De-SPAC Transaction Requirements
Application of New Listing Requirements
The terms of a De-SPAC Transaction must include a condition that the transaction will not complete unless listing approval of the Successor Company’s shares is granted by the Exchange.
A Successor Company must meet all new listing requirements of these rules.
Note: These include all the applicable requirements under Chapter 8, and the application procedures and requirements for a new listing set out in Chapter 9. The Successor Company will be required, among other things, to issue a listing document and pay the non-refundable initial listing fee. Chapters 8A, 18 and 18A will also apply where applicable.
(1) A Successor Company must appoint at least one sponsor to assist it with the application for listing in accordance with Chapter 3A. The sponsor(s) must comply with the requirements as set out in Chapter 3A, including, among other things, the requirement in rule 3A.07 such that at least one sponsor must be independent of the Successor Company.
(2) The sponsor(s) must be formally appointed at least two months prior to the date of the listing application of the Successor Company.
Note: If a De-SPAC Target has been considering an application for listing not via a De-SPAC Transaction at the same time as it is considering listing via a De-SPAC Transaction (i.e. it is taking a “dual-track” approach to listing), then the Exchange will take into account the due diligence performed by the sponsor(s) of the De-SPAC Target during the whole dual-track process for the purpose of considering whether the minimum engagement period of two months referred to in rule 18B.37(2) has been satisfied. However, the sponsor(s) must be formally engaged by the Successor Company for the purpose of its listing application.
Eligibility of De-SPAC Targets
At the time of entry into a binding agreement for the De-SPAC Transaction, a De-SPAC Target must have a fair market value representing at least 80% of the funds raised by the SPAC from its initial offering (prior to any redemptions referred to in rule 18B.57).
Independent Third Party Investment
The terms of a De-SPAC Transaction must include investment from third party investors who must meet independence requirements consistent with those that apply to an independent financial adviser under rule 13.84. Such third party investors must be Professional Investors.
Note 1: For the purpose of this rule, references in rule 13.84 to the appointment of an independent financial adviser and its duties should be disregarded.
Note 2: Such independent third party investors must submit a confirmation in writing to the Exchange of their independence as required by this rule.
The total funds to be raised from the independent third party investors referred to in rule 18B.40 must constitute at least the following percentage of the negotiated value of the De-SPAC Target as stated in the announcement referred to in rule 18B.44.
Negotiated value of the De-SPAC Target (“A”) Minimum independent third party investment as a percentage of (A) Less than HK$2,000,000,000 25% HK$2,000,000,000 or more but less than HK$5,000,000,000 15% HK$5,000,000,000 or more but less than HK$7,000,000,000 10% HK$7,000,000,000 or more 7.5% Note 1: The Exchange may accept a lower percentage than 7.5% in the case of a De-SPAC Target with a negotiated value larger than HK$10,000,000,000.
Note 2: A SPAC must demonstrate to the Exchange that the required minimum independent third party investments have been committed by the time of the announcement referred to in rule 18B.44.
The independent third party investment referred to in rule 18B.41 must include significant investment from sophisticated investors, as defined by the Exchange in guidance published on the Exchange’s website, as amended from time to time.
The investments made by the independent third party investors referred to in rule 18B.40 must result in their beneficial ownership of the listed shares in the Successor Company.
Note: Other forms of investments (such as investments resulting in the receipt of convertible bonds) will not be counted for the purpose of determining the satisfaction of the thresholds set out in rule 18B.41.
Announcement of De-SPAC Transaction
A SPAC must make an announcement of the terms of a De-SPAC Transaction as soon as possible after the terms of the De-SPAC Transaction have been finalised.
The content of the announcement referred to in rule 18B.44 must comply with rules 14.58 to 14.62, as applicable.
Note: The Exchange may issue guidance on the Exchange’s website, as amended from time to time, on requirements regarding the contents of the announcement referred to in rule 18B.44.
A SPAC must submit the announcement referred to in rule 18B.44 to the Exchange prior to publication and must not publish it until the Exchange has no further comments on the announcement.
A SPAC must state in the announcement referred to in rule 18B.44 when it expects the listing document for the De-SPAC Transaction to be issued.
Listing Document Requirements
A SPAC must issue a listing document for the De-SPAC Transaction that complies with the requirements of these rules.
Note: This means the listing document must comply with the requirements of Chapter 11 including the requirements on profit forecasts of rules 11.16 to 11.19 and the requirements on a reverse takeover in rules 14.63 and 14.69.
The listing document referred to in rule 18B.49 must not be issued until the Exchange has confirmed to the SPAC that it has no further comments on the document.
The listing document issued for the De-SPAC Transaction must contain:
(1) all the information required for a new listing applicant by these rules;
(2) the information required by rules 14.63 and 14.69 for a reverse takeover;
(3) prominent disclosure of the potential dilution effect of the De-SPAC Transaction (whether resulting from the conversion or exercise of the Promoter Shares, Promoter Warrants and SPAC Warrants, any earn-out rights referred to in Note 1 to rule 18B.29(1) or any other securities issued as part of the De-SPAC Transaction) to the number and value of the holdings of non-redeeming SPAC shareholders;
(4) the identities of, the amount of investment by, and any other material terms of the investment committed by third party investors to complete the De-SPAC Transaction; and
(5) how the Successor Company proposes to provide liquidity in the trading of the warrants following the listing of the Successor Company.
A SPAC must despatch the listing document referred to in rule 18B.49 to SPAC shareholders at the same time as or before the SPAC gives notice of the general meeting to approve the De-SPAC Transaction.
A De-SPAC Transaction must be made conditional on approval by the SPAC’s shareholders at a general meeting. Written shareholders’ approval will not be accepted in lieu of holding a general meeting.
Shareholders and their close associates must abstain from voting on the relevant resolution(s) at the general meeting referred to in rule 18B.53 if they have a material interest in the transaction.
Note: For the avoidance of doubt, SPAC Promoters and their respective close associates will be regarded by the Exchange as having a material interest in the transaction and must abstain from voting.
The terms of any third party investment to complete a De-SPAC Transaction must be the subject of the SPAC shareholders’ vote at the general meeting referred to in rule 18B.53.
Note: This matter may be voted on together with the De-SPAC Transaction as one resolution, or separately.
De-SPAC Transactions Involving Connected De-SPAC Targets
With respect to a De-SPAC Transaction that is a connected transaction under Chapter 14A, a SPAC must comply with the applicable connected transaction requirements in Chapter 14A and, in addition, a SPAC must:
(1) demonstrate that minimal conflicts of interest exist in relation to the proposed transaction;
(2) support, with adequate reasons, its claim that the transaction would be on an arm's length basis; and
(3) include an independent valuation of the transaction in the listing document referred to in rule 18B.49.
Note: Rule 18B.56 (1) and (2) may be evidenced, for example, by:
(a) demonstrating that the SPAC and/or its connected persons are not controlling shareholders of the De-SPAC Target; and
(b) no cash consideration is paid to connected persons, and any consideration shares issued to the connected persons are subject to a lock-up period of 12 months.