Event: on December 17, the stock exchange, a wholly-owned subsidiary of the Hong Kong stock exchange, announced the establishment of a new spac listing mechanism in Hong Kong, which will take effect on January 1, 2022.
Compared with the SPAC consultation document published on September 17 this year, the listing mechanism has changed in five aspects: in September this year, the Hong Kong Stock Exchange issued the SPAC system consultation suggestions, which is more stringent than the SPAC listing system implemented in the United States and Singapore, mainly reflected in the higher requirements for the fund-raising scale of SPAC and the stricter requirements for the qualification of sponsors. The formal listing mechanism has some changes in the number of SPAC institutional professional investors, the requirements of SPAC directors, the binding of voting rights and share redemption rights, mandatory independent pipe investment and the diluted upper limit of Warrants: 1) reduce the number of investors: the number of professional investors required for initial listing has been reduced from 30 to 20; 2) Give more flexibility to the structure of the board of directors: the requirements of SPAC directors are changed to stipulate that the SPAC board of directors must be at least two class 6 or class 9 CSRC licensees (including a director of a licensed spac promoter); 3) adjust the expression that the voting right is consistent with the share redemption right: the relevant expression is changed to strengthen the independent pipe (private placement after listing) investment regulations, stricter regulatory review on the terms and valuation of M & A transactions of SPAC; 4) stricter requirements for mandatory independent pipe Investment: the minimum investment scale of independent pipe is refined, and the qualification requirements for pipe investors are improved. 5) the upper limit of warrant dilution is increased: the upper limit is increased from 30% to 50%, and the impact of warrant dilution needs to be more clearly disclosed
Based on the experience of the United States, spac has become the main way of IPO of American companies, and its development has been accelerating. Spac model has been developed in the United States for many years and has become more and more active in the US stock market in recent years. According to the IPO data of the U.S. market by November 2021 according to spacanalytics, in terms of the number of IPO projects, 606 of the 953 IPO events in the U.S. market were issued through spac, accounting for 64% of the total number of IPOs; From the perspective of IPO raising scale, the whole market IPO raising scale in the United States is US $327.24 billion, and the raising scale through spac is US $161.044 billion, accounting for 49%.
Compared with traditional IPO, spac has obvious advantages in listing speed and flexibility. The SPAC listing model provides a new listing path for the companies to be listed and becomes the target company acquired by spac. Compared with the conventional IPO process, the listing time is shorter, the listing success rate is higher, and the transaction structure design is more flexible, which will further enhance the attraction of the Hong Kong market to the companies to be listed.
We believe that the establishment of the SPAC rules of the Hong Kong Stock Exchange will probably bring significant increment to the Hong Kong stock IPO and further expand the market. The attractiveness of IPO in Hong Kong market will be further improved under the establishment of SPAC system, and the listing process of companies to be listed will be significantly accelerated, which is expected to bring increment to the market; In addition, due to the constant friction between China and the United States in the capital market, China and the United States have not reached an agreement on the supervision of China concept shares. Under this background, with the implementation of the SPAC listing system of Hong Kong shares, it will bring more rich ways for the return of China concept shares and further improve the return speed of China concept shares.
Investment suggestions:
We believe that the establishment of the SPAC system will further improve the IPO speed, effectively expand the capacity of the Hong Kong stock market, and then catalyze the improvement of the daily average trading volume center. We recommend the Hong Kong stock exchange.
Risk tip: the effectiveness of SPAC listing system is not as expected, the competition of overseas exchanges is intensified, and the daily average trading volume of Hong Kong stocks is falling more than expected
