On 17 December 2021, The Stock Exchange of Hong Kong Limited (the “Exchange”) published its consultation conclusions (the “Consultation Conclusions”) to create a new listing regime for special purpose acquisition companies (“SPACs”) in Hong Kong.  The Exchange also published a guidance letter on SPACs (the “Guidance Letter”).  In addition, the Securities and Futures Commission (the “SFC”) published a Practice Note 23 to provide guidance on waivers of the mandatory general offer obligation under Rule 26.1 of the Takeovers Code for De-SPAC Transactions.

Majority of the responses from the public has generally supported the Exchange’s proposals outlined in its consultation paper on SPAC dated 17 September 2021 (the “Consultation Paper”).  This article follows up with our news update in September 2021 on the Exchange’s Consultation Paper.  The capitalised terms used herein shall have the same meanings as defined in the Consultation Conclusions and Consultation Paper.

The Exchange shall broadly implement its proposals on SPAC set out in the Consultation Paper, with some amendments to reflect the public’s responses. The amended Listing Rules as set out in the Consultation Conclusions and the Guidance Letter came into effect on 1 January 2022.

Key features of SPACs

The table below lays out the key differences between the original proposals and the final SPAC framework to be implemented:



Original Proposal

Final Model Adopted

Open Market Requirement at Initial Listing


A SPAC’s securities must be distributed to a minimum of 30 Institutional Professional Investors.

Proposal relaxed, the minimum number of Institutional Professional Investors is reduced to 20.

SPAC Directors


The majority of SPAC’s board must be composed of representatives of the SPAC Promoters who nominate them.

Proposal replaced by a requirement for a SPAC’s board to have at least two Type 6 or Type 9 SFC-licensed individuals (including one director representing the licensed SPAC Promoter).

Alignment of Voting with Redemption


SPAC shareholders can only redeem their shares if they vote against any one of the following matters:


(a)  A material change in a SPAC Promoter or the eligibility and/or suitability of SPAC Promoter;


(b)      A De-SPAC Transaction; or


(c)   A proposal to extend the De-SPAC Announcement or De-SPAC Transaction Deadline.

Proposal replaced with strengthened Independent PIPE Investment requirements (see item 4 below) to provide a stronger regulatory check on the terms and valuation of the De-SPAC Transaction.  SPAC shareholders will be able to redeem their shares regardless of how they cast their vote.

Mandatory Independent PIPE Investment


Size of Independent PIPE Investment

Outside independent PIPE investment constitute at least 25% of the expected market capitalisation of the Successor company, or 15% to 25% in the case of Successor Companies with an expected market capitalisation of over HK$1.5 billion.


Significant Sophisticated Investment

At least one independent PIPE Investor must be an asset management firm or fund with assets under management (the “AUM”) of at least HK$1 billion, and the PIPE investment must result in this investor beneficially owning at least 5% of the issued shares of the listed issuer following the completion of a De-SPAC Transaction.

Size of Independent PIPE Investment

Proposal requirements strengthened, staggering Independent PIPE Investment size thresholds relative to the negotiated value of a De-SPAC Target adopted:


Negotiated De-SPAC Value

Minimum independent PIPE investment as a percentage

< HK$2 billion


HK$2 billion -

HK$5 billion


HK$5 billion -HK$7 billion


≥ HK$7 billion


> HK$10 billion

Waiver to be considered on a case-by-case basis


Significant Sophisticated Investment

Proposal requirements tightened, at least 50% of Independent PIPE Investment must come from at least three institutional investors with AUM of at least HK$8 billion.

Dilution Cap on Warrants


Overall Warrant Cap is 30%. 

Proposal relaxed:


(a)  Overall Warrant Cap increased to 50%.


(b)  More prominent disclosure on the dilutive effect of all warrants required.


(c)   No separate cap on the warrant to share ratio and on Promoter Warrants. 

SPAC Promoters Licensing Requirement


At least one of the SPAC Promoters must be a firm holding:


(a)     a Type 6 (advising on corporate finance) and/or Type 9 (asset management) licence issued by the SFC; and


(b)     at least 10% of the Promoter Shares.

Proposal maintained, the Exchange will also consider granting waiver on a case-by-case basis (for example, to accept a SPAC Promoter if they have overseas accreditation that is equivalent to an SFC Type 6 and/or Type 9 license).


Funds Held in Escrow


100% of the gross proceeds raised from the SPAC’s initial offering are held in a ring-fenced trust account in Hong Kong until a De-SPAC transaction takes place or the SPAC is liquidated.

Proposal adopted, with a minor modification that accrued interests or other income earned on monies held in the escrow account may be released.


Rights to additional Successor Company Shares (earn-out rights)


The Exchange proposed to accept requests from a SPAC to issue additional Promoter Shares, as an earn out portion, subject to the following:


(a) the total number of Promoter Shares (including the earn-out portion) should not be more than 30% of the total number of shares in issue at the time of the SPAC listing;


(b) the earn-out portion is linked to objective performance targets;


(c) SPAC shareholders having granted approval, at the general meeting; and


(d) such earn-out portion shall be included in the resolution approving the De-SPAC Transaction.


The Exchange will permit a SPAC to issue earn-out rights to SPAC Promoters that are convertible into ordinary shares of the Successor Company, if the Successor Company meets pre-defined performance targets.


The Exchange will allow share price to be used as a performance target for the earn-out rights as long as those share price performance targets are:


(a)     at least 20% higher than the issue price of the SPAC Shares at listing of the SPAC;


(b)     satisfied by exceeding a pre-defined volume weighted average price of the Successor Company’s shares over a period of not less than 20 trading days within a 30 consecutive trading day period, with such period commencing at least six months after the listing of the Successor Company.

Brokerage Fee



The 1% brokerage free requirement for the placing of securities by SPAC at its initial listing will be exempted.

Trading Arrangements


Separate trading of SPAC shares and SPAC warrants from the date of initial listing to a De-SPAC Transaction.  The Exchange proposed two options to mitigate the risks of volatility, namely:


(a)     Option 1: allow only manual trades on SPAC Warrants; and


(b)     Option 2: allow both automatching of orders with Volatility Control Mechanism and manual trades on SPAC securities.

Proposal with Option 2 is adopted.




The Promoter Warrants and SPAC Warrants are only exercisable after the completion of a De-SPAC transaction.  The Exchange also prohibits SPACs from issuing Promoter Warrants at less than fair value or that contain more favourable terms than that of SPAC Warrants.


Proposal modified, the Exchange will prohibit:


(a)     with the issue of Promoter warrants at less than 10% of SPAC Shares per Promoter Warrant issue price; and


(b)     Promoter Warrants that entitle the holder, upon exercise, to receive more than one share in the Successor Company.  The Exchange will also impose an additional requirement that the minimum exercise price of the SPAC Warrants and Promoter Warrants must be at a price which represents at least 15% premium to the issue price of the SPAC Shares.

Analysis and Takeaways

We can see that the Hong Kong regulators have kept in mind its commitment to investor protection in the Consultation Conclusions.  The new Hong Kong SPAC listing regime seeks to strike a balance between upholding Hong Kong as a leading financial centre by allowing SPAC listings while ensuring high quality SPAC listing applicants and De-SPAC targets to enter into the Hong Kong capital markets and maintaining robust regulatory framework.   

Please contact our Partner Mr. Rodney Teoh and associate Ms. Angela Lau for any enquiries or further information.