HONG KONG: First SPAC moves a step closer to IPO after HKEX approval.

As published on scmp.com, Wednesday 9 March, 2022.

Hong Kong stock exchange has approved the first initial public offering (IPO) by a special purpose acquisition company (SPAC) under its new listing regime.

The approval for Aquila Acquisition Corp, sponsored by the asset management arm of Chinese brokerage CMB International, was reflected in an updated draft prospectus published on website of Hong Kong Exchanges and Clearing (HKEX) on Wednesday.

While the company did not say how much it plans to raise from the share sale, SPACs in Hong Kong must raise a minimum of HK$1 billion (US$128 million).

Green Tea Group, a Chinese restaurant chain operator with 236 outlets nationwide, also received a nod from the city’s bourse operator for its IPO. The firm aims to raise between US$100 million and US$200 million, a source familiar with the transaction said.

These companies are pressing ahead with their IPO plans despite concerns over the global economy following Russia’s invasion of Ukraine, which has roiled equities and commodities markets. The price of crude, which has risen to the highest level since 2008, has fuelled fears of a global recession, sending the Hang Seng Index towards a six-year low. The S&P500 fell to its lowest level since June.

This has curbed investors’ appetite for new shares, as many are focusing on limiting losses of their portfolios as they digest the implications of a ban on Russian oil imports by the US and UK, bankers said.

Aquila Acquisition, which is led by CMB International Asset Management along with several executive directors and senior management, said it planned to use the IPO proceeds to buy companies in the “new economy sector”.

“Our objective is to generate attractive returns for the shareholders by selecting a high-quality [acquisition] target,” it said in the prospectus.

Aquila also said that CMB International has invested in over 100 Chinese technology companies, many of which have gone on to launch their own stock offerings. These include China’s super app Meituan and electric-car battery maker Contemporary Amperex Technology.

Morgan Stanley and CMB International are the joint sponsors of the SPAC deal.

Green Tea Group, which claims to be the fourth-largest casual Chinese dining chain, plans to open up to 100 new restaurants between 2022 and 2024, according to its draft prospectus. It also plans to use part of the IPO proceeds to upgrade its information technology network.
Citigroup and CMB International are joint sponsors of the deal.

The group earned 94.9 million yuan (US$15 million) of profit in the nine months to September 2021, compared with a net loss of 30.7 million yuan in the same period a year earlier.

So far this year, only eight companies have completed IPOs in Hong Kong, raising US$1.3 billion, versus US$10.1 billion in the same period a year ago from 23 deals, data from Refinitiv shows. The bumper first quarter of 2021 was bolstered by Chinese short-video platform Kuaishou Tech’s US$5.4 billion IPO in January, the world’s third-largest deal last year.

On the Nasdaq, the world’s top IPO venue in 2021, there have been no IPOs since mid-February, Refinitiv data shows.

Meanwhile, Top Glove of Malaysia, the world’s largest producer of medical gloves, said on Wednesday that it would pursue a Hong Kong IPO at the “appropriate time”, as the Kuala Lumpur-based company responded to media reports regarding the delay to its planned US$545 million share sale.

‘Quality and quantity’ on show…