HKEX Issues Consultation Paper on SPACs

Julia Charlton

Partner, Charltons

I. SPACS BACKGROUND AND INTRODUCTION TO HONG KONG SPACS

The Stock Exchange of Hong Kong Limited, a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited (the HKEX) published a consultation paper on 17 September 2021 to seek market feedback on proposals to create a listing regime for special purpose acquisition companies (“SPACs”) in Hong Kong (the HKEX Consultation Paper). The proposed Hong Kong SPAC listing framework aims to provide another attractive route to listing in Hong Kong, allowing more companies from Greater China, Southeast Asia and beyond to seek a listing on HKEX.

In the U.S., SPACs listings is already an established regime and have gained prominence in recent years; IPO funds raised by US-listed SPACs rose from approximately US$13.6 billion in 2019 to approximately US$83.4 billion in 2020.1 It is hoped that this alternative route to listing will enhance Hong Kong’s listing framework and ensure its competitiveness as one of the world’s leading IPO markets.

The HKEX Consultation Paper sets out HKEX’s proposals to create a listing framework for SPACs in Hong Kong and market feedback is sought during a 45-day consultation period. The deadline for responses is 31 October 2021 and interested parties are encouraged to respond to the HKEX Consultation Paper online.

Given proportionate higher retail market participation in Hong Kong than in the U.S. as well as observation of over-supply of SPACs seeking business combination with a limited pool of target businesses resulting from the U.S. SPAC boom, the HKEX proposals under HKEX Consultation Paper are designed to provide a high entry point for SPAC listing applicants and targets, and hence, a more stringent SPAC listing regime than the U.S.

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