Since Aquila Acquisition, the first SPAC company, delivered its forms to the Hong Kong Stock Exchange on January 17, six more SPAC have delivered their forms one after another, namely, Tiger Jade, Interra and Trinity in January, and Ace Eight, Vision Deal HK and Vivere Lifesciences in February.

According to the prospectus, the seven SPAC submitted to the HKEx are invested in different areas:

Aquila focuses on technology-enabled companies in new economy industries in Asia (especially China), such as green energy, life sciences and advanced technology and manufacturing.

Tiger Jade focuses on healthcare-related companies in Greater China.

Trinity targets lifestyle companies in the global consumer sector.

Interra focuses on high-growth companies in Greater China in the areas of innovation and technology, consumer and new retail, high-end manufacturing, health and climate action.

Ace Eight focuses on Asian companies operating in the biotechnology and TMT industries in China.

Vision Deal HK focuses on high-quality Chinese companies that specialize in smart car technology or have supply chain and cross-border e-commerce capabilities that benefit from escalating domestic consumption.

Vivere Lifesciences focuses on companies in the global healthcare industry in China, with a particular focus on biotechnology, diagnostics, medical equipment, new platform technologies and healthcare-related technologies, synthetic biology and CXO.

The sponsors of the seven SPAC come from well-known institutions or individuals. For example, one of the sponsors of Aquila is China Bank International Asset Management; the sponsors of Trinity include Mr. Li Ning Co. Ltd., a well-known athlete; the sponsors of Interra include Chunhua Capital, Agricultural Bank of China International Asset Management, etc.; the sponsors of Vision Deal HK include Mr. Wei Zhe, a former executive of BABA.

New mechanism for listing SPAC in Hong Kong

The so-called special purpose acquisition company (SPAC,Special Purpose Acquisition Company) is simply a shell company without capital. the purpose of its listing is to acquire a company with growth and potential for valuation growth within a predetermined period of time after listing, and then share the returns with investors.

In recent years, the listing of SPAC is in the ascendant in the American capital market. Statistics show that in 2020, a total of 248 SPAC listed on the US capital market, raising a total of 83.335 billion US dollars, surpassing the traditional IPO listing model for the first time. In 2021, the number of SPAC IPO in the United States is as high as 613, with a total fund-raising of 162.394 billion US dollars.

Judging from the relevant regulations on the listing of SPAC updated by the HKEx, there are the following differences between HKEx and SPAC in the United States:

Initiator

-HKEx requires at least one SPAC sponsor to be a company holding a category 6 (advising on institutional financing) and / or category 9 (provision of asset management) licence issued by the SFC.

-at least one sponsor must own at least 10 per cent of SPAC.

The amount of capital raised and the issue price

-SPAC raised a total of at least HK $1 billion in its initial public offering.

-the issue price per share is at least HK $10; the trading unit and subscription amount for its SPAC shares are at least HK $1 million.

Market participants

The HKEx stipulates that the Hong Kong SPAC initial public offering is limited to professional investors, and only professional investors can trade SPAC securities until the SPAC merger and acquisition transaction is completed.

Among them, professional investors include:

1) individuals with a portfolio of at least HK $8 million

2) Trust companies with considerable assets and HK $40 million

3) an enterprise or partnership with an investment portfolio of not less than HK $8 million and assets of not less than HK $40 million.

SPAC warrants (i.e. warrants issued by SPAC, not originator warrants):

-the exercise price must be at least 15 per cent higher than the offering price of SPAC shares at the initial public offering.

-the exercise period begins after the completion of the SPAC M & A transaction, and the maturity date of the SPAC warrants is not less than 1 year and not more than 5 years from the date of completion of the M & A transaction.

Mandatory independent PIPE investment

Before the completion of the merger between SPAC and the target M & A company, the HKEx asked SPAC to obtain funds from external independent PIPE investors to complete the SPAC M & A transaction.

HKEx is of the view that since the target valuation of SPAC after M & An is not the same as that of traditional IPO, which is determined by the underwriter using bookkeeping and filing to estimate the market demand of outside investors, but by the SPAC M & A target in consultation with SPAC sponsors, the risk of valuation manipulation is higher, so the establishment of an independent PIPE investment can provide important protection for the valuation.

HKEx stipulates that all PIPE investments must be professional investors and that the funds raised must reach the percentage of the agreed valuation of SPAC mergers and acquisitions as shown in the table below, with at least 50 per cent of them coming from at least three senior investors.

Generally speaking, SAPC listing has the advantages of short time, low cost, good information disclosure and high flexibility, and it is also a good form of financing for emerging enterprises or small and micro enterprises of science and technology. In the future, the SPAC model may bring significant increments to Hong Kong stocks' IPO and accelerate the return of US-listed stocks.

HKEx SPAC consultation summary link: https://www.hkex.com.hk/-/media/HKEX-Market/News/Market-Consultations/2016-Present/September-2021-Special-Purpose-Acquisition-Co/Conclusions-(Dec-2021)/cp202109cc_c.pdf?la=zh-HK