On 17 September 2021, The Stock Exchange of Hong Kong Limited (Exchange) published a consultation paper seeking market feedback on proposals to create a listing regime for SPACs in Hong Kong.
A SPAC is a type of shell company, established and managed by professional managers who have private equity, corporate finance and/or relevant industry experience (SPAC Promoters, known as “SPAC Sponsors” in the United States (US)), for the purpose of raising funds through its listing for acquiring a business (De-SPAC Target) at a later stage within a pre-defined time period after listing (De-SPAC Transaction). The listed issuer resulting from the completion of a De-SPAC Transaction is a Successor Company.
The Hong Kong approach
Instead of replicating the US SPAC regime, the Exchange proposes to provide a high entry point for SPAC listing applicants and De-SPAC Targets, aiming at listing of SPACs that have experienced and reputable SPAC Promoters that seek good quality De-SPAC Targets.
A notable difference from the US regime is that the Exchange proposes to restrict the subscription for, and trading of, a SPAC’s securities to professional investors (as defined in section 1 of Part 1 of Schedule 1 to the Securities and Futures Ordinance (SFO)) only.
The key proposals for a Hong Kong SPAC listing regime are summarised below.
Consultation period will end on 31 October 2021.
At listing of a SPAC
|1.||At listing and for the lifetime of the SPAC:the Exchange must be satisfied with the character, experience and integrity of a SPAC Promoter and its capability of meeting a standard of competence commensurate with its position. The Exchange will publish guidance setting out the information that must be provided to it to determine the suitability of each SPAC Promoter. It is proposed that the Exchange will view favourably persons who have experience in:managing assets with an average collective value of at least HK$8 billion over a continuous period of at least three financial years; orholding a senior executive position (e.g. Chief Executive or Chief Operating Officer) at an issuer that is or has been a constituent of the Hang Seng Index or an equivalent flagship index; andat least one SPAC Promoter is a firm that holds a Type 6 (advising on corporate finance) and/or a Type 9 (asset management) license issued by the Securities and Futures Commission (SFC), which is the beneficial holder of at least 10% of the Promoter Shares issued by the SPAC.|
|2.||At the time of listing, a SPAC must distribute:each of SPAC Shares and SPAC Warrants to a minimum of 75 professional investors, of which 30 must be institutional professional investors (i.e. persons falling under paragraphs (a) to (i) of the definition of “professional investor” in section 1 of Part 1 of Schedule 1 to the SFO); andat least 75% of the total number of SPAC Shares and SPAC Warrants to institutional professional investors.|
|3.||Promoter Shares are shares issued by a SPAC exclusively to a SPAC Promoter at nominal consideration as a financial incentive to establish and manage the SPAC. A SPAC Promoter must, at the date of listing of the SPAC and thereafter, remain as the beneficial owner of such Promoter Shares issued to it.A SPAC must not allot, issue or grant Promoter Shares to the SPAC Promoters that represent more than 20% of the total number of shares the SPAC has in issue as at the date of listing. The Exchange may allow a SPAC to issue additional Promoter Shares to the SPAC Promoters after completion of the De-SPAC Transaction subject to the Successor Company meeting certain performance targets (i.e. earn-outs), provided that the total number of Promoter Shares (including the earn-out portion) will represent not more than 30% of the total number of shares the SPAC has in issue at the date of its listing.|
|4.||SPAC Shares for which a listing is sought must have:an issue price of at least HK$10 each; anda board lot size and subscription size of a value of at least HK$1,000,000.If the Promoter Shares are convertible into SPAC Shares, such conversion shall be on a one-for-one basis only.|
|5.||Issue or grant of all warrants by a SPAC must be subject to the prior approval of:the Exchange; andin the case of issue or grant of warrants after listing, the shareholders in general meeting (unless they are issued or granted pursuant to the authority of a general mandate granted by shareholders).Each warrant issued or granted by a SPAC must entitle the holder to not more than a third of a share of the SPAC (or of the Successor Company).The number of SPAC Shares that may be issued upon exercise of all outstanding warrants issued or granted by a SPAC must not exceed 30% of the number of shares in issue at the time such warrants are issued.Warrants must not be exercisable before completion of a De-SPAC Transaction.|
|6.||Promoter Warrants are warrants issued by a SPAC exclusively to a SPAC Promoter who must remain as the beneficial owner of such Promoter Warrants at the date of listing of the SPAC and thereafter.The number of SPAC Shares that may be issued upon exercise of all outstanding Promoter Warrants issued or granted by a SPAC must not exceed 10% of the number shares in issue at the time such warrants are issued.Promoter Warrants must not be exercisable during the period ending 12 months from the date of the completion of a De-SPAC Transaction.|
|7.||The majority of directors of a SPAC must be officers (as defined under the SFO) of the SPAC Promoters representing the respective SPAC Promoters who nominate them.|
SPAC IPO sponsor engagement
SPAC listing applicants should engage a sponsor in connection with its listing application. The sponsor should conduct due diligence to determine whether the SPAC Promoter and the SPAC’s internal controls meet Listing Rule requirements prior to the submission of a “substantially complete” listing application in accordance with Paragraph 17 of the Code of Conduct for Persons Licensed by or Registered with the SFC and Practice Note 21 of the Listing Rules.
