New listing rules for China's tech companies could ‘dampen' appetite for SPAC deals

remained keen on the investment vehicle,, accounting for stock warrants, one of the hottest fundraising trends, review any foreign listings, population of more than 1.4 billion, Didi Chuxing’s

Heightened oversight of foreign listings by China’s tech unicorns and an uncertain regulatory environment could weigh on the pace of deals by special purpose acquisitions companies (SPACs) seeking to acquire Chinese companies as they deploy huge financial war chests raised in the past year, according to deal makers and sponsors.

So-called blank-cheque companies raised more than US$105 billion in the first half of this year and sponsors – both based in Asia and in the US – have been increasingly turning their attention to targets in Asia, particularly growth companies in China, as the marketplace has become more saturated. China is home to two-thirds of Asia’s tech unicorns.

However, a new slate of draft rules announced last week by the Cyberspace Administration of China (CAC) threatens to slow the rate of US listings by Chinese tech companies – and attractiveness of those companies to American investors.

It is early days, but it is possible the new regulations could weigh on acquisitions of Chinese companies by blank-cheque companies, according to Kristin Zimmerman, who heads Morgan Stanley’s SPAC M&A practice in New York.

“There are a number of unicorns coming out of Asia and China, in particular, that may raise a flag to the regulators that these businesses are going overseas in the form of a SPAC transaction,” said Zimmerman, who was speaking at a “Asia SPAC Management Bootcamp” workshop last week. “Time will tell, but I suspect, as you see some of these announcements come to fruition, that may raise the attention of the broader political agenda.”

SPACs do not have an existing business, instead they are created purely as a vehicle to raise funds and buy assets within a specified time limit, usually two years. They have been seen as an easier path for some companies, particularly pre-profit emerging technology firms, to go public and are primarily listed in the US.

Asian sponsors and target companies have remained keen on the investment vehicle, even as fatigue set in this spring among institutional investors following a frantic period of fundraising in the first quarter. The US Securities and Exchange Commission also raised questions in April about the accounting for stock warrants common to most SPAC deals, leading to a pause in what had been one of the hottest fundraising trends in the past two years.

“With respect to SPACs merging with Chinese companies, it will unquestionably have a very significant dampening effect,” said Peter Kuo, the CEO of PTK Acquisition Corporation, a SPAC backed by the China CEO of VIA Technologies and the chief strategy officer of Apple supplier Foxconn Technology. “I think larger companies will be reluctant to be sticking their heads out in this environment.”

remained keen on the investment vehicle,, accounting for stock warrants, one of the hottest fundraising trends, review any foreign listings, population of more than 1.4 billion, Didi Chuxing’s

Beijing unveiled new draft rules to review foreign listings by Chinese technology platforms following Didi Chuxing’s US$4.4 billion initial public offering in June. Photo: Bloomberg

Under the draft rules, the CAC, China’s top cybersecurity regulator, would review any foreign listings by technology platform companies that possess the data of at a least 1 million users. That is a small hurdle for a country with a population of more than 1.4 billion.

The proposed rules followed a series of data-security inquiries of Chinese tech companies that recently listed in the US following Didi Chuxing’s US$4.4 billion initial public offering, the biggest by a Chinese company in the US since 2014.

The crackdown has prompted dozens of Chinese companies who have filed for US IPOs or are prepping for such listings to put their plans on hold. Chinese social media and lifestyle platform Xiaohongshu, e-commerce platform Meicai, medical data solutions provider LinkDoc Technology and fitness app Keep are among the companies that have shelved their IPO plans recently.

“Even if it isn’t a company caught squarely by the regulations, i.e. not over 1 million users or is in an industry like a traditional consumer business, I still think that will give you some pause,” said Kuo, who is co-founding partner of private equity firm Canyon Bridge Capital Partners and is based in Hong Kong.

One issue for SPAC sponsors and target companies will be if they need so-called private investment in public equity (PIPE) financing from international investors to complete deals, Kuo said. (Typically, listed SPACs borrow additional money beyond the capital raised in their IPOs to complete acquisitions).

“People are really going to be antsy about participating in a PIPE where you’re taking months of market risk where you can’t trade it and you’re committed to a deal,” Kuo said. “That will be a practical impediment.”

The reality for many SPAC sponsors is they have 18 months to two years to complete a transaction and need to derisk that deal “no matter how good the target looks”, according to Steve Kaplan, head of capital markets at investment bank Ladenburg Thalmann & Company.

“If you’re a sponsor team, you have to be very, very careful going down a path where you can be shutdown outside your control,” Kaplan said.

A higher degree of risk may steer some sponsors away from deals that could fall under the new Chinese listing rules, but there remains pressure for SPACs who have gone public to consummate deals in the next few years, according to Steven Canner, co-chair of law firm Baker & McKenzie’s transactional group in New York.

