Hong Kong explores allowing SPAC listings

Hong Kong is considering allowing SPAC listings as the popularity of blank-cheque vehicles starts to pick up outside the US.

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Hong Kong is exploring whether to allow Special Purpose Acquisition Companies (SPAC) to list in the Asian financial hub, according to a government statement, indicating that a large U.S. phenomenon could be going global.

Hong Kong financial secretary Paul Chan asked the Securities and Futures Commission and Hong Kong Exchanges and Clearing “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.” Chan said in an interview with Bloomberg that the government is considering allowing SPAC listings.

Hong Kong tycoons like Richard Li have set up SPACs, while other players such as Traveloka and Bukalapak are eyeing a US listing via blank-check firms. Hong Kong was the second-most popular IPO market around the world last year. It recorded US$31.2 billion in deals last year, compared to Nasdaq’s US$51.3 billion, said the report, citing data from Refinitiv.

 

A SPAC is a blank-cheque company that raises money through an initial public offering (IPO) with the intention of merging with another firm, allowing that business to list more quickly. Most SPACs so far have listed in the United States. They raised $60 billion in the first two months of 2021, Dealogic data showed, already more than 70% of 2020’s annual deal value. Nearly 180 SPACS have been filed or priced this year in New York and last month Frankfurt and Amsterdam both had their first listings.

It comes just a day after the Hong Kong-based luxury Rosewood Hotel group announced it had filed for a SPAC listing that could raise around $400m. There are also reports the SPAC phenomenon could make its way to the UK as Chancellor Rishi Sunak eyes ways to make the City of London competitive post-Brexit. A review into London’s listing rules is set to be published alongside the Budget and is reportedly looking at whether the UK should become more SPAC-friendly. Currently, SPACs are not eligible for listing on the LSE’s premium segment because they don’t meet the independence and track record requirements. Arguably a London-listed Spac is more attractive to a big name sponsor because they don’t need shareholder approval to complete the acquisition unlike in the US.

Hong Kong’s markets regulator, the Securities and Futures Commission (SFC) and exchange operator Hong Kong Exchanges and Clearing (HKEX) briefed a forum of top financial leaders in the city about the latest developments in SPACS on Monday, according to the statement issued that evening. Chan said in an interview with Bloomberg TV on Tuesday that the government was seriously looking into allowing SPACs.