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posted 3 years ago
By Rossana Chu, Ricky Ho:
The Stock Exchange of Hong Kong Limited (“Stock Exchange”) published in December 2021 the Conclusions[1] to its Consultation[2] of September 2021 on Special Purpose Acquisition Companies (“SPAC”), and the SPAC rules took effect on 1 January 2022 as part of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (“Main Board Listing Rules”).
The Stock Exchange made it clear that Hong Kong regime is more stringent than that of the United States. In this article, we attempt to summarize the relevant rules and provide some analysis on certain significant aspects in relation to the SPAC listing rules.
Typical features of a SPAC
SPAC is a listing vehicle with no substantial business or asset, and its sole purpose is to raise capital through initial public offering (“IPO”) for future acquisition or merger with a target within a certain time period. It is typically formed by professional managers (i.e. SPAC promoters) who have private equity and corporate finance experience. At the IPO, the SPAC will issue shares for subscription by investors. It may at the same time offer SPAC warrants as a form of “sweetener” in the IPO. The SPAC may introduce new investors in the acquisition. Upon completion of the acquisition or merger, the SPAC and the target will then be combined, resulting in the listing of a “Successor Company” – this is referred to as a “De-SPAC transaction“. If the SPAC does not complete a De-SPAC transaction within the specified time frame, it has to seek approval from its shareholders for an extension of the life of the SPAC, or be liquidated and the funds raised in the IPO will be returned to the SPAC investors.
Hong Kong’s SPAC regime set out in Chapter 18B of the Main Board Listing Rules[3]
Corporate governance
Listing and post-IPO obligations
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Note: This material has been prepared for general information purposes only and is not intended to be relied upon as professional advice for any cases. Should you need further information or legal advice, please contact us.
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[1] https://www.hkex.com.hk/-/media/HKEX-Market/News/Market-Consultations/2016-Present/September-2021-Special-Purpose-Acquisition-Co/Conclusions-(Dec-2021)/cp202109cc.pdf?la=en
[2] https://www.hkex.com.hk/-/media/HKEX-Market/News/Market-Consultations/2016-Present/September-2021-Special-Purpose-Acquisition-Co/Consultation-Paper/cp202109.pdf?la=en
[3] https://en-rules.hkex.com.hk/sites/default/files/net_file_store/HKEX4476_5770_VER18989.pdf
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