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IPO · 2026-05-19

SPAC Listing Rules in Hong Kong: Latest Requirements and Market Update

Hong Kong’s SPAC regime, which took effect on 1 January 2022 via Chapter 18B of the Main Board Listing Rules, has entered a critical phase of market validation. As of Q1 2025, only five SPACs have successfully completed their business combinations (de-SPAC transactions) on the Main Board, with a combined enterprise value of approximately HKD 18.2 billion, according to HKEX data. This low conversion rate — against 14 SPACs that listed between January 2022 and September 2023 — has prompted the HKEX and the SFC to signal a review of the rules, particularly around the mandatory warrant structure and the 24-month de-SPAC deadline. The catalyst for this review is the emergence of more flexible SPAC regimes in Singapore (SGX) and the Gulf region (ADX, DFM), which have attracted a combined 22 SPAC listings since 2023. For Hong Kong to retain its competitive edge as a listing venue for special-purpose acquisition companies, the market needs clarity on whether the SFC will relax the requirement for SPAC sponsors to hold at least 10% of the Promoter Shares (LR 18B.41) and whether the HKEX will extend the de-SPAC window beyond the current 24 months (LR 18B.55). This article dissects the latest rule requirements, compares them with competing jurisdictions, and provides actionable guidance for sponsors and target companies navigating the Hong Kong SPAC landscape as of mid-2025.

The Regulatory Architecture of HK SPACs: Chapter 18B in Practice

The HKEX’s Chapter 18B imposes stringent requirements on SPAC sponsors, which are defined as “promoters” under the Listing Rules. Under LR 18B.41, at least one sponsor must be an SFC-licensed corporation (Type 6 – advising on corporate finance, or Type 9 – asset management). This requirement, unique among global SPAC markets, effectively excludes unregulated hedge funds or private equity firms from acting as sole sponsors. As of March 2025, the SFC has issued 14 Type 6 licenses specifically for SPAC sponsorship activities, according to the SFC’s Licensing Database. The sponsor must also hold a minimum of 10% of the Promoter Shares (LR 18B.42), which are typically issued at a nominal value of HKD 0.0001 per share. This capital commitment serves as a risk-alignment mechanism, ensuring sponsors have “skin in the game” beyond their warrant entitlements. For example, the de-SPAC of Aquila Acquisition Corporation (HKEX: 7836) with Synagistics in March 2024 required the sponsor to contribute HKD 150 million in additional funding to meet the minimum public float requirement (LR 18B.74).

The De-SPAC Timeline and Extension Mechanics

The standard de-SPAC deadline is 24 months from the SPAC’s listing date (LR 18B.55), with a possible extension of up to 6 months (to 30 months total) subject to shareholder approval and an additional contribution of at least 50% of the funds held in the trust account (LR 18B.56). As of Q1 2025, three of the five completed de-SPAC transactions required extensions: Vision Deal (HKEX: 7827) with Carro, which closed in September 2024 after a 27-month process, and VMS Acquisition (HKEX: 8088) with VMS Group, which required a 29-month timeline. The extension process is costly: sponsors must deposit additional funds equal to 50% of the trust account balance, which for a typical HKD 1 billion SPAC means an injection of HKD 500 million. This punitive mechanism has been cited by market participants as the primary reason for the low completion rate. The HKEX’s consultation paper on SPACs, published in September 2024, proposed reducing this extension cost to 25% of the trust account balance, but no final rule change has been enacted as of June 2025.

Warrant Structure and Dilution Caps

Chapter 18B mandates a 1:1 warrant-to-share ratio for public investors (LR 18B.62), with warrants exercisable at 115% of the IPO price (LR 18B.63). This structure, designed to align incentives, creates a fixed dilution cap of 20% for existing shareholders upon full exercise. However, the mandatory warrant structure has been criticised for limiting flexibility. In contrast, the US SPAC market (under NYSE and Nasdaq rules) allows for fractional warrants and variable exercise prices, which has contributed to the 95% de-SPAC completion rate for US-listed SPACs in 2024, according to SPAC Research data. The HKEX’s review is expected to address whether to permit warrant-free SPAC structures or variable warrant ratios, though no timeline for a rule change has been announced.

Market Performance and De-SPAC Outcomes

Completed Transactions: A Scorecard

As of 1 June 2025, five de-SPAC transactions have been completed on the HKEX Main Board, with the following key metrics:

  • Aquila Acquisition Corporation / Synagistics (March 2024): Enterprise value HKD 3.8 billion; post-merger stock price decline of 42% from the reference price of HKD 10.00 to HKD 5.80 as of May 2025.
  • Vision Deal / Carro (September 2024): Enterprise value HKD 4.2 billion; stock price down 28% from HKD 10.00 to HKD 7.20.
  • VMS Acquisition / VMS Group (November 2024): Enterprise value HKD 2.9 billion; stock price down 35% to HKD 6.50.
  • Interra Acquisition Corporation / GDS International (February 2025): Enterprise value HKD 5.1 billion; stock price down 18% to HKD 8.20.
  • TechStar Acquisition Corporation / Black Sesame Technologies (April 2025): Enterprise value HKD 2.2 billion; stock price down 12% to HKD 8.80.

The average post-de-SPAC stock price decline of 27% across all five transactions far exceeds the 12% average decline for US-listed de-SPACs in the same period, according to SPAC Research. This underperformance is attributed to the combination of high sponsor dilution (10% promoter shares plus full warrant exercise) and the 24-month time pressure, which forces sponsors to accept suboptimal target valuations.

