Special Purpose Acquisition Company (SPAC) Service

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A Special Purpose Acquisition Company (SPAC) is a type of shell company that raises capital through a public listing with the sole purpose of acquiring or merging with an existing business—known as the “De-SPAC Target”—at a later stage. This acquisition or merger, called a “De-SPAC Transaction,” must be completed within a pre-defined time frame after the SPAC’s listing.

SPAC Regime – Effective 1 January 2022

SPAC Promoter Requirement – At least one promoter must be an SFC-licensed firm holding ≥10% of Promoter Shares.
Investor Restriction – Participation limited to Professional Investors only.
Minimum Fundraising – A SPAC must raise at least HK$1 billion in its initial offering.
Post-De-SPAC Listing Standards – The resulting listed company must meet all new listing requirements.
Independent Third-Party Investment – To complete the De-SPAC Transaction, the SPAC must secure 7.5%–25% of the target’s negotiated value from independent Professional Investors. At least 50% of this investment must come from a minimum of three Sophisticated Investors.
Transaction Timeline – The De-SPAC Transaction must be announced within 24 months and completed within 36 months of the SPAC’s listing.

Key features of the new listing regime for SPACs

Before De-SPAC

Investor eligibility (pre-De-SPAC): Subscription and trading of SPAC shares and warrants are restricted to Professional Investors (PIs) only. HKEX also operates SPAC-specific trading arrangements.
Distribution & open-market rules at IPO: Each of SPAC Shares and SPAC Warrants must be distributed to ≥75 PIs, of whom ≥20 must be Institutional Professional Investors (IPIs); those IPIs must collectively hold ≥75% of the securities to be listed. Standard open-market safeguards also apply: ≥25% public float and no more than 50% of securities in public hands held by the top three public shareholders at listing.
SPAC Promoters (suitability & licensing): Promoters must meet stringent suitability/experience tests. At least one SPAC Promoter must be an SFC-licensed Type 6 and/or Type 9 firm and must hold ≥10% of the Promoter Shares; HKEX may modify/waive the licensing requirement case-by-case for equivalent overseas accreditation.
Board composition: The SPAC board must include at least two SFC-licensed individuals (Type 6 and/or Type 9), one of whom must represent the licensed SPAC Promoter; any director nominated by a SPAC Promoter must be an officer of that Promoter.
Promoter economics (caps & earn-outs): Promoter Shares are capped at 20% of total shares at SPAC listing. HKEX may allow earn-out rights so that Promoter Shares + earn-out shares together do not exceed 30% of the SPAC’s IPO share count. Any share-price earn-out target must be ≥20% above the IPO price, tested over ≥20 trading days within a 30-day window, starting ≥6 months after the Successor Company lists; conversion only at/after De-SPAC on a one-for-one basis.
Warrants (public & promoter): The total shares issuable on exercise of all outstanding warrants (public + promoter) must not exceed 50% of the shares in issue when the warrants are issued. Exercise price must be ≥15% above the SPAC IPO share price; exercise only after completion of the De-SPAC. (Additional rule: Promoter Warrants cannot be issued below 10% of the IPO share price.)
Minimum fundraising & share price: A SPAC must raise at least HK$1 billion at IPO, and the issue price per SPAC Share must be ≥HK$10.
Stock short-name markers: SPAC Shares use short names ending “-Z”; SPAC Warrants end “ZYYMM/ZYY” (YY = expiry year; MM = month).

De-SPAC

Successor Company must meet all new listing requirements.
The post-merger listed issuer must satisfy all Main Board new listing tests (e.g., profit/market-cap/revenue/cash-flow tests in Chapter 8), file a new listing application under Chapter 9, and appoint at least one independent IPO Sponsor (Chapter 3A) at least two months before filing; the listing document is fully vetted.
De-SPAC Target size threshold (fair market value ≥80%).
At signing a binding agreement, the target’s fair market value must be at least 80% of the funds raised in the SPAC’s IPO (before any redemptions). Boards must state the basis for this assessment in the De-SPAC announcement/documentation.
Independent PIPE investment required (7.5%–25% of negotiated value).
The SPAC must secure independent third-party PIPE equal to 7.5%–25% of the negotiated value of the target (lower % for larger deals; potential waiver for >HK$10bn). PIPE investors must be Professional Investors and genuinely independent.
“Sophisticated Investors” must anchor the PIPE.
At least 50% of the independent PIPE must come from ≥3 Sophisticated Investors (each an asset manager with AUM ≥HK$8bn or a fund of size ≥HK$8bn), and commitments must be in place by the De-SPAC announcement.
Shareholder approval at a general meeting (with abstentions).
The De-SPAC must be approved by SPAC shareholders at a general meeting; SPAC Promoters and any shareholder with a material interest (and their close associates) must abstain. Terms of the independent PIPE are also subject to shareholder vote.
Mandatory redemption rights for SPAC shareholders.
Shareholders must be given the option to redeem their shares before (a) the De-SPAC vote, (b) any material change in SPAC Promoters/required licensed directors, and (c) any extension to De-SPAC deadlines; redemptions must be paid from the escrowed IPO proceeds.
Open-market spread at listing of the Successor Company.
On listing, the Successor Company must have at least 100 Professional Investors (instead of the usual 300) and meet all other open-market requirements (e.g., ≥25% public float; concentration cap on top three public holders).
Announcement and completion deadlines (with limited extensions).
The De-SPAC must be announced within 24 months and completed within 36 months of SPAC listing; up to 6 months’ extension requires shareholder approval (promoters abstain) and HKEX approval. Failure may lead to suspension and return of funds.