Another well-known investor has entered SPAC.

The investment community has exclusively learned that well-known domestic PE institutionsFu Wei, founder of Kangqiao CapitalIt officially took the lead in initiating the establishment of SPAC company Summit Health, which is committed to seeking mergers and acquisitions projects in the health industry, and has completed public registration with the SEC.

According to the prospectus, the co-founders of Summit Health also include former CFO Tan Bo of Sansheng Pharmaceutical and former Citibank Asia Pacific executive Ken ?$#@$. The SPAC also received support from Xuehu Capital and Prulin Capital and participated as a cornerstone investor. This will be the first SPAC that clearly pursues the goals of the Asian life and health industry.

The SPAC feast came menacingly. The so-called SPAC (Special Purpose Acquisition Company) isSpecial purpose acquisition companiesAlso known as a “blank check company”, it is a form of listed company unique to the US capital market. In this feast, Hong Kong billionaire Lee Chak-kai spent only five months to increase the value of his stock holdings by 1,200 times.

Today, SPACs have begun to take the PE industry by storm — from foreign countries such as Blackstone Group, KKR, and SoftBank, to China's Gaoxin, Chunhua Capital, Hongyi Investment, CITIC Capital, and Times Capital, have all begun to get involved in SPAC. Furthermore, there is another wave of Asian PE institutions on their way.

SPACs are starting to take PE circles by storm

Just now, Fu Wei of Kangqiao Capital also broke in

The investment community exclusively learned that Kangqiao Capital founder Fu Wei officially took the lead in initiating the establishment of a special purpose acquisition company (SPAC) Summit Healthcare Acquisition Corp to seek mergers and acquisitions projects in the health industry. According to reports, the company's cornerstone investors include Snow Lake Capital (HK) Limited (Snow Lake Capital) and The Valliance Fund (The Valliance Fund).

If there are no surprises, this will beThe first SPAC that clearly pursues the goals of the life and health industry in Asia.After experiencing the COVID-19 pandemic, the life and health industry achieved explosive growth on a global scale, especially in the Asian region represented by China. This explosive development required a large amount of capital, and SPAC, as an emerging capital tool, provided a new rapid development channel for the entire industry.

As the founder, Fu Wei has over 17 years of experience in China for top international private equity funds. The institutions he has worked for includeTemasek, Macquarie, Standard Chartered, Goldman Sachsand other internationally renowned institutions. In 2014, Fu Wei founded Kangqiao Capital, which focuses on platform construction, holding acquisition opportunities and alternative financing across three core areas: pharmaceuticals and biotechnology, medical technology and medical services. So far, it has become one of the largest and most active healthcare investment companies in Asia.

According to data, Kangqiao Capital currently manages more than 4.5 billion US dollars and has a team of more than 80 outstanding medical, investment and operation professionals. With its unique style of “incubation+operation”, Kangqiao Capital has deeply participated in the establishment of 10 platform-based medical companies in the past 3 years. Today, it already owns 2 biomedical listed companies — Tianjing Biology and Genting Xinyao, and has successfully incubated many life and health companies.

Fu Wei's entry into the market can be described as a true picture of SPAC's popularity in the domestic PE industry. Right now, SPAC is undoubtedly one of the hottest keywords on Wall Street today. If you're on Wall Street and don't have one or two SPAC companies on your hands, you're likely to be marginalized by Wall Street.

To put it bluntly, SPACs are like blind boxes in the US stock industry. They are a form of listed company unique to the US capital market, and are known as special purpose acquisition companies. The so-called company has only cash, no industry or assets; it's like creating a “shell” of its own; the so-called special purpose is to find an unlisted company and get it listed through a merger.

A typical SPAC usually works like this: first, a SPAC sponsor is needed to take the lead in establishing a SPAC listed company. The sponsor may be the founder, management team, angel investors, private equity funds, etc., with a certain level of credibility and prestige. The SPAC is managed by the sponsor. Next, capital is raised from the original shareholders. Investors buy shares of this shell company at a fixed price of $10. The sponsor's task is to store the funds raised and find promising companies to buy.

