Hong Kong Mulls New and Tighter SPACs Listing Rules

Hong Kong on Friday proposed changing its rules to allow SPACs to list, but with tighter restrictions than elsewhere as it becomes the latest to tap the desire for such investment vehicles even as the frenzy that began last year wanes.

The Stock Exchange of Hong Kong has been working on proposals for SPACs since early this year, but one challenge, market participants say, has been finding a way of allowing such listings without undermining efforts by the exchange and regulator to combat illegal practices linked to the formation and trading of shell companies with which Hong Kong grappled in the last decade.

On the other hand, there are also concerns that tough restrictions would mean the exchange would not be an attractive place to list a SPAC.

The proposal is open for public consultation, with the deadline for responding set for Oct. 31.

SPACs, or special purpose acquisition companies, are shell corporations that list on stock exchanges and then merge with an existing company to take it public, typically offering strong valuations and shorter listing time frames than initial public offerings.

Under Hong Kong’s proposals, only professional investors would be able to invest in a SPAC until it has merged with a target company, and the firms sponsoring a SPAC must include at least one institution licenced by the local securities regulator.

The company that is acquired by a SPAC must also meet the same requirements as would a company listing in Hong Kong via an IPO, including being approved by the bourse’s listing committee.