First Hong Kong-listed SPAC has slow start in trading debut

[HONG KONG] Aquila Acquisition, the first special purpose acquisition company (SPAC) to list in Hong Kong, had a slow debut on Friday (Mar 18) as few investors are qualified to trade the shares.

As of 12.55 pm local time, just 2 trades were registered with the shares, which were unchanged from their offer price of HK$10 each. The firm backed by CMB International Asset Management and AAC Mgmt Holding raised about US$128 million in the IPO, inaugurating rules for blank-check companies effective since January.

Transactions with blank-check companies in the Asian hub are restricted to professional investors, and there are only 29 approved SPAC exchange participants allowed to trade them in Hong Kong, according to information in the Hong Kong Exchanges & Clearing's website.

The timing is challenging for newcomers in Hong Kong, with pressures ranging from increasing interest rates to Russia's war in Ukraine and high volatility with Chinese stocks.

Additionally, SPAC offerings globally have slowed down considerably after a flurry of listings last year as investor interest diminished, US regulatory scrutiny increased and stock prices tumbled.

Aquila Acquisition's debut is being closely watched by 9 other blank-check firms working on offerings in the financial hub city.

"Although each SPAC will have its own special features and unique selling points, we believe the market response to the first debut will likely set an important precedent for future SPACs in Hong Kong," said Virginia Lee, a partner at Clifford Chance, before the debut.

Hong Kong's rules for SPACs are more stringent than those of other venues given past scandals involving shell companies. Issuers must respect a minimum fund-raising threshold of HK$1 billion (S$173 million), higher than in Singapore or New York. Additionally, individual investors are allowed to trade the shares in those hubs.

Aquila Acquisition will focus on an acquisition within "new economy" sectors, including green energy, life sciences and advanced technology and manufacturing in Asia, particularly in China, according to its prospectus.

"The appetite of promoters hinges on how the current remaining application cases come out and whether the first de-SPAC transaction would be successfully completed within 3 years," Andy Wong, IPO leader at SW Hong Kong, said prior to Aquila Acquisition's debut. Morgan Stanley and CMB International Capital are joint sponsors of Aquila's offering. BLOOMBERG