A SPAC listing application should be submitted no earlier than one month (instead of two months for other types of new listing applications or a De-SPAC Transaction) after the date of the formal appointment of the sponsor.
Trading arrangements and restrictions on dealing in SPAC securities
The Exchange proposes to allow the separate trading of SPAC Shares and SPAC Warrants from the date of initial listing onwards, subject to having measures in place to mitigate the risks of extreme volatility and a disorderly market.
SPAC Promoters (including their directors and employees), SPAC directors and SPAC employees, and their respective close associates are prohibited from dealing in any of the SPAC’s securities prior to the completion of a De-SPAC Transaction.
|1.||A De-SPAC Target must have a fair market value of at least 80% of funds raised by the SPAC from its initial offering.An investment company (as defined by Chapter 21 of the Listing Rules) would not be an eligible De-SPAC Target.Can a De-SPAC Target be connected to the SPAC?This is not prohibited. The current connected transactions rules would apply to the De-SPAC Transaction, and for this purpose, the SPAC Promoters, the SPAC’s trustee/custodian, the SPAC directors and associates of any of them would fall within the meaning of connected persons. In addition, the SPAC must also:demonstrate that minimal conflicts of interest exist in relation to the proposed acquisition;demonstrate that the transaction would be on an arm’s length basis, for example:the SPAC and its connected persons are not controlling shareholders of the De-SPAC Targetno cash consideration being paid to connected persons, and any consideration shares issued to the connected persons being subject to a lock-up period of 12 months; andinclude an independent valuation of the transaction in the circular to shareholders.|
|2.||The terms of a De-SPAC Transaction must include investment from independent third party investors:whose investment must constitute at least 25% of the expected market capitalisation of the Successor Company (or at least 15%, if the Successor Company’s expected market capitalisation at listing is over HK$1.5 billion); andwhich must include at least one asset management firm with assets under management of at least HK$1 billion or a fund with a fund size of at least HK$1 billion. The investment made by this firm or fund must result in it beneficially owning at least 5% of the issued shares of the Successor Company as at the date of the Successor Company’s listing.|
|3.||A Successor Company must meet all new listing requirements (including minimum market capitalisation requirements and financial eligibility tests, as well as appointment of at least one sponsor at least two months prior to the date of the listing application).Successor Company must ensure an adequate spread of holders of its shares of at least 100 shareholders (instead of the minimum 300 shareholder requirement normally required for a new listing).|
A De-SPAC Transaction must be made conditional on approval by the SPAC’s shareholders at a general meeting.
A SPAC Promoter and their close associates must abstain from voting. If the De-SPAC Transaction results in a change of control, any outgoing controlling shareholder(s) of the SPAC and their close associates must not vote in favour of the relevant resolution(s) at the general meeting.
A SPAC must:
The Exchange may permit an extension of either deadline for a period of a maximum of six months if the extension is approved by an ordinary resolution of the SPAC’s shareholders at a general meeting (on which the SPAC Promoters and their respective close associates must abstain from voting).
