Hong Kong's introduction of a stringent regulatory framework for Special Purpose Acquisition Companies (SPACs) in 2022 has led to limited market activity, with corporate bosses warning that tough standards are deterring blank-cheque companies from listing. Hong Kong still awaits reward from its new SPAC regime, as stringent rules and economic challenges constrain the growth of this alternative listing method.
The SPAC regime in Hong Kong, introduced in January 2022, imposes strict requirements on blank-cheque companies. These regulations include:
A minimum fundraising threshold of HK$1 billion (approximately US$128 million)
Trading restricted to professional investors only, with a minimum of 75 professional investors required
At least 20 institutional investors must hold 75% of securities
Mandatory PIPE investment requirements varying by deal size
A 24-month deadline to announce a de-SPAC transaction and 36 months to complete it
These stringent rules reflect Hong Kong's priority of ensuring quality listings over attracting a high volume of SPAC IPOs, aiming to prevent potential market abuses and protect investor interests.
 SPACs in Hong Kong face significant hurdles, primarily due to the stringent regulatory environment. The restriction to professional investors only severely limits the potential investor base, creating liquidity challenges and reducing market interest. Additionally, the high minimum market capitalization requirement of $128 million narrows the pool of suitable acquisition targets. These factors, combined with competition from a robust traditional IPO market that raised $42.4 billion in 2021, make it difficult for SPACs to gain traction. The strict timeline requirements - 24 months to announce and 36 months to complete de-SPAC transactions - further intensify the pressure on SPAC sponsors to find and secure quality targets quickly.
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Since the introduction of Hong Kong's SPAC regime in January 2022, market activity has been notably limited. Only two SPACs have successfully listed: Aquila Acquisition Corp and Vision Deal HK Acquisition Corp. This tepid response contrasts sharply with the U.S. market, which saw 613 SPAC listings raising $163 billion in 2021. Despite the slow start, some positive developments have emerged:
Five SPACs have successfully listed on HKEX since the rules came into effect
Three have announced de-SPAC transactions
High-quality SPACs with experienced sponsors, particularly those targeting mainland China businesses, have filed in Hong Kong
However, no de-SPAC transactions have successfully closed yet, highlighting the ongoing challenges in the market. The conservative approach adopted by Hong Kong regulators has resulted in a more measured SPAC market development compared to other jurisdictions.
Hong Kong's SPAC regulations are notably more stringent than those in the U.S. and Singapore. While the U.S. allows retail investor participation and has a lower minimum market capitalization requirement of $50-100 million, Hong Kong restricts SPAC investments to professional investors only and mandates a minimum of $128 million. Singapore's approach is more closely aligned with U.S. practices, allowing retail investor participation and offering a generally more flexible regulatory framework. These differences reflect Hong Kong's cautious stance, shaped by previous experiences with fraudulent shell companies, and its focus on preventing potential market abuses. The stricter requirements in Hong Kong have resulted in slower SPAC market development compared to these other jurisdictions.
Hong Kong’s cautious approach to SPACs, while designed to protect investors and ensure high-quality listings, has led to limited market activity and left the city lagging behind other SPAC-friendly jurisdictions like the U.S. and Singapore. The stringent requirements—from the high minimum capital threshold to the restriction to professional investors—have dampened enthusiasm among potential SPAC sponsors and constrained liquidity. However, the regulatory framework reflects Hong Kong's commitment to safeguarding market integrity and avoiding past missteps with shell companies. Whether this careful approach will ultimately yield positive results remains to be seen. For Hong Kong to become a competitive SPAC hub, regulators may need to balance stringent safeguards with flexibility, creating a framework that invites innovation while preserving investor confidence.
