相比港交所相对审慎的态度，新交所对于SPAC的态度则更为“激进”。2月17日接受彭博社采访时新交所首席执行官罗文才（Loh Boon Chye）表示，新交所计划在第一季度就引入SPAC展开市场咨询，“若市场支持，我们希望今年就能实现（引入SPAC上市）”。
Hong Kong Shows Interest, Caution Towards SPACs
With SPACs becoming a much-sought-after listing model in the U.S., many Asian companies and sponsors are looking to follow this new trend. In Asia, both the Singapore Exchange (SGX) and the Hong Kong Stock Exchange (HKEX) have initiated studies on SPACs and we might see this innovative listing model very soon in this region.
Shortly before Chinese New Year 2021, the California-based electric vehicle startup Faraday Future, founded by fugitive Chinese entrepreneur Jia Yueting, announced some good news: After nearly seven years of struggling with fundraising, the company will now solve its financial problems by merging with a SPAC and subsequently going public on the Nasdaq Stock Exchange. According to Reuters, the deal is expected to fetch Faraday Future $1 billion in gross proceeds.
SPAC is short for “special purpose acquisition corporation,” also known as a “blank check company.” A SPAC neither has operations, nor own any assets. After IPO registration, it will look to acquire private companies before taking the target company public. In the U.S., a SPAC needs to complete its acquisition, called a de-SPAC combination deal, within two years, otherwise it might face liquidation.
IN THE SPOTLIGHT
2020 was known as “the year of the SPAC” in U.S. capital markets. According to a recent EY report, the U.S. recorded 248 SPAC listings in 2020, accounting for 53 percent of all IPOs, with 64 having already completed their de-SPAC deals. SPAC listings raised $80.9 billion, accounting for 48 percent of all raised funds.
Inspired by these numbers, bourses in Asia have started looking at this new form of listing. SGX first expressed interest on Feb. 17, and then Mar. 2, a Hong Kong SAR government statement said that the territory is also “exploring whether to allow Special Purpose Acquisition Companies (SPAC) to list.”
According to the statement, the Hong Kong’s markets regulator, the Securities and Futures Commission (SFC) and HKEX have already briefed a forum of top financial leaders in the city about the latest developments in SPACs.
The Financial Leaders Forum, which is chaired by Hong Kong’s Financial Secretary, Paul Chan, had asked the two organisations “to explore suitable listing regimes to enhance the competitiveness of Hong Kong as an international financial centre while safeguarding the interests of the investing public.”
According to Caixin, a blog post by Au King Lun, executive director of Hong Kong’s Financial Services Development Council, set the ball rolling. In the post, he wrote that the SAR authorities had noticed the SPAC upsurge in the U.S. “The rapid growth of SPAC listings might cause certain risks. But with the growing popularity of this new model, we need to research cautiously on this topic,” he wrote.
Compared with Hong Kong’s caution, Singapore has been more proactive when it comes to SPACs. Loh Boon Chye, CEO of SGX, told Bloomberg in an interview on Feb. 17 that SGX would initiate market consultation on SPAC listings in the first quarter this year. “If the market is supportive, we hope to be able to do that sometime this year,” he said.
“This might mean that now Hong Kong and Singapore are competing to be the first financial hub in Asian to list SPACs. However, Singapore falls far behind in terms of IPO fundraising amount,” Caixin commented.
Simon Luk, partner and chairman of Winston & Strawn’s Asia practice agrees on HKEX’s existing advantage. “Hong Kong continues to reinforce its position as a world-leading IPO hub and has launched a number of innovative measures to attract global issuers. Last year, the HKEX recorded $50 billion in total funds raised through IPO, a 25 percent year-on-year growth. It will be interesting to see whether and how SPACs will be adopted in Hong Kong, and the dynamics it brings to the Hong Kong capital market,” he says.
CONVENIENCE AND IMPACT
Although only a few Chinese companies have been listed using the SPAC model so far, the concept is not new to them. Apart from Faraday Future, another recent example is the co-working platform Orisun. Orisun filed its IPO application to the U.S. Securities and Exchange Commission (SEC) in December 2019, and after more than half a year of waiting, decided to opt for a SPAC, and got listed in about four months.
In 2019, United Family Healthcare and EdtechX Holdings, two companies holding the largest market shares in the areas of private healthcare and English training, respectively, in China, also went public by merging with SPACs. Back in 2018, out of 48 Chinese companies that went public in the U.S., six chose SPACs.
Luk tells ALB that the advantages of SPAC are obvious. “SPACs offer more certainty and will take less time to complete because the IPO registration process has been completed ahead of a business combination, often within a few months,” he says.
This has caught the attention of the clients. “In the last six months, interest in SPACs has steadily increased,” Luk says. “we have seen increasing interests from Asian and Chinese clients appointing us to act for sponsors to form SPACs for possible business combination with targets from China or elsewhere in Asia. We have also received inquiries and are advising Asian and Chinese clients exploring opportunities to merge with SPACs - we are selecting the right SPACs for discussion of a merger.”
Luk points out that the U.S. is undoubtedly the most sophisticated market for SPACs, but the trend will inevitably come to Asia. “The rapidly increasing number of SPACs means a heated competition for targets in the Western world. We expect to see more SPACs expand their search for business combination targets in Asia. Asian sponsors, especially general partners in Asian private equity funds, have a natural competitive advantage when it comes to identifying and finding merger candidates from the unlisted unicorns in Asia because of their close connection and proximity to these targets,” he says.
Luk’s observation is backed up by recent news: After forming and listing two SPACs in the U.S. in 2020, Richard Li, the younger son of Hong Kong business magnate Li Ka-shing, is now planning to form a third one this year, with the aim of raising millions of dollars.
According to the EY report, the SPAC market will remain active in 2021 with more de-SPAC combinations emerging. According to market data, there are more than 300 listed SPACs in the U.S. that haven’t found target companies.
But EY also points out that if merged companies do not perform well, it might dampen the enthusiasm for SPACs in the future.
Luk also advocates caution on the part of the Hong Kong bourse. “HKEX will study the U.S. SPAC explosion carefully and will consider its role to protect the investors in the Hong Kong capital markets. It is not likely to move fast as the SPAC explosion may lose its attraction if too much money is tied up in current SPACs looking for business combination and it is difficult to find great listing candidates,” he says.
To contact the editorial team, please email ALBEditor@thomsonreuters.com.