Home Stock exchange Hong Kong: Stock Exchange launches SPAC listing regime

Hong Kong: Stock Exchange launches SPAC listing regime


In short

On December 17, 2021, The Stock Exchange of Hong Kong Limited (“Exchange“) released its consultation conclusion on Special Purpose Acquisition Companies (SPACs). After taking into account market commentary, the exchange relaxed some of the proposed regulatory requirements to take into account business factors while ensuring the quality of the issuers of the main board. The new regime is defined in a new chapter 18B of the main board entry rules. The changes made to the main board entry rules as well as a policy letter will come into force on the 1st January 2022.

Below is a summary of some of the main features of the new regime.

New PSPC regime


1. Investor suitability requirement
  • Only “professional investors” (as defined in the Securities and Futures Ordinance, Cap. 571 (SFO) and the resulting rules) will be allowed to subscribe and trade in securities of a PSPC prior to the completion of a de-SPAC transaction.
  • Minimum HKD 1 Million Advisory Lot Size for PSPC Stocks
2. Mandates
  • Removable
  • The exercise price of the warrants must be at least 15% higher than the IPO price of the SPAC shares.
  • Warrants must not be exercisable until the completion of a PSPC transaction.
  • Warrants must expire between one and five years after the completion of a PSPC transaction.
3. The founding shareholders / promoters of SPAC
  • SAVS promoters must meet the suitability and eligibility criteria, in particular having at least one SAVS promoter as a company holding:
    • A Type 6 (corporate finance advice) and / or Type 9 (asset management) license issued by the Securities and Futures Commission (SFC)
    • At least 10% of the promoter’s shares
  • The Exchange will consider waiving the above SFC license requirement on a case-by-case basis, for example, if the PSPC promoter has overseas accreditation equivalent to an SFC Type 6 and / or Type 9 license.
4. Minimum fundraising size
  • Minimum fundraising size of 1 billion HKD
5. Funds held in trust
  • 100% of the gross proceeds of the proceeds from the IPO of a PSPC (excluding the proceeds from the issuance of Promoter Shares and Promoter Warrants) must be held in an isolated domiciled escrow account in Hong Kong.
  • The escrow account must be managed by a trustee or custodian qualified under Chapter 4 of the Hong Kong Mutual Fund and Mutual Fund Code.
  • Gross proceeds must be held in the form of cash or cash equivalents, such as short-term securities issued by governments with a minimum credit rating of: (a) A-1 by S&P; (b) P-1 by Moody’s Investors Service; (c) F1 by Fitch Ratings; or (d) an equivalent rating by a credit rating agency acceptable to the Exchange.
6. Minimum public float and number of shareholders at the time of the IPO
  • A SAVS must distribute:
    • Each of the SPAC shares and SPAC warrants has a minimum of 75 professional investors, of which 20 must be “institutional professional investors” (as defined in the SFO).
    • At least 75% of each of the SPAC shares and SPAC warrants to professional institutional investors.
    • At least 25% of the total number of issued shares of a SPAC and at least 25% of the total number of warrants issued of a SPAC must be held by the public.
    • No more than 50% of the securities held by the public at the time of the IPO of a SPAC can be beneficially owned by the three main public shareholders.
7. Directors of SASP
  • At least two administrators have an SFC type 6 or type 9 license, one of which represents the SFC licensed SPAC promoter).
  • A SPAC must comply with Chapter 3 of the Main Board Registration Rules, including requirements for the appointment of at least three independent non-executive directors and the establishment of board committees.
DE-SPAC transaction
8. Size of the de-SPAC target
  • Minimum fair value of 80% of funds raised by the IPO of SPAC
9. Mandatory independent PIPE investment
  • The terms of a de-SPAC transaction must include the investment of independent PIPE investors. These investors must each be a professional investor and meet the independence requirements for an independent financial advisor under Rule 13.84 of the Principal Board Registration Rules.
  • The total amount to be raised from independent PIPE investors must meet the threshold of the percentage of the traded value of the target of-PSPC as indicated below:
Negotiated value of the de-PSPC target (A) Minimum independent investment in PIPE as a percentage of (A)
  • At least 50% of independent PIPE investment must come from at least three sophisticated investors, i.e. an asset management company with assets under management of at least HKD 8 billion, or a fund with a fund size of at least HKD 8 billion.
10. Deadline for completion of de-SPAC
  • Within three years of the IPO with an extension of up to six months subject to the approvals of the Stock Exchange and shareholders at a general meeting of the extension.
11. Moratorium / Blocking periods
  • After the completion of a de-PSPC transaction:
    • Promoters of a PSPC will be subject to a blocking period of 12 months from the completion of a de-PSPC transaction.
    • Like registration rule 10.07, majority shareholders of a SPAC will be subject to a blocking period of six months from the registration of the successor company. They will not be authorized to sell their shareholdings in the second half of the listing of the successor company if they cease to be controlling shareholders at the end of these disposals.
12. Application of the new listing requirements to the successor company
  • A successor company will need to meet all new listing requirements, including hiring the IPO sponsor to perform due diligence, minimum market capitalization requirements, and financial eligibility test under the IPO. listing rule 8.05 / 8.05A / 8.05B, and the business continuity and ownership requirements for new listings. .
  • A PSPC will be required to announce the de-PSPC transaction once its terms have been finalized. This announcement must contain all the information required by the Listing Rules for Reportable Transactions and Reverse Takeovers.
  • A de-PSPC operation will have to comply with the procedures and requirements for new registration requests under Chapter 9 of the Registration Rules. The listing document issued for the de-SPAC transaction must contain all the information required for both a new listing candidate and a reverse takeover.

The content is provided for educational and informational purposes only and is not intended and should not be construed as legal advice. This may be termed a “lawyer advertisement” requiring notice in some jurisdictions. Past results do not guarantee similar results. For more information, please visit: www.bakermckenzie.com/en/disclaimers.