SPAC Promoters must not dispose of any securities of the Successor Company during the period ending 12 months from the date on the completion of the De-SPAC Transaction.
The controlling shareholder of a Successor Company would be subject to the current requirements of the Listing Rules on the disposal of shares by controlling shareholders following a new listing. That means, the controlling shareholder could not dispose of its holdings in the first six months of the Successor Company’s listing and could not dispose of its holdings in the second six months following the listing if this would result in it ceasing to be a controlling shareholder.
A SPAC must provide its shareholders with the opportunity to elect to redeem all or part of their shareholdings (at the price at which they were issued in the SPAC’s initial offering, plus accrued interest) in the circumstances of a shareholder vote on:
Shareholders would only be able to redeem those SPAC Shares voted against the relevant resolution(s).
Liquidation and delisting
If a SPAC fails to:
the Exchange will immediately suspend the trading of the SPAC, and the SPAC must, within one month of the suspension, return the funds it raised at its initial offering to all holders of SPAC Shares (plus any and all accrued interest) as held in the trust account on a pro rata basis.
As soon as practicable after such return of funds, the SPAC must voluntarily liquidate. The Exchange will automatically cancel the listing of a SPAC upon its liquidation.
Application of the Takeovers Code
|Would the Takeovers Code apply?|
|Prior to completion of a De-SPAC Transaction:||Yes|
|De-SPAC Transaction:||The application of Rule 26.1 of the Takeovers Code in relation to a De-SPAC Transaction which would result in the owner of the De-SPAC Target obtaining 30% or more of the voting rights should normally be waived.|
SPAC 是一种壳股公司，由通常有私募股权、企业融资及／或行业经验的专业管理人（SPAC发起人，在美国市场，称为SPAC sponsor）创立和管理，透过首次公开发售集资，目的是在上市后一段预设时间内收购目标公司（SPAC并购目标）的业务（SPAC并购交易），完成 SPAC 并购交易而出现的上市发行人称为“继承公司”。
联交所建议对 SPAC 上市申请人及 SPAC 并购目标订下较高的上市门坎，确保最后能够上市的 SPAC都是来自经验丰富、声誉良好、致力物色优质并购目标的 SPAC 发起人，而不是将美国 SPAC 制度倒模复制。
香港建议的SPAC上市机制跟美国 SPAC 制度相比，最显着的分别在于联交所建议仅限专业投资者（定义与《证券及期货条例》附表 1 第 1 部第 1 条的“专业投资者“相同）认购和买卖SPAC证券。
