What is a SPAC and how popular is it? Business Acquisition Limited with DayDayCook, a company specialising in the sale and production of healthy A special purpose acquisition company (“SPAC”) is a shell ready-to-cook, ready-to-heat; and plant-based meat corporate or blank-check listing looking for an acquisition products in the PRC, which had been invested by a tycoon opportunity to bring another private company listed. In Peter Lee Ka Kit, Henderson Land and Towngas in short, it is led by a management team, a.k.a. a sponsor, previous Series C financing, and the merger of Magnum and it raises money through an IPO before an acquisition Opus with Forbes Global Media Holding Inc., a global target is identified. media company headquarters in the US.

Typically, money raised from an IPO is placed in an interest- Mushrooming of China-HK domiciled SPACs bearing trust account. Such money will be used when a SPAC consummates a business combination, a.k.a. a De- As compared to only 17 Asia-domiciled SPACs listed in the SPAC transaction, or will be returned to investors if it fails to US in 2020, some 34 Asia-domiciled SPACs have already seek an appropriate acquisition target and eventually filed a SPAC IPO application on the Nasdaq for the first four liquidates. In the case a merger succeeds, the SPAC will months of 2021. According to Refinitiv, US-listed SPACs accomplish its mission and be given a new stock code, and are very fascinating for Asian investors, particularly when the acquired target will become the truly listing entity. i the acquisition targets are also domiciled in Asia.

There were 248 successful SPAC IPOs in 2020, which is a "For every publicly filed one, I would say there are three or fourfold increase of that in 2019 (59 cases) and contributed four that have not filed publicly, but have been kicking more than half of the total IPOs in the US (248/450 cases) around SPAC opportunities," said Peter Kuo, the CEO of for the year. Draftkings and Open Lendings are two of the PTK Acquisition Corporation ii. Bonnie Chan, the Head of US-based SPAC-listed super-stars of 2020, which raised Listing of the HKEX, added that a lot of companies had US$1,664 million and US$275 million in their respective expressed interest in exploring a SPAC listing in Hong SPAC IPOs. Kong. According to HKEX's statistics, 25 US-listed SPACs are headquartered in greater China, and approximately 12 As for Asian investors, there have been emerging China-HK companies in Asia have been acquired by a SPAC in recent based companies seeking SPAC-listing since early 2020. In yearsiii. Listed below are recent cases of China-HK the past two months, we can see De-SPAC domiciled SPACs in 2020-2021. announcements such as the merger of Ace Global

Table 1: Some recent cases of China-HK domiciled SPAC-listings in 2020-2021

Stock Code

SPAC Base Amount Raised in IPO (Pre De-SPAC)

Ace Global Business Acquisition Limited * US US$ 40 million ACBA

PTK Acquisition Corporation Hong Kong US$ 115 million PTKiv

Magnum Opus Acquisition Limited # Hong Kong US$ 200 million OPA

Bridgetown Holdings Limited Hong Kong US$ 550 million BTWN

Bridgetown 2 Holdings Limited Hong Kong US$ 299 million BTNB

Artisan Acquisition Corporation Hong Kong US$ 345 million ARTAUv

Angel Pond Holdings Corporation China US$ 250 million PONDvi

Trinity Acquisition Corporation China US$ 250 million TRNYUvii

Silver Crest Acquisition Corporation China US$ 250 million SLCRviii

Source: Moore Analysis

* Announcement has been made on 26 August 2021 to merge with DayDayCook

# Announcement has been made on 26 August 2021 to merge with Forbes

The HKEX’s SPAC consultation – The act of Better late than never, the HKEX released a 45-day strategic prudence? consultation on 17 September 2021 to seek market feedback to create a Hong Kong listing regime of SPACs. In Asia, Singapore is obviously much more aggressive to Nevertheless, the adoption of a fast-tracked SPAC-listing fight for the SPAC market. The SGX has announced new route still appears self-contradictory to HKEX’s current rules that enable SPACs to list on its mainboard from 3 listing policy development. It is therefore reasonable to the September 2021 onwards. Other Asia exchanges, such as proposed SPAC-listing rules are perceived by the market the Japan Stock Exchange and the Indonesia Stock to be even more stringent than that of the US. By doing so, Exchange, are both considering having their own SPAC- the adoption of the SPAC-listing route, up to a listing- listing rules, said their government bodies. threshold close to a traditional IPO, becomes justifiable to all the stakeholders who have been believing and following On the other hand, the HKEX is known to have been HKEX’s sustainability strategies, including its strategic actively imposing more stringent requirements for prudence and patience to introduce SPAC-listing in Hong continuing listing and IPO applications in recent years. The Kong. market has been mulling and giving grave concern when HKEX is going to announce its SPAC-listing rules, and The HKEX’s proposed SPAC requirements and the whether savvy SPAC speculators are attracted. requirements of the SGX and the Nasdaq are tabularised below:

