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Spacs get off to slow start in Hong Kong

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Hong Kong’s tough line on Spacs is intended to protect investors and stop low-calibre companies from getting a listing via the backdoor. With just two Spac IPOs so far in the city, the asset class has struggled to attract the kind of enthusiasm seen in other markets such as the US.

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.

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