“There are a lot of SPACs in competition to find appropriate targets,” Canner said. “There will be a marketplace for robust companies, regardless of where they’re located.”

News Related

OTHER NEWS

India to resume exports of surplus COVID-19 vaccines from October under Vaccine Maitri programme

Representative image. The Union Minister of Health and Family Welfare Mansukh Mandaviya on September 20 said the government will resume exports of COVID-19 vaccine under the Vaccine Maitri initiative from ... Read more »

Skoda Kushaq bookings cross 10,000 units, new features added

Cumulative bookings for the Skoda Kushaq have crossed 10,000 units since its launch in late June making the SUV one of the most successful models from the Czech brand in ... Read more »

China rolls out autonomous driving standards as carmakers work towards making self-driving a reality

China has published its first national standards for grading autonomous driving, which will come into force in March, providing a benchmark for carmakers to develop the futuristic technology. China’s six-level ... Read more »

World shares at one-month low, default fears stalk China Evergrande

Source: Reuters World shares skidded and the dollar firmed on Monday ahead of a week packed with global central bank meetings, while debt troubles at property group China Evergrande dragged ... Read more »

Dow futures tumble more than 600 points as September slide intensifies

The Dow has so far turned in three straight weeks of losses for the first time since September 2020. Read more »

CVS Health to hire 25,000 ahead of flu season, COVID-19 booster roll out

CVS Health Corp said on Monday it would fill as many as 25,000 clinical and retail jobs ahead of the flu season and as the United States prepares to administer ... Read more »

PNB earns Rs 170 crore in FY21 by levying charges on non-maintenance of minimum balance: RTI

State-owned Punjab National Bank (PNB) collected nearly Rs 170 crore by levying charges on customers for not maintaining the required minimum balance in their accounts during 2020-21, according to RTI ... Read more »

More permanent jobs and 100 euros extra for all workers, FNV demands

Not only a pay rise, but also “a lot more” permanent jobs. That is the FNV trade union’s commitment to next year’s collective labor agreement negotiations. FNV wants an end ... Read more »

Gas prices in Europe surpass $900 per 1,000 cubic meters

Later, the price of October futures on the TTF hub in the Netherlands dropped to $881 per 1,000 cubic meters Read more »

Armenia, Russia achieve positive trade turnover dynamics, says ministry

Russian Deputy Economic Development Minister Dmitry Volvach noted that Russian deliveries of fuel and energy goods, transport vehicles, food, agricultural stock, chemical products to Armenia and supplies from Armenia to Russia had gone up Read more »

Energy crisis: 'No interruption' to supplies - Octopus Energy CEO

Octopus Energy boss Greg Jackson reassured consumers there would be no interruption to energy supplies amid the current crisis and said the price cap would help protect people if suppliers go bust. Read more »

Gainers & Losers: 10 stocks that moved most on September 20

Benchmark indices ended lower for the second consecutive session on September 20 dragged by the metal and banking names. At close, the Sensex was down 524.96 points or 0.89% at ... Read more »

Markolines Traffic Controls IPO: Offer subscribed 2 times on the final day

Highway operations and maintenance services provider Markolines Traffic Controls’ initial public offering (IPO) was subscribed two times on September 20, the final day of bidding. Investors bid for 1,05,31,200 equity ... Read more »

Moneycontrol Pro Panorama | Government needs to iron out GST wrinkles

FM Nirmala SItharaman Dear Reader, The Panorama newsletter is sent to Moneycontrol Pro subscribers on market days. It offers easy access to stories published on Moneycontrol Pro and gives a ... Read more »

Taking Stock: Sensex, Nifty end lower on weak global cues; metals worst hit

Indian benchmark indices flashed red for the second consecutive session on September 20, pulled down by the metal stocks as investors remained cautious ahead of multiple central bank meetings scheduled ... Read more »

Yes Bank partners Visa to issue line of nine credit card variants

Yes Bank (File image) Yes Bank has announced its partnership with Visa as a payment processor to offer its customers credit cards and enhance payments efficiency. The partnership has nine ... Read more »

Silver prices flat at Rs 60,000/kg after last week selloff; bias remains weak

Silver Silver prices were steady near Rs 60,000 a kg on September 20 on dollar uptick, subdued gold and weakness in industrial metals. The precious metal had tanked 5.66 percent ... Read more »

CAIT demands CBI inquiry into Amazon bribery allegation

The investigation is being done following a whistleblower complaint alleging that money paid for legal fees was funneled into bribes by Amazon’s legal representatives. The Confederation of All India Traders ... Read more »

