On 17 December 2020, the Stock Exchange of Hong Kong ("HKEX") published its conclusions to the consultation paper on the new listing regime for Special Purpose Acquisition Companies ("SPACs").
The HKEX will start accepting listing applications from SPACs pursuant to this new SPAC regime under the new Chapter 18B (the "Hong Kong SPAC Regime"), which will take effect on 1 January 2022.
Key features of the Hong Kong SPAC regime, along with the differences between the Hong Kong SPAC regime and the U.S. SPAC regime, are set out below:
HKEX CONCLUSIONS |
CHANGES FROM THE CONSULTATION PAPER |
THE UNITED STATES |
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Open Market Requirements |
The subscription and trading of a SPAC's securities will be restricted to Professional Investors only. A SPAC must distribute each of SPAC shares and SPAC warrants to a minimum of 75 Professional Investors, of which 20 must be institutional professional investors.1 On the other hand, the trading of the shares of the new combined company after the de-SPAC transaction (the "Successor Company") is open to all investor types. |
The HKEX lowered the minimum number of institutional professional investors from 30 to 20. |
The trading of a SPAC's securities in the offering is open to both professional and retail investors. |
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SPAC Promoter |
At least one SPAC Promoter must be a firm that holds a Type 6/Type 9 license issued by the Securities and Futures Commission (SFC); a waiver of the licensing requirement may be granted on a case-by-case basis. The firm must also hold at least 10% of the Promoter Shares.2 |
The HKEX may consider granting waiver on a case-bycase basis of the SFC licensing requirement for the SPAC Promoter.3 |
The SPAC promoters have the flexibility to determine whether to hold promoter shares or not, and the allocation of promoter shares.4 |
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SPAC Directors |
The SPAC's board must consist of at least two Type 6 or Type 9 SFClicensed individuals, one of whom must be a director representing the SFC-licensed SPAC Promoter.5 |
The HKEX removed the original requirement that a majority of the SPAC's board be representatives of the SPAC Promoters who nominate them. |
No equivalent requirement. |
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Mandatory PIPE Investment |
Staggered thresholds for the minimum independent PIPE investment are adopted for de-SPAC targets of different sizes:6
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The HKEX removed a blanket requirement that outside independent PIPE investment constitute at least 25% of the market capitalization of the Successor Company. |
No requirement to obtain PIPE investments of any particular size, although as a matter of business practice, PIPE financings are common to validate the proposed enterprise value of a target.7 |
Footnotes
1 Rule 18B.05, IV-5; para 47, p. 13.
2 Rule 18B.11, IV-7.
3 Rule 18B.10, IV-7, note 2.
4 Para 112, p. 23.
5 Rule 18B.12, IV-8; para 147, p 28.
6 Rule 18B.41, IV-16.
7 Consultation para 291, p 66.
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