Built specifically without commercial operations, a Special Purpose Acquisition Company (SPAC) attempts to raise capital through Initial Public Offering (IPO). But Hong Kong’s market seems unsuitable for SPAC’s playground. Firstly hit the market in March 2022, Hong Kong’s SPAC IPO faces a challenging condition where there are a lot of varying qualities of promoters.
This means that the deals are less attractive for widespread investors.
Last week moreover, SPAC tends to target overseas businesses at Chinese digital firms. Plus it already won Hong Kong’s Stock Exchange approval for around $300m.
The blank-cheque companies list in the city from January 1. Seven companies including Aquila with CMB International Asset have filed for IPO. Chinese lenders and management such as Aquila backs up the SPACs. These Chinese merchant banks aim at investing in China’s technology, green energy, science, healthcare, and consumer sectors
But having SPAC IPO kick off in March is not the right time. Russia’s invasion to Ukraine dents investor interests. Currently, investors are taking care and watching their existing portfolios. With such a business situation, it is expected that they have no interest in looking at new listings,” said one of the SPAC IPOs bankers.
Hong Kong sets rules requiring SPAC to sell 1PO shares to at least 74 professional investors with at least 20 institutional reliable investors. However, on a SPAC float a banker said that Hong Kong’s SPAC buyers are from family members or friends. They are indeed keen buyers but not all of them can be qualified as professionals. Promoted by weaker promoters, SPACs would be a bad market.
Head of listing at HKEx, Bonnie Chan argues that in order to build a strong SPAC regime, Hong Kong SPAC should meet the same eligibility and sustainability requirements as companies listed via IPO. Thus, Hong Kong screens companies to meet financial eligibility tests and all the necessary requirements in the meantime forward.
