SPAC IPO SEC SGX HKEX Special Purpose Acquisition Company Capital Markets

Introduction

Special Purpose Acquisition Companies (SPACs) experienced explosive growth in 2020-2021, followed by significant regulatory scrutiny and market correction. This article examines the evolving regulatory landscape across major markets.

United States: SEC SPAC Regulation

The SEC has significantly increased SPAC regulation through proposed rules and enhanced enforcement actions.

Proposed SPAC Rules (2022)

The SEC proposed comprehensive rules for SPACs that would:

  • Enhance disclosure requirements for SPAC IPOs and de-SPAC transactions
  • Align SPAC liability framework with traditional IPOs (safe harbor not available for projections in de-SPAC)
  • Require additional disclosures on conflicts of interest, dilution, and sponsor compensation
  • Mandate financial statement requirements for target companies
  • Expand underwriter liability for SPAC offerings

De-SPAC Transaction Disclosures

  • Enhanced disclosure on projections including basis, assumptions, and risks
  • Conflicts of interest disclosures for sponsors and insiders
  • Detailed discussion of due diligence conducted on target
  • Disclosure of PIPE (Private Investment in Public Equity) financing terms

Enforcement Actions

SEC has brought numerous enforcement actions against SPAC sponsors, targets, and auditors for inadequate due diligence, misleading projections, and inadequate disclosures.

European Union: SPAC Framework

EU SPACs operate under existing Prospectus Regulation and Market Abuse Regulation with some exchange-specific accommodations.

Euronext SPAC Framework

  • No dedicated SPAC regime; SPACs listed on Euronext Growth (for smaller SPACs) or Euronext Paris (for larger)
  • Minimum market capitalization: €5 million for Euronext Growth, €40 million for Euronext Paris
  • Prospectus required at IPO and de-SPAC stage
  • 24-month completion deadline (extendable)

Deutsche Börse SPAC Framework

  • Scale segment for SPACs with minimum market cap €30 million
  • EU prospectus regime applies
  • 36-month completion deadline

Asia-Pacific SPAC Markets

Singapore: SGX SPAC Framework (2021)

SGX established the first dedicated SPAC regime in Asia with significant investor protections:

  • Minimum Market Capitalization: S$150 million (US$110 million)
  • Independent Directors: At least 3 independent directors, including one independent chair
  • Sponsor Requirements: Minimum S$5 million shareholding; lock-up until post-de-SPAC profitability
  • De-SPAC Timeline: 24 months, extendable to 30 months with shareholder approval
  • Redemption Rights: Shareholders may redeem regardless of how they vote on de-SPAC
  • PIPE Requirement: Minimum 15% of merger proceeds from PIPE investments

Hong Kong: HKEX SPAC Framework (2022)

HKEX implemented SPAC rules with strong investor protections:

  • Professional Investor Requirement: At least 75% of SPAC securities held by professional investors
  • SPAC Promoters: Eligibility criteria including track record, reputation, and minimum shareholding of 10%
  • Minimum Market Cap: HK$1 billion (US$128 million)
  • De-SPAC Timeline: 24 months, extendable to 36 months
  • PIPE Requirement: Minimum 25% of de-SPAC merger proceeds from independent PIPE investors (15% for larger valuations)
  • Warrant Trading Restrictions: Only professional investors can trade SPAC warrants

Other Asian Markets

  • Malaysia (Bursa Malaysia): SPAC framework established 2021 with minimum market cap RM150 million
  • Indonesia (IDX): SPAC regulations under development
  • Thailand (SET): SPAC framework effective 2022 with minimum market cap THB 1.5 billion

Market Trends and Outlook

  • Regulatory Convergence: Global trend toward enhanced disclosure and investor protections
  • PIPE Criticality: PIPE financing increasingly essential for de-SPAC completions
  • Sponsor Quality: Market favor SPACs with experienced, high-quality sponsors
  • Traditional IPO Resurgence: Return to traditional IPOs as market conditions normalize
  • Continued Innovation: Alternative listing vehicles emerging (direct listings, reverse mergers)

Practical Considerations

  1. Conduct thorough due diligence on target companies
  2. Ensure robust disclosure of projections and assumptions
  3. Structure PIPE financing early in de-SPAC process
  4. Consider regulatory approval timelines across jurisdictions
  5. Evaluate alternative listing vehicles for specific circumstances