Once the sponsor has determined the acquisition target, they will notify the shareholders, and shareholders will vote to decide whether to approve the acquisition. Shareholders who do not approve canRecovering funds with interest. This process has a two-year statute of limitations. If not completed within two years, all shareholders will receive a return on their investment. Therefore, it is also viewed by the outside world as a huge feast.

A rare and popular scene:

KKR SoftBank Gao Yu Chunhua is here

And behind this SPAC feast, many well-known investment institutions and bigwigs are active.

Among them, PE's enthusiasm is particularly high. According to US Securities and Exchange (SEC) documents, as of the fourth quarter of 2020, Gao Lin owned three SPAC companies, namely LEAP, DGNR, and MAAC. Among them, LEAP is a SPAC company initiated by Rabbit Capital that focuses on finding mergers and acquisitions targets in the fintech sector. Currently, Rabbit Capital has invested in many excellent companies, including the cryptocurrency trading platform Coinbase and the US version of Huabei Affirm, which is already listed.

Earlier, Vision Fund, a subsidiary of SoftBank Group, revealed plans to establish a SPAC in October 2020. The capital came from external investors and Vision Fund No. 2 to raise 500 million US dollars to 600 million US dollars, with the aim of getting more invested companies listed. For example, SoftBank-backed housing sales platform OpenDoor previously announced a listing through such a merger.

At the end of 2020, Blackstone Group (BX.US) was negotiating a merger between Alight Solutions LLC and empty check acquisition company Foley Trasimene Acquisition Corp, hoping to merge the two companies into a listed company with a market capitalization of over 8 billion US dollars (including debt).

At the beginning of this year, well-known domestic PE Chunhua Capital entered the SPAC market. According to NASDAQ's official website, Chunhua Capital established its first SPAC company, Primavera Capital Acquisition Corporation (“PCAC”), and listed on the New York Stock Exchange under the PV.U stock code to raise 360 million US dollars. The target of the merger and acquisition focused on companies in the Chinese consumer sector.

In March, KKR announced the establishment of its first SPAC KKR Acquisition Holdings, which successfully raised 1.2 billion US dollars, exceeding the original target of 1 billion US dollars. Subsequently, Jeneration Capital (Jeneration Capital) officially submitted an S-1 prospectus to the US Securities and Exchange Commission (SEC), and the special purpose acquisition company (SPAC) that was established, Jeneration Acquisition Corporation plans to be listed on the NASDAQ using “JACAU” as the stock code.

Also in March, Hongyi Investment submitted an S-1 prospectus to the SEC. The special purpose acquisition company (SPAC) it established, Hony Capital Acquisition Corp., plans to be listed on the New York Stock Exchange under the stock code “HCAA.U.” The prospectus says the SPAC company favors technology-driven companies in the healthcare and consumer sector in China.

At the same time, wealthy Asians are also joining the SPAC army one after another.Li Chak-kai, second son of Li Ka-shing, the richest man in Hong KongIt only took five months, and without adding any assets, the value of the shares held had already increased 1,200 times, making it easy to achieve two small goals. Last year 10, Li Chak-kai's SPAC company landed on the NASDAQ, codenamed BTWN. He spent $25,000 and obtained 287.5 founder shares. By the close of March 31, the SPAC company's market value had reached 750 million US dollars. What needs to be clarified is that this is the third SPAC initiated by Lee Chak-kai in the US.

Also coveted are the Hong Kong Cheng family.On March 1, 2021, Zheng Zhigang, Vice Chairman and CEO of New World Development, is planning to set up a SPAC listing in the US to raise up to 400 million US dollars. Meanwhile, Spades Capital, the private family office of Macau International Chairman and CEO Ho Yulong, is also working hard to prepare for the second SPAC investment.

