Country Cracking Down On Capitalism Courts SPACs

There is much that is not welcome in China these days: New York initial public offerings, massive debt, democracy. But there’s plenty the Chinese Communist Party and their collaborators in Hong Kong are happy to welcome: bond issues, individual investors, displaced IPOs. And, on that note—now that there’s no interest in them on this side of the globe (or is there?), perhaps some big fat blank checks.

Proposals released Friday by Hong Kong’s stock exchange would require SPACs to raise at least 1 billion Hong Kong dollars, the equivalent of $128.5 million, in an IPO. The companies would have two years to find a merger partner, and would have to conclude the merger within three years…. Subscription and trading of SPAC securities will be restricted to professional investors, while individual investors will be allowed to buy into stocks after the merger takes place, it said.

Before merging with SPACs, companies would need to raise 15% to 25% of their expected market capitalization via a so-called PIPE, or private investment in public equity. PIPE funding rounds are typical in SPAC mergers.

Hong Kong Considers Allowing SPAC Listings [WSJ]
SPAC IPOs Are on the Rise Because Investors Are Looking for Yield [Barron’s]
China Link Gives Hong Kong a Boost in Bond Trading [WSJ]

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