Rupee slumps 26 paise to close at 73.74 against US dollar

Representative image The Indian rupee fell by 26 paise to close at 73.74 (provisional) against the US dollar on Monday, tracking a strong American currency in the overseas market and ... Read more »

PayPal completes rollout of cryptocurrency offering in UK

The roll-out in UK is the first international expansion of PayPal’s cryptocurrencies services outside of the United States. (Source: Reuters) Nearly a month after PayPal announced that it will expand ... Read more »

Mainland Chinese firms likely to need another 4 million sq ft in office space in Hong Kong, Colliers says

Mainland Chinese companies are likely to require an additional 4 million sq ft of office space in Hong Kong by 2025, according to Colliers. Estimates based on a report published ... Read more »

Small energy suppliers lambast regulator Ofgem over industry crisis

Fifteen suppliers, which on Monday signed a letter to the prime minister, accuse Ofgem of being “unfit” to regulate the sector amid expectations of further imminent collapses, Sky News can reveal. Read more »

These underdog cryptocurrencies surged upto 450% in last 24 hours

While popular cryptocurrencies like Bitcoin and Ethereum have kept the limelight even the market is in red. However, some underdog tokens have been the biggest gainers in the last 24 ... Read more »

Energy boss: It's 'crunch time' for many small providers

Read more »

Energy price crisis: What can I do to shield my family from surging bills?

The price of energy is going through the roof as winter looms, with price comparison sites even admitting the industry regulator's cap on standard variable tariffs could currently offer the best shelter for those not already protected through fixed-price contracts. Read more »

Take a look at how Top 5 cryptocurrencies have performed since April

Cardano (Representative image) Cryptocurrencies continue to be volatile, with wild swings amid rising popularity and regulatory uncertainty in India. Here’s how the five top cryptocurrencies have performed in the last five-and-a-half ... Read more »

Looneis FNV: all employees €100 per month

Traditionally, FNV announces the commitment for the upcoming collective labor agreement negotiations one day before Budget Day. This year it introduced a wage requirement of 5% in sectors where things ... Read more »

Expo 2020 Will Set Up A Tough Benchmark To Future Global Shows

As curtains go up in Dubai for the much-awaited Expo 2020 in a few days, the mega event, indisputably, would set a new model and benchmark for other global events ... Read more »

China debt concerns mounting as Beijing shifts attention to hidden local government financing

Concerns are mounting over how local governments in China will pay back so-called hidden debts raised through self-issued bonds, especially as Beijing is increasing controls to prevent a meltdown in ... Read more »

America's Cup defence campaign: Mark Dunphy sees $40m shortfall part filled by more Government cash

Mark Dunphy has promised to put up $20 million of his own money to keep the next America’s Cup in New Zealand, but still sees a $40m shortfall which may ... Read more »

France's high-speed trains get an eco-makeover

French President Emmanuel Macron on Friday unveiled a mock-up of the next generation of greener, super-high-speed trains, known in France as TGVs — four decades after the first TGV was ... Read more »

Focus: NZ Delta outbreak | Level 4 has been a 'nightmare' for small businesses

Auckland small businesses like Dough Boys bakery can't wait for the drop down alert levels. Video / NZ Herald Read more »

Covid-19 Delta outbreak: Business groups welcome Level 3 in Auckland

Business leaders are welcoming news that Auckland will drop down an alert level midnight Tuesday, although firms want to see more flexibility and continued financial support. “It will be a ... Read more »

Thailand lifts debt-to-GDP cap to 70% to aid economy rebuild

Finance Minister Arkhom Termpittayapaisith (Parliament photo) Thailand will raise its public debt ceiling to accommodate higher borrowing and spending to help support the economic recovery from the pandemic. The limit ... Read more »

K-drama review: Squid Game – Netflix survival drama starring Lee Jung-jae is gory, and wickedly entertaining

4.5/5 stars Netflix Korea may very well find its widest global audience to date with its latest original series. Through nine episodes chock full of vivid thrills and dramatic bloodletting, ... Read more »

Why did the Sansera Engineering IPO get strong subscription from QIBs?

Sansera Engineering’s initial public offering during September 14-16 was subscribed 11.47 times, with the portion reserved for qualified institutional buyers subscribed 26.47 times. The portion set aside for non-institutional investors ... Read more »

Bigbloc Construction share price rises 6% on partnership with SCG International Corporation

Bigbloc Construction share price rose over 6 percent intraday on September 20 after the company partnered with SCG International Corporation. Bigbloc Construction and SCG International Corporation announced the signing of ... Read more »

Natural gas futures fall for third day on long unwinding, weak global cues

Natural gas futures edged lower for the third day on September 20 due to the long unwinding of positions by participants after a sharp rally in the last few days. ... Read more »