SPAC | Singapore introduces the industry to call for Hong Kong to start research within the shortest year: Don't block your own wealth

Special interview

Author: Zhan Yongyu

2021-02-23 09:52

The last update date: 2021-02-23 09:52

SPAC (Special Purpose Acquisition Company) is becoming more and more popular in the United States, and Singapore has already announced the introduction of SPAC in Asia.

Yesterday (22nd) it was rumored that the Hong Kong Stock Exchange had begun to study SPAC and asked individual brokers for their opinions, but the official has not yet made a clear statement.

EY Asia Pacific Listing Services Lead Partner Cai Weirong believes that Hong Kong, as an international financial center, should be open to the introduction of new products, otherwise it would be tantamount to banning one's own "financial path". "You (Hong Kong) are the leading brother in the Asia-Pacific region. , Even if you think it is not feasible in the end, you have to explain to the public why it is not feasible.”

SPAC is becoming more and more popular in the United States. According to data from research firm SPAC Research, there are 445 US stock IPOs in 2020, of which 248 are SPACs, accounting for 56%.

Last year, the total SPAC fundraising amounted to US$82 billion (approximately HK$639.6 billion), which is 6 times the high set in 2019.

Looking back to the Asian region, Singapore Exchange Chief Executive Loh Boon Chye said that he plans to introduce SPACs for market consultation this season. If supported by the market, he hopes that the first SPAC will be listed on the Singapore Exchange as soon as this year.

It is reported that SGX has already negotiated with international banks and related companies. If it succeeds, Singapore will become the first country in Asia to open SPAC listings, leading Hong Kong.

It is reported that SGX has already negotiated with international banks and related companies. If it succeeds, it will become the first country in Asia to open SPAC listings.

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The opening of the golden game: worth careful study

In contrast to Hong Kong, the Hong Kong Stock Exchange has not launched relevant consultations.

Ou Jinglin, the administrative director of the Financial Affairs Bureau, published a blog in early February this year, voluntarily mentioning that when studying the development of the global capital market, he noticed that SPAC was launched in the US market last year.

He believes that the rapid growth of SPAC listings itself may have certain risks. However, in view of the increasing popularity of SPAC listings, the FSDC believes that relevant issues deserve careful study.

The local big sands and funds are also "one step ahead."

PCCW (0008) Chairman Li Zekai, in September last year, and Peter Thiel, one of the founders of Paypal, have jointly established two SPACs.

Among them, Bridgetown Holdings (BTWN) plans to develop new economic technologies in Southeast Asia, and the target acquisition targets are technology, financial services and media companies. Recently, there are rumors that Li Zekai is considering setting up a third SPAC in the United States.

Argyle Street Management Limited (ASML), a fund company founded by the founder of Value Partners Group (0806), Ye Weiyi, established SPAC "Malacca Straits Acquisition" last year, with the goal of acquiring potential media, food processing, renewable energy and healthcare companies for mergers and acquisitions .

In recent years, the Stock Exchange intends to "clean up peaceful land" to crack down on "backdoor listings" and penny stocks.

(Information Picture/Photo by Jiang Zhiqian)

Hong Kong's current regulatory constraints restrict development

EY Asia Pacific Listing Services Lead Partner Cai Weirong believes that SPAC has room for research. "The U.S. is so prevalent, and Hong Kong needs to study and imitate it. Singapore is doing it. You (Hong Kong) is the leader in the Asia Pacific region. Even if you think it is not feasible in the end, you have to explain to the public why it is not feasible."

In fact, the current supervision in Hong Kong may limit the possibility of introducing SPACs. For example, Rules 14.82 to 14.84 of the Listing Rules clearly specify that all or most of the assets of a listed company are cash or short-term securities, which will be regarded as Companies with cash assets are not suitable for listing.

At the same time, it is also proposed that cash asset companies cannot rely on the expected use of funds in the future as a means of deducting the level of cash after the fund-raising activities are completed.

After the fundraising activity is completed, the company's assets must be less than half (50%) in cash.

Otherwise, the Hong Kong Stock Exchange will treat it as a backdoor listing, and may not pass an IPO.

Cai Weirong said that Hong Kong has not yet matured the supervision of SPACs, and the current implementation may not be suitable.

"Because you (SPAC) stated that it is a shell stock, you have to exempt SPAC first, because it is 100% cash for a long time!" He thinks that the SFC may have doubts about the company's selection of SPAC for listing, why a company does not seriously do an IPO ?

"This question is actually worth asking the regulator, but if you (the company) can solve it, it turns out that SPAC is really suitable for you, and if you have sufficient disclosure, you should have the right to do it."

He explained that in traditional IPOs, there is a chance that after the company completes the roadshow, under-subscription and unable to go public, some companies will choose to go public in the form of SPAC in order to avoid "washing in vain." Looking for you, if you do well, I will buy you. The two things are so different."

Cai Weirong, EY's Asia Pacific Listing Services Lead Partner, believes that SPAC has room for research in Hong Kong.

(Photo by Huang Baoying)

Not introducing SPAC is the same as blocking Hong Kong's wealth road

Last year, Hong Kong raised a total of 359.503 billion yuan, the highest level since 2010, second only to Nasdaq's 441 billion yuan, making it the world's second-highest exchange of new stocks in 2020.

Last year, SPAC funds raised alone amounted to US$82 billion (approximately HK$639.6 billion), which is 6 times the high set in 2019.

Looking ahead to this year, Cai Weirong believes that the amount of IPO funds raised this year can continue the strong momentum of last year. As for the introduction of SPAC, will the Hong Kong IPO market become more prosperous?

"In terms of the right path, it should be possible, but it is difficult to quantify how many more, because Hong Kong's introduction of SPAC is most likely to find Chinese companies, followed by Southeast Asian companies, but it is still unknown whether Chinese companies will choose SPACs to list."

He believes that the purpose of introducing SPAC is not to "make a big market," but not to block one's own money.

He took the earlier approval of the same shares with different rights as an example, which only gave the company more options for listing in Hong Kong, instead of making all companies with the same shares with different rights only listed in Hong Kong.

He said with a smile, "A restaurant serving 10 dishes and 20 dishes, 20 dishes must be popular."

Hong Kong Stock Exchange Financial Development Bureau