Hong Kong tycoon Li Ka-shing, Zheng Zhigang and other Asian billionaires have recently invested in “special purpose acquisition companies” (SPAC), hoping to ride the wave of “shell listing” boom, but now the United States is ready to tighten the rules for such blank check companies, resulting in Wall Street’s enthusiasm has cooled, potentially hitting these Asian tycoons’ deals.
Bloomberg reports that a total of 326 companies have raised more than $101 billion through the SPAC listing boom this year, but the fundraising pipeline is now at a standstill amid the possibility of stricter SEC regulations, which could affect the deals of some Asian investment firms and tycoons.
New guidelines set by the SEC last week could curb the recent boom in SPAC listings. Under the new guidelines, warrants issued to initial investors in SPAC deals may not be considered equity instruments, but instead may be classified as liabilities, potentially disrupting the listing applications of these SPACs.
This is no less bad timing for Asian entrepreneurs. Asian SPACs currently waiting to go public in the U.S. include Gateway Strategic Acquisitions, backed by buyout operator Gaw Capital Advisors, and Artisan Acquisitions, backed by Cheng’s New World Development Company, together with Hony Capital. All of these applications were filed two weeks ago and were able to start the initial public offering process for the stock, but none have been processed yet. People familiar with the matter said these applications are waiting for the market atmosphere to improve.
In addition, investors such as Li Ka-shing, the richest man in Hong Kong, and New Wind Horizon, backed by Nan Fung Group and private equity firm EmerVest, are also planning more SPAC deals. Asia SPAC has raised $3.1 billion this year, more than the total of similar deals last year. This rapid growth in deal value underscores the growing attraction of SPACs for Asian entrepreneurs to invest in. However, since the SPAC market is showing signs of a similar bubble, the cooling of the boom is not necessarily bad news.
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