After Hong Kong’s first listing of a firm acquired by a special purpose acquisition company, a long line of such deal vehicles in the city continues to struggle to find targets or receive regulatory approval.
Singapore-based Synagistics, a digital-commerce platform backed by a unit of Alibaba Group Holding, went public Wednesday after combining with HK Acquisition. The debut was the first since Hong Kong allowed in 2022 listings of spacs, shell companies that seek to bring private businesses public.
Shares of Synagistics rose nearly fivefold before paring gains in their debut on Wednesday. The stock gained 4.8% Thursday.
The so-called de-spac deal, however, hardly comes as consolation for a market segment that remains in limbo, with the other 13 special vehicles that have applied for listings in the Asian financial hub making little headway. Behind the slow progress are Hong Kong’s stricter rules for spacs that have affected liquidity and demand.
A less friendly global environment didn’t help either, with activity in the once-hot sector for startups and investment banks languishing in recent years after regulators stepped up scrutiny and interest rates surged. China’s previous crackdown on private enterprise, especially the country’s tech industry, was another headache for deal makers in Hong Kong.
See also: Singapore-based Synagistics begins trading as Hong Kong’s first de-spac
Most SPACs That Have Filed in Hong Kong Haven't Been Listed |
Among the other 13 spacs, two have struck deals with target companies but have yet to get approvals from China’s securities regulator. Another two have yet to find private businesses to go public and risk liquidation. Others haven’t resubmitted their listing documents after expiration.
See also: S’pore-headquartered Synagistics to begin trading on Oct 30 as Hong Kong’s first successful de-spac
“I’m lucky that I didn’t get listed two years ago,” said Jason Wong, a financier who founded Ace Eight Acquisition Corp, one of the special vehicles. The blank-check firm filed pre-listing documents in early 2022 and let them expire twice. It hasn’t refiled since.
Spacs are subject to more stringent requirements in Hong Kong than the US. The city’s stock exchange has in the past been mired in scandals over shell companies and is taking a cautious approach toward the sector.
The special vehicles require private investment from third parties to be in place ahead of their potential deals in the Asian financial hub. In addition, only professional investors have access to spac offerings, while such deals in the US are available to retail investors.
“It is a trading interest for only a small group of professional investors,” said Kenny Wen, head of investment strategy at KGI Asia. Individual investors, often a force of demand in initial public offerings, have little reason to give spacs attention, and their absence could keep trading volumes muted even after the target company has listed shares, Wen added.
Spacs that want to merge with Chinese firms also need green light from China’s securities regulator, which since last year has required companies seeking share sales overseas to get its nod. Clearance time has varied from one and a half months to more than two years, according to an analysis by KPMG LLP.
The Hong Kong bourse said in August that it would temporarily relax some of the rules, including the option to lower the amount of third-party investment.
While IPOs in the city have sprung back to life following a stimulus-induced rally in Chinese shares, the local exchange’s loosening of rules alone won’t be enough to electrify the spac market, said Louis Lau, a partner in the capital markets advisory group at KPMG China.
“I do not expect there to be a lot of spac listings in the near future,” Lau said, adding that investors would need to be more willing to take more risks as they did in the US spac boom of 2020. “The current market conditions do not allow a lot of spacs globally.”
