Hong Kong could have a hard time attracting blank check companies after it proposed a high threshold to list in the city.
In a consultation paper, Hong Kong Exchanges & Clearing Ltd proposed that special purpose acquisition companies would need to raise at least HK$1 billion ($128 million) when listing and that retail investors would be barred from participating.
It also set an eligibility test for SPAC promoters, including having managed at least HK$8 billion for three years or possessing senior management experience at major listed companies.
The bourse has in the past been mired in scandals over shell companies and is now arguably taking the most careful approach to SPACs among major exchanges.
Singapore and New York have no minimum fundraising size, but have a market capitalisation requirement of $112 million and of between $50 million to $100 million, respectively, according to the paper. London, New York and Singapore also have no restrictions on retail investors.
“HKEX could struggle to attract SPACs with its conservative framework proposals,” said Sharnie Wong, a senior analyst at Bloomberg Intelligence. The exchange, one of the world’s busiest in terms of initial public offerings, could see a 8% boost in IPO volumes from SPAC listings, Wong estimated.
The exchange acknowledged its proposal was on the strict side, but argued it needed safeguards to “maintain Hong Kong’s reputation for high quality listings.”
It said that the minimum fund raising size would ensure that SPACs have the available funds to seek good high-quality targets.
Morgan Stanley sees limited upside to turnover at the bourse due to the stricter requirements than in other markets, analysts including Richard Xu said in a report.
SPACs are empty shells when they go public, raising money with the intention of buying and merging with another company.