|1.||于上市时及持续于SPAC上市期间:SPAC必须令联交所信纳每名SPAC发起人的个性、经验及诚信能持续地适宜担任SPAC发起人，并信纳其具备足够的才干胜任其职务。联交所建议刊发指引，列出SPAC须为每名 SPAC 发起人向联交所提供的资料，以决定每名 SPAC 发起人是否合适。联交所建议，如能证明 SPAC 发起人具有以下经验，则对 SPAC 发起人较有利：连续三个财政年度或以上管理平均合共价值至少 80 亿港元的资产；或于目前或曾经为恒生指数或同等旗舰指数成份股的发行人担任高级行政职务（例如行政总裁或营运总监）；及至少要有一名 SPAC 发起人持续持有香港证券及期货事务监察委员会（证监会）发出的第6类（就机构融资提供意见）及／或第9类（提供资产管理）牌照，而该名 SPAC 发起人实益持有SPAC发行的发起人股份的至少 10%。|
|2.||于上市时:SPAC 须将 SPAC 股份及 SPAC 权证各自分发予至少 75 名专业投资者，当中须有至少 30 名机构专业投资者（定义与《证券及期货条例》附表 1 第 1 部第 1 条第(a)至(i)段的“专业投资者”相同）；及SPAC 的 SPAC 股份及 SPAC 权证均分别须将至少 75%分发予机构专业投资者。|
|3.||发起人股份指的是 SPAC（通常以象征式代价）只向 SPAC 发起人发行的股份（与 SPAC 股份不同类别），作为发起人建立和管理 SPAC 的财务奖励。SPAC发起人在SPAC上市时及之后均必须一直是SPAC向其发行的发起人股份的实益拥有人。SPAC向SPAC发起人配发、发行或授予的发起人股份，不得多于SPAC在上市之日已发行股份总数的 20%。联交所可容许SPAC在其完成SPAC并购交易后并在继承公司达到预设的表现目标后向SPAC发起人发行额外发起人股份（即提成部分），惟发起人股份总数（包括提成部分）只可占SPAC在上市之日已发行股份总数的不多于 30%。|
|4.||寻求上市的SPAC股份的发行价必须至少为每股10 港元。SPAC股份的交易单位及认购额至少为100 万港元。若发起人股份可转换为SPAC股份，该转换只能按一换一的基准进行。|
|6.||发起人权证指的是 SPAC只向SPAC发起人发行的权证，SPAC发起人在SPAC上市时及之后均必须一直是SPAC向其发行的发起人权证的实益拥有人。于SPAC发行或授予而未行使的全部发起人权证行使时，可发行的SPAC股份数目不得超过权证发行时已发行股份数目的 10%。发起人权证不得在SPAC并购交易完成日起计 12 个月内行使。|
SPAC上市申请人须委任首次公开发售保荐人协助其上市申请。保荐人应按照《证券及期货事务监察委员会持牌人或注册人操守准则》第 17 段和《上市规则》第 21 项应用指引进行尽职审查，以决定SPAC发起人及SPAC的内部监控是否符合《上市规则》的规定等事宜，然后才提交“大致完备”的上市申请。
有关SPAC的上市申请不得于首次公开发售保荐人获正式委任日期起计未足一个月（而非适用于其他新上市申请或适用于进行 SPAC 并购交易须满两个月的规定）所时呈交。
联交所建议允许首次发售日期起，SPAC 股份及 SPAC 权证可分开买卖，并透过若干额外措施减低与买卖 SPAC 权证有关的波动风险。
在 SPAC 并购交易完成前，SPAC 发起人（包括其董事及雇员）、SPAC 董事和 SPAC 雇员以及其各自的紧密联系人不得买卖任何 SPAC 证券。
|1.||SPAC并购目标公平市值须达SPAC首次发售所筹得资金的至少 80%。SPAC不得寻求透过SPAC并购交易而将受《上市规则》第二十一章约束的投资公司上市。SPAC并购目标是否可为与SPAC有关连的公司?可以。《上市规则》项下有关关连交易的规定将适用于 SPAC 并购交易，而就此目的而言，SPAC 发起人；SPAC 受托人／托管人；SPAC 董事及任何上述人士的联系人均会被定义为“关连人士”。此外，SPAC必须：证明建议交易相关的利益冲突极微；证明有关交易会按公平交易基础进行， 例如：SPAC及／或其关连人士并非SPAC并购目标的控股股东；SPAC并没有向关连人士支付现金代价，而向关连人士发行的代价股份设有 12 个月的禁售期；及在向股东发出的通函内提供有关交易的独立估值资料。|
|2.||SPAC并购交易的条款必须包括来自独立第三方投资者的投资。独立第三方投资者筹集所得的资金须占继承公司预期市值的至少 25%。若继承公司于上市的预期市值超过 15 亿港元，则联交所可接纳较低的百分比（至少15%）。至少一名独立第三方投资者须为管理资产总值至少达 10 亿港元的资产管理公司（或基金规模至少达10 亿港元的基金），而该公司或基金作出的投资须使其于继承公司上市之日实益拥有继承公司至少5%的已发行股份。|
由完成 SPAC 并购交易起计 12 个月内，SPAC 发起人不得出售其所持有的有关证券。
在以下情况，SPAC 须为股东提供选择按 SPAC 首次发售价格（加应计利息）赎回其所有或部分持股的机会：
SPAC 股东只能赎回用于投票反对相关决议案的 SPAC 股份。
|SPAC 并购交易||倘若 SPAC 并购交易将会导致 SPAC 并购目标拥有人取得 30%或以上的投票权，则通常会获豁免应用《收购守则》规则 26.1。|