Chinese Startups’ SPAC Listings Increase As Weighty Offshore IPO Regulations Loom

Chinese companies are increasingly turning to Hong Kong as a platform for listing on the Shanghai Stock Exchange. The so-called “SPAC Listings” have become one of the main attractions that draw investment into China’s technology sector, with many focusing on blockchain and fintech startups in particular.

The “list of spacs 2021” is a list that contains the names and addresses of all the spas in China. The listing is updated every year, and it’s expected that there will be 1,000 more spas by 2021.

Bankers and business leaders seem to be under attack. Smaller Chinese companies are pushing for quick offshore listings by combining with blank-check corporations at a time when Beijing’s tougher monitoring has hampered capital raising through abroad IPOs, according to bankers and corporate executives.

As a slew of special purpose acquisition companies (SPACs) scour the market for targets to combine with, the startups see an opportunity to raise capital and be listed by reducing the time and regulatory rigor required for typical market debuts.

However, the developing Ukraine crisis, which has increased market volatility and decreased investors’ risk appetite, might throw a shadow on fundraising efforts in the short future.

SPACs are shell companies that gather money from institutional and retail investors via public offerings and invest it in a trust with the goal of merging with a private business and becoming public.

Wall Street’s frenetic blank-check purchases have slowed in the last year as a result of certain authorities tightening and tightening laws, as well as mismatches in valuation expectations, while competition in Asia has intensified owing to a significant number of unicorn firms in the area.

Tian Rui, the general manager of Nongdinghui Technology, which creates online marketplaces that link farmers and customers and is planning to go public on the Nasdaq this year after combining with a blank-check firm, said:

“We are in desperate need of funding to help us develop.”

Traditional IPOs take too long, according to Tian:

“A SPAC is an excellent instrument for accelerating our growth.”

ETAO International Group, a digital healthcare company that offers health insurance, pharmacy, telemedicine, and hospital treatment, announced in January that it would go public on NASDAQ via a merger with a publicly traded SPAC, valuing it at $2.5 billion.

Other Chinese firms considering a U.S. listing via SPAC merger include pet entertainment company Ailulu Technology and solar technology startup Santime Technology, according to officials at both companies.

Lin Xiaoxi, a partner at Hong Kong-based legal firm Linklaters, said:

“In this setting, the potential for it (SPAC) to be speedier, as well as the fact that you have a bit more control over the process… may make a difference.”

Between 2019 and 2021, ten Chinese corporations raised $2 billion via mergers with US-listed SPACs, according to SPAC specialist investment bank Chardan.

Nonetheless, in 2021, after Beijing’s extraordinary crackdown on technology businesses, the US government strengthened scrutiny on Chinese companies’ New York listings, halting mergers and resulting in just one SPAC merger being completed.

ETAO’s Shanghai-based CFO, Joel A. Gallo, said:

“Regulatory tightening in both China and the United States has stopped some blank-check corporations from merging with a Chinese company, but investors are not likely to overlook the chances.” This (SPAC) technique of going public was selected because it allows for a faster listing procedure while lowering the expenses of becoming public.”

SPACs are gaining popularity.

Most Chinese businesses choose to list in the United States through a SPAC merger since there are more chances for such acquisitions in that market and larger value expectations. China has failed to establish a structure for onshore SPAC listings.

A market for SPAC listings has just opened in Singapore and Hong Kong. The move has heightened competitiveness for acquisitions at a time when Wall Street’s appetite for them is waning. However, significant Chinese interest has also entered the picture.

While Ailulu executive Ding Jian said that a NASDAQ listing in the United States would be more realistic for his firm, Santime’s worldwide strategy would be bolstered by a NASDAQ listing via a SPAC agreement, according to its founder and CEO Harry Ze.

A listing through a SPAC is also a more practical choice for a technological firm with limited commercial track record, according to Zhang Yexuan, the founder of a Chinese solar energy vehicle start-up that plans to list on Nasdaq next year.

Even while some experts believe the door will remain open, it is unclear if SPAC listings will be scrutinized as well. The Chinese securities regulator has yet to release final regulations for local businesses seeking to expand internationally.

Drew Bernstein, U.S-based co-chairman of Marcum Bernstein & Pinchuk, a China-focused international accounting firm, said that he believes the new overseas capital raising rules did not target small companies. Bernstein concluded:

“It appears to make sense to go for the smaller transactions (in China) to be able to get things done.”