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On 23 August 2024, the Securities and Futures Commission (SFC) and The Stock Exchange of Hong Kong Limited (Exchange) jointly announced temporary modifications to certain requirements relating to the listing of “Specialist Technology Companies” and “De-SPAC Transactions”, which will be effective for a fixed period of three years from 1 September 2024 to 31 August 2027 (Implementation Period).
A “Specialist Technology Company” is a company primarily engaged in the research and development of, and the commercialisation and/or sales of, products and/or services that apply science and/or technology within an acceptable sector of any of the specialist technology industries as set out in Chapter 2.5 of the Guide for New Listing Applicants. Chapter 18C of the Rules Governing the Listing of Securities on the Exchange (Listing Rules), which was introduced with effect from 31 March 2023, provides a listing pathway for Specialist Technology Companies that cannot meet the eligibility requirements under Chapter 8 of the Listing Rules.
A “De-SPAC Transaction” refers to an acquisition of, or a business combination with, a business (De-SPAC Target) by a special purpose acquisition company (SPAC), which is a shell company that raises funds through its listing for the purpose of conducting a De-SPAC Transaction at a later stage within a pre-defined time period after listing resulting in the listing of the “Successor Company”. Chapter 18B of the Listing Rules, which was introduced with effect from 1 January 2022, provides a listing pathway for SPACs in Hong Kong and set out the requirements for De-SPAC Transactions.
As of 23 August 2024, two Specialist Technology Companies have been listed on the Exchange under Chapter 18C of the Listing Rules, and there was also one active listing application under this chapter. Among the five SPACs listed under Chapter 18B of the Listing Rules, three SPACs have announced De-SPAC Transactions.
According to the SFC and the Exchange, the modifications (which are set out below) are designed to address the change in market conditions since the introduction of the two listing regimes, taking into account the Exchange’s experience gained from handling Specialist Technology Companies’ listing applications and De-SPAC Transactions:
A. Specialist Technology Companies ‒ Reduction in minimum initial market capitalisation thresholds
B. De-SPAC Transactions ‒ Independent third party investment requirements
(1) Reduction in minimum independent third party investment
(2) Modification of independence requirements for third party investors
Prior to the end of the Implementation Period (i.e. 31 August 2027), the Exchange may review the requirements and conduct public consultation, if necessary.
The introduction of the modifications is certainly a welcomed move, which hopefully may attract more eligible companies to list under the two listing regimes, thereby boosting the local capital market.
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