Hong Kong is finally joining the SPAC bandwagon, and a slew of influential personalities have lined up to lend credibility to the city’s inaugural offerings -- from an Olympic medalist to political power brokers and a sofa tycoon.
Gymnast-turned-businessman Li Ning, who launched one of China’s top sportswear brands after retiring from competition, was one of the first to file and will be looking for a consumer lifestyle deal. Chinese drug developer I-Mab formed a special purpose acquisition company to hunt for the next hot health-care innovation.
But it’s serial dealmaker Eugene Wong who’s assembled the most wide-ranging team for his SPAC, hoping to tap their connections to find good targets in the tech and biotech space. He’s working with his uncle Jason, known as “the godfather of SPACs in Asia.” Furniture maker Royale Home Holdings and a cigarette package printing magnate are among the partners they’ve roped in for Ace Eight Acquisition Corp.
Another backer is legislator Kenneth Lau, head of an influential rural body representing Hong Kong’s indigenous villagers and a top adviser to the territory’s chief executive. Lau, known for leading a temple ceremony to read the city’s fortune at Lunar New Year, owns a passive stake along with his sisters. Digital marketing guru Sammy Hsieh, who founded Nasdaq-listed iClick Interactive Asia Group, is also getting in on the action.
While Hong Kong SPACs are following the US in luring well-known names to back deals, stricter rules in the Asian financial hub require promoters to have financial knowhow and industry experience. The US track record shows links with A-listers don’t necessarily mean superior returns, as betting on celebrities like Jay-Z and Martha Stewart left investors mostly in the red last year.
It is paramount for the first few Hong Kong SPAC listings to succeed in order to provide confidence for the deals that follow, said David Blennerhassett, an analyst at Ballingal Investment Advisors. The city’s stricter rulebook means that promoters’ credentials are more important than in other jurisdictions, according to Andy Wong, IPO leader at SW Hong Kong.
See also: What went wrong for 17Live?
Deal Network
“The Hong Kong stock exchange wants quality SPACs, quality SPAC promoters and subsequent quality de-SPAC deals, to differentiate the Hong Kong market from elsewhere,” Wong said in an interview. “Trust is the most important thing in the game.”
Eleven blank-check companies have filed to list in Hong Kong as of Friday, including one that’s already started trading. Aquila Acquisition Corp, the first to debut, had a timid start with just a few trades in its first session, and it last closed below its listing price.
The stakes are high as Hong Kong competes for issuers with Singapore, which approved its SPAC regime last year and hosted the debut of three blank-check firms in January. The two Asian financial hubs raced to set up new frameworks for SPACs after the asset class exploded on Wall Street. The buzz has since faded in New York, with issuance slowing compared with last year.
See also: NTAA spac is dissolving, confirming The Edge Singapore's report
Members of the Hong Kong elite are lending their prestige to a number of prospective deals. A company controlled by Adrian Cheng, 42-year-old scion of one of the city’s wealthiest property dynasties, started a consumer SPAC with Franklin Templeton alumnus Claudius Tsang.
Norman Chan, who previously led Hong Kong’s de-facto central bank, will search for a finance acquisition with former Standard Chartered Plc executive Katherine Tsang, the sister of the city’s second post-colonial leader. Well-known Hong Kong personalities with good connections to potential targets can be valuable to a SPAC, said Keith Pogson, senior partner for financial services, Asia Pacific at EY.
“It is the network to find the company that is critical,” Pogson said. “If you want to say what’s going to differentiate one SPAC from another, it’s going to be the ability to target the right market, look in the right places.”
Several SPACs are backed by Chinese lenders’ overseas asset management arms. Others are giving veterans of the mainland tech boom a new chapter in their careers, with former Alibaba.com boss David Wei and ex-Tencent Music executive Xie Guomin’s investment firm both sponsoring deals.
The Hong Kong scene also has the standard assortment of retired Wall Street luminaries and private equity mavens that were at the vanguard of the US blank-check boom.
CLSA veteran Richard Taylor is helping run a SPAC backed by casino billionaire Lawrence Ho. A co-founder of CDH Investments, one of China’s biggest private equity shops, is leading another. Ex-Goldman Sachs Group Inc. rainmaker Fred Hu and JPMorgan Chase & Co.’s former top China banker Frank Gong are involved in other listings.
Those SPACs that go ahead will need to contend with tougher regulations compared with other financial centers, thanks to past scandals in Hong Kong involving shell companies. Issuers must raise a minimum of HK$1 billion ($170 million; US$128 million), and the city’s securities watchdog has banned individual investors from trading their shares.
“People might invest in the SPACs for the wrong reasons,” EY’s Pogson said. “Here in Hong Kong, we’ve taken a slightly different approach.”
