On 17 September 2021, the Stock Exchange of Hong Kong Limited (the “Exchange”) published a consultation paper (“Consultation”) seeking market feedback on proposals to create a listing regime for special purpose acquisition companies (“SPACs”) in Hong Kong. The deadline for submissions is 31 October 2021.

A SPAC is a shell company that raises funds through its listing for the purpose of acquiring a business (the “De-SPAC Target”) at a later stage (the “De-SPAC Transaction”) within a pre-defined time period after listing.

While the listing regime for SPACs is new to Hong Kong, it has a long history in the U.S. and its popularity has increased significantly in recent years. The introduction of a SPAC listing regime would allow Hong Kong to remain competitive globally by providing another route to attract Greater China and South East Asia companies to list in Hong Kong that may otherwise choose to list elsewhere via De-SPAC Transactions.

However, the “shell” characteristic of SPACs will give rise to concerns about market quality and shareholder protection. Since the reputation of Hong Kong’s capital market is also an important cornerstone of its competitive position as an international financial centre, it is crucial for a successful Hong Kong SPAC listing regime to impose safeguards that not only maintain but enhance this reputation for quality.

To strike a balance between market development and quality, the SPAC listing regime proposed in the Consultation, which is acknowledged to be more stringent than that of the U.S. market, is aimed at listing SPACs that have experienced and reputable SPAC Promoters that seek good quality De-SPAC Targets. It is designed to provide a high entry point for SPAC listing applicants and De-SPAC Targets.

The key proposals of the Consultation are summarised in the report.