Table 2: Comparison of SPAC-listing requirements

Requirements US (Nasdaq and NYSE) HKEX (proposed) SGX

Share Issue Price A minimum issue price of A price of HK$10 or above. A minimum issue price of US$4. SG$5.

Fundraising Size Minimum Market At least HK$1 billion. At least SG$150 million

Capitalisation Requirement: market capitalisation.

  • NASDAQ (Cap. Market):

US$50 million

  • NYSE (American):

US$50 million

SPAC Promoters With experience and/or track With at least 1 SPAC promoter With track record and repute record of SPAC Promoters. which is an SFC licensed firm of the founding shareholders holding at least 10 per cent of and experience and expertise the Promoter Shares. of the management team of a

Investor Suitability No restrictions. Restricted to professional No restrictions. investors only prior to a De- SPAC transaction. Shareholder Vote and Public shareholders voting SPAC shareholders must be All independent shareholders Redemption Option against the De-SPAC given the option to redeem their have a redemption option transaction must be entitled shares prior to a De-SPAC regardless of their voting to a right to redeem their transaction. decisions. SPAC shares. Lock-up Period No restrictions, but normally 12 months upon completion of At least 6 months and up to 12 months upon completion the De-SPAC transaction. 12 months from the of the De-SPAC transaction. completion date of the De- SPAC transaction. Acquisition Target No restrictions as long as it Shall not include investment Expressly contemplates De- fulfils the listing company (as defined by Chapter SPAC transactions involving requirements. 21 of the Listing Rules). But life science companies and biotech companies and mineral mineral, oil and gas companies would be eligible De- companies. SPAC targets. De-SPAC Transaction Within 36 months of its IPO Announcement within 24 months Within 24 months, with the Deadlines without further extension. of the date of its listing. options for an extension of up However, many US-listed Completion within 36 months of to further 12 months. SPACs voluntarily set a the date of its listing. shorter deadline of 24 months. Source: HKEX consultation paper on SPAC dated 13 Sep 2021, Moore Analysis

Who is the Mr. Right in Asia? The tug of war

between HKEX and SGX What are the most common SPAC-listing It is not unreasonable to believe that SPACs may become successful factors? more popular than traditional IPOs in the near future. The latest US Stock Market data revealed that SPAC IPOs had Greater deal size, greater chance of success contributed to 63% of total 2021 IPOs in the US up to September 2021ix. SGX, being the first Asia SPAC-listing SPACs generally acquire a target that is at least three to stock market, has definitely made a right move to absorb five times the size of the SPAC trust account. The main the unequivocal demands of a new listing channel while purpose for this multiple is to mitigate the many forms of the HKEX still sticks to the rules. dilution of the founder shares.

While some of the capable investors have had their SPACs Balance of sponsor and investor incentives listed on the Nasdaq, the borderline investors may eventually choose their SPAC-listing through SGX. If the It is common to find a SPAC sponsor gets 20% of stock whole idea of SPAC-listing is about fast and investment paid as promotion stock in nominal consideration after De- flexibility, the marketing position of Hong Kong SPAC- SPAC. SPAC Alpha conducted a research which listing would rather be too prudent like a traditional IPO concluded that “Deals where the sponsor has been willing albeit it is reasonably understood that a more stable stock to sacrifice something have traded better than deals where market is protected in return. We do not see a winner, but the sponsor has held onto the entire promote.” only the first mover right now.

In order words, the more promotion stock is retained, the

lower stock price is traded in long term. It is a strategic How can Moore Transaction help? decision to let sponsors give up some of their compensation to sufficiently attract private investment in public equity (“PIPE”) to participate in long term stock In Moore Transaction Services Limited, we have a team of trades. financial analysts and accountants who are experienced in performing valuations and financial due diligence for purposes such as De-SPAC transactions and other M&As, Successful deals tend to have a strong management financial reporting, listing and litigation purposes. team