,148 | ||
Tencent Group | Advertising expenses | |||||
Related Party Transaction [Line Items] | |||||
Services provided by related parties | 682 | 112 | |||
Tencent Group | ESOP management service income | |||||
Related Party Transaction [Line Items] | |||||
ESOP management service income | $ 550 | $ 202 |
RELATED PARTY BALANCES AND TR_4
RELATED PARTY BALANCES AND TRANSACTION - Additional Information (Details) - HKD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Payables to clients | |||
Related Party Transaction [Line Items] | |||
Payable to related parties | $ 19,553 | $ 308,073 | |
Directors and officers and their spouses | Brokerage Services and Margin Loans | |||
Related Party Transaction [Line Items] | |||
Revenues earned | $ 2,211 | $ 6,797 | $ 3,040 |