Hong Kong proposes allowing Spac listings restricted to professional investors

HONG KONG – The Stock Exchange of Hong Kong, on Friday, proposed changing its rules to allow special purpose acquisition companies (Spacs) to list, a bid to tap the frenzy for such investment vehicles in the United States earlier this year.

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

Spacs are shell corporations that list on stock exchanges and then merge with an existing company to take that public, typically offering strong valuations and shorter listing timeframes than initial public offerings.

The proposals come with tighter restrictions than those elsewhere, limiting trading in the Spacs. They suggest allowing only professional investors to invest in a Spac and requiring companies sponsoring a Spac to include at least one firm licenced by the local securities regulator the Securities and Futures Commission.

These “safeguards” were included “to maintain Hong Kong’s reputation for high quality listings and stable secondary trading,” said Bonnie Y Chan, head of listing at Hong Kong Exchanges and Clearing, the stock exchange’s parent.

Regional rival Singapore Exchange unveiled its final rules for Spacs to list earlier this month, after easing some measures viewed as too strict by participants following market consultations.

Spacs surged in popularity in the United States last year and early this year. But the pace of capital raising has slowed as investors have been spooked by many Spacs’ poor financial performance and a regulatory crackdown led by the US Securities and Exchange Commission over their disclosures.

Comments are closed.