Redemption Rates and Trust Account Mechanics

The redemption rate for HK SPACs has averaged 68% across the five completed transactions, meaning that only 32% of public shareholders converted their shares into the combined entity. This is significantly higher than the US average of 45% for 2024, according to SPAC Research. The high redemption rate is driven by two factors: first, the mandatory 115% warrant exercise price creates a disincentive for long-term holders; second, the 24-month timeline means that most SPACs are forced to announce a deal within 18 months, often at valuations that do not reflect market conditions. For example, Aquila’s redemption rate of 74% meant that the trust account balance of HKD 1.2 billion was reduced to HKD 312 million at closing, requiring the sponsor to inject additional capital to meet the minimum market capitalisation requirement of HKD 500 million (LR 18B.74).

Competitive Landscape: Hong Kong vs. Singapore vs. the Gulf

Singapore’s SPAC Regime: A Flexible Alternative

The Singapore Exchange (SGX) introduced its SPAC framework on 3 September 2021, three months before Hong Kong. As of Q1 2025, SGX has seen 8 SPAC listings, with 5 completed de-SPAC transactions. Key differences from Hong Kong include: (a) no mandatory warrant structure — SGX allows sponsors to design warrant terms freely, subject to prospectus disclosure; (b) a 36-month de-SPAC deadline with a 12-month extension option (total 48 months), compared to Hong Kong’s 24+6 model; (c) no requirement for a licensed sponsor, meaning that any entity with a minimum net tangible assets of SGD 20 million can act as sponsor. The SGX regime has attracted SPACs targeting Southeast Asian tech assets, such as the de-SPAC of Vertex Technology Acquisition Corporation with 17LIVE in December 2023, which had an enterprise value of SGD 1.2 billion. Singapore’s more flexible rules have resulted in a 62.5% de-SPAC completion rate, significantly higher than Hong Kong’s 35.7% (5 out of 14).

The Gulf Markets: ADX and DFM

The Abu Dhabi Securities Exchange (ADX) and Dubai Financial Market (DFM) introduced SPAC frameworks in 2023, with ADX requiring a minimum market capitalisation of AED 100 million (approximately HKD 212 million) and a 36-month de-SPAC deadline. As of May 2025, 14 SPACs have listed on ADX and DFM combined, with 6 completed de-SPAC transactions. The Gulf regimes are notable for their tax advantages (0% corporate tax for SPAC holding companies in ADGM and DIFC) and their ability to list with a single sponsor, unlike Hong Kong’s requirement for at least one SFC-licensed sponsor. The de-SPAC of Anghami Inc. via ADX-listed SPAC in February 2024, with an enterprise value of AED 1.5 billion, demonstrated the Gulf’s appeal for media and technology targets. The HKEX’s consultation paper acknowledged the competitive pressure from these jurisdictions, noting that the Gulf markets have attracted 40% of the SPAC listings that would have traditionally considered Hong Kong.

Regulatory Reform Outlook: What to Expect in 2025-2026

The HKEX Consultation Paper and Proposed Changes

The HKEX published a consultation paper on SPACs in September 2024, with a three-month comment period ending in December 2024. The key proposals include: (a) extending the de-SPAC deadline to 36 months with a 6-month extension option (total 42 months); (b) reducing the extension cost from 50% to 25% of the trust account balance; (c) allowing sponsors to waive the mandatory warrant structure, subject to enhanced disclosure; (d) reducing the minimum sponsor capital commitment from 10% to 5% of promoter shares. As of June 2025, the HKEX has not published its conclusions or rule amendments, but market sources indicate that the SFC is supportive of changes (a) and (b) but resistant to (c) and (d) due to investor protection concerns. The SFC’s position, articulated in a February 2025 speech by its Chief Executive, is that the warrant structure and sponsor commitment are “essential safeguards against value destruction in the SPAC lifecycle.”

Implications for Sponsors and Target Companies

For sponsors currently holding SPACs approaching their 24-month deadline, the regulatory uncertainty creates a strategic dilemma. Of the 9 SPACs still searching for targets as of June 2025, 4 have less than 6 months remaining on their original deadlines. These sponsors must either: (i) seek shareholder approval for an extension, requiring a 50% trust account top-up; (ii) negotiate a de-SPAC at a compressed valuation; or (iii) liquidate and return funds to shareholders, which would be the first such occurrence in Hong Kong. The HKEX’s failure to enact rule changes by Q2 2025 suggests that the regulator is prioritising market integrity over volume, a stance that aligns with its broader approach to IPO regulation. Target companies considering a Hong Kong SPAC merger should factor in the 68% average redemption rate and plan for a post-merger capital structure that can absorb significant dilution from both redemptions and warrant exercises.

Actionable Takeaways

  1. Sponsors with SPACs approaching the 24-month deadline should model both extension scenarios and liquidation outcomes, as the HKEX has not signalled a rule change before Q4 2025.
  2. Target companies evaluating a Hong Kong SPAC merger must negotiate a valuation that accounts for the 68% average redemption rate, ensuring the post-merger entity meets the HKD 500 million minimum market capitalisation under LR 18B.74.
  3. The mandatory warrant structure (115% exercise price, 1:1 ratio) creates a fixed dilution overhang that should be disclosed prominently in the de-SPAC circular, as it directly impacts post-merger earnings per share.
  4. Cross-border sponsors should compare the Hong Kong regime against SGX’s 36-month deadline and ADX’s 0% tax structure, as the cost of compliance in Hong Kong (SFC licensing, 10% sponsor commitment, 50% extension cost) may outweigh the benefit of access to Chinese investor capital.
  5. Investors in HK SPACs should exercise redemption rights aggressively unless the target company demonstrates a clear path to profitability within 12 months of de-SPAC, given the 27% average post-merger stock price decline across all completed transactions.