The Hong Kong Stock Exchange unveiled a new regime for special purpose acquisition companies (Spacs) on January 1 to great fanfare. But so far, only two Spacs, also known as blank-cheque companies, have listed on the bourse: Aquila Acquisition Corp in March and Vision Deal HK Acquisition Corp in June.
It is starting to look as though Hong Kong – and perhaps Singapore too, where only three Spacs have listed so far – may have missed the boat with this particular financial product.
In the US, blank-cheque companies have been around for nearly two decades. They are shell firms that raise capital in an initial public offering and then put that money in a trust until they find a suitable business to acquire. The business to be bought is called a target, and the process of its acquisition by a Spac is called a de-Spac. A Spac itself, at the time of listing, has no assets or revenues of its own.
During the pandemic, this proved an easy way to take private companies public; in the US, there were 613 Spac listings in 2021, which raised a total of $163 billion – a 96% increase from the amount raised in 2020, and a near 150% rise in the number of deals, according to research by US investment bank Stifel.