The logic behind the SPAC torrent is sweeping through, and the logic behind it seems easy to understand — over the past year, the COVID-19 pandemic made US stocks feel like a roller coaster. As the Federal Reserve used easing policies to stimulate economic development, large amounts of hot money poured into the secondary market.

In 3 months, SPAC raised 100 billion US dollars

Another big wave of PE is coming

SPAC can no longer simply be described by the word “hot.” According to Refinitiv statistics, in 2020, at least 356 special purpose acquisition companies were successfully listed, raising capital of 793 billion US dollars, an increase of more than 460% over the previous year, accounting for about the US IPO market that yearhalf way over the wall. The sharp rise continued in 2021, reaching 100 billion US dollars in the first three months.

So why are so many investment institutions getting involved in SPAC? Obviously, the SPAC listing provided a quick exit channel for a large amount of idle private equity capital. A well-known PE agency in Beijing shared: “In the past 5-10 years, people have seen the emergence of more and more unicorn companies, but these companies are unable to go public smoothly because their valuations are too high. Thanks to opportunities like SPAC, many of these companies have been released.

“SPAC listing also has many advantages: first, speed, some companies can be listed in 3-4 months; second, valuation certainty; third, flexibility, the cashout situation of the transaction can be designed in advance.” A summary of a well-known investment institution.

Based on the many advantages of SPACs, a SPAC boom has begun to emerge in the Asian region. Hong Kong and Singapore, for example, have been actively exploring conditions to allow SPACs to go public, and are now putting this topic on the agenda.

“In my opinion, exchanges can introduce SPACs, but they're not as simple as allowing SPACs to trade on stock exchanges. In my opinion, whether in Singapore or Hong Kong, if they want to try SPAC, the most important thing is to find high-quality promoters in this market.” A partner of a first-tier investment agency in Beijing put it bluntly.

It is worth noting that SPACs allow investors to “blindly select” these shell stocks. Influential sponsors and physical enterprises are indispensable. Conversely, SPACs that lack strong endorsements may be unpopular.

Therefore, many professional investment institutions are probably the best partner for SPAC. An investment banker emphasized, “If the SPAC is managed by a well-known investment manager, investors will be more interested, so the management team is very important. If investors are not satisfied with the IPO merger target, they can choose to redeem and take away the principal and interest.”

But the problem came up again.Will a VC/PE fund establish a SPAC conflict of interest with LP?

“In fact, SPACs have given us a new way to help operate funds and seize more new opportunities. Of course, when we choose to be a SPAC, LP will actively communicate. More importantly, a successful SPAC will improve the sponsor's credibility in the market, so the LPs behind it will also benefit.” An investor from a leading PE institution in China told the investment community.

Of course, SPACs aren't a one-size-fits-all business. Buffett and Munger issued a warning against SPAC at the Berkshire shareholders' meeting on Saturday. Earlier, Munger publicly criticized the SPAC model. He believes that SPAC investing in companies that have not yet been established or selected is a kind of crazy speculation and an annoying bubble sign.

In April of this year, the US SEC issued a series of statements against SPACs. The most substantial impact was the clear guidance on SPAC's accounting standards. The Hong Kong Securities Regulatory Commission also smelled the dangerous atmosphere of Wall Street and had doubts about whether SPACs should be introduced. Some lawyers pointed out that in October 2019, the Hong Kong Stock Exchange revised its listing rules to crack down on shell making and shell trading. If SPAC were introduced at this time, it would give the market a wrong signal and could easily cause market chaos. There are even more voices saying that the SPAC rush to go public is one of the warning signs before the big bull market is about to end.

Half sea water, half fire. Right now, this feast is still going on — “I personally predict that by the end of the year, any famous Asian PE you can call will probably have a SPAC.” A well-known PE investor in Shanghai revealed,Some of my peers are already studying SPAC related knowledge and practical experience.“If this market continues to flourish, then we will see more PE institutions launch SPACs.”