A SPAC is a type of shell company that raises funds through its listing for the purpose of acquiring a business (a “De-SPAC Target”) at a later stage (a “De-SPAC Transaction”) within a pre-defined time period after listing.
SPAC regime effective 1 January 2022
- At least one SPAC Promoter is an SFC-licensed firm holding at least 10% of the Promoter Shares.
- SPAC investors are restricted to Professional Investors.
- A SPAC must raise at least HK$1 billion from its initial offering.
- The listed issuer resulting from the De-SPAC Transaction must meet all new listing requirements.
- The SPAC must obtain independent third party investment of at least 7.5% to 25% of the negotiated value of the De-SPAC Target for completing the De-SPAC Transaction. Such third party investors must be Professional Investors. At least 50% of such investment must come from at least three Sophisticated Investors.
- De-SPAC Transaction must be announced and completed within 24 months and 36 months of the SPAC listing respectively
Key features of the new listing regime for SPACs
Before De-SPAC
- The subscription and trading of a SPAC’s securities are restricted to Professional Investors only prior to the De- SPAC Transaction.
- A SPAC’s securities must be distributed to at least 75 Professional Investors, of whom at least 20 must be IPI and such IPI must hold at least 75% of the SPAC securities to be listed.
- SPAC Promoter must meet rigorous suitability and eligibility requirements, and with at least one being an SFC Type 6/Type9-licensed firm holding at least 10% of the Promoter Shares. The Exchange will consider modifying or waiving the SFC licensing requirement on a case-by-case basis (e.g. accept SPAC Promoters with overseas accreditation that is equivalent to an SFC Type 6/Type9 license).
- A SPAC’s board must include at least two SFC Type 6/Type 9-licensed individuals (including one director representing the licensed SPAC Promoter).
- Promoter Shares are capped at 30% of the SPAC’s total issued shares at listing.
- SPAC Warrants plus Promoter Warrants are capped at 50% of the SPAC’s total issued shares at the time such warrants are issued.
- A SPAC must raise at least HK$1 billion from its initial offering.
- The stock short names of SPAC Shares will end with the marker “Z”.
De-SPAC
- The listed issuer resulting from the completion of a De-SPAC Transaction (a “Successor Company”) must meet all new listing requirements (including IPO Sponsor engagement to conduct due diligence, minimum market capitalisation requirements and financial eligibility tests).
- The fair market value of a De-SPAC Target should represent at least 80% of the funds raised by the SPAC from its initial offering.
- The SPAC must obtain independent third party investment (“independent PIPE Investment”) of at least 7.5% to 25% of the negotiated value of the De-SPAC Target for the purpose of completing the De-SPAC Transaction. The PIPE investors must be Professional Investors.
- At least 50% of the independent PIPE Investment must come from at least three Sophisticated Investors.
- The De-SPAC Transaction must be approved by SPAC shareholders at a general meeting (excluding SPAC Promoter and other shareholders with a material interest).
- SPAC Shareholders must be given the option to redeem their shares prior to: (a)De-SPAC Transaction; (b)a material change in SPAC Promoters and/or SPAC Directors; and (c)any extension of deadline for finding a suitable De-SPAC Target.
- The Successor Company’s shares must be held by at least 100 Professional Investors (instead of 300 shareholders normally required) at the time of listing.
- The De-SPAC Transaction must be announced and completed within 24 months and 36 months from the date of the SPAC’s listing respectively, with an extension of up to 6 months subject to the SPAC shareholders’ and the Exchange’s approval.
