Hong Kong’s listing reform marks a historic milestone this week as an overseas company becomes the first to list here via a merger with a blank-cheque company.
Singapore-based Synagistics, an e-commerce solutions provider, starts trading on the Hong Kong stock exchange under the 2562 stock code on Wednesday after combining its business with Hong Kong Acquisition Corporation, a special-purpose acquisition company (SPAC).
Synagistics’ listing is the first “de-SPAC” since Hong Kong Exchanges and Clearing introduced the SPAC listing rules in January 2022 to catch up with the US and Singapore, which had introduced regulations to boost such listings.
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“The listing of Synagistics via a successful de-SPAC transaction is a milestone for Hong Kong to introduce a new way for a company to go public other than normal initial public offerings (IPOs),” said Norman Chan Tak-lam, chairman of Hong Kong Acquisition. “This will strengthen Hong Kong’s role as a listing venue and international financial centre.”
Hong Kong tycoons are no strangers to SPACs and de-SPAC transactions. Still, most of their vehicles have chosen to raise capital overseas and conduct merger deals. Artisan Acquisition, a Nasdaq-listed SPAC backed by Adrian Cheng Chi-kong, the former CEO of New World Development, merged with Hong Kong genetics testing company Prenetics in 2021. Similar deals have also been conducted by tycoons, including Richard Li Tzar-kai and Lawrence Ho Yau-long, the chairman of Melco Resorts & Entertainment.
Former HKMA CEO Norman Chan is one of the backers of Hong Kong Acquisition Corporation, a special-purpose acquisition company. Photo: Jonathan Wong alt=Former HKMA CEO Norman Chan is one of the backers of Hong Kong Acquisition Corporation, a special-purpose acquisition company. Photo: Jonathan Wong>
Chan’s SPAC, which raised HK$1 billion (US$128 million) in August 2022, will now become the first to complete a deal to allow another firm to list in Hong Kong. The former CEO of Hong Kong Monetary Authority has focused on the fintech business since retiring in October 2019.
In Hong Kong, a SPAC needs to raise at least HK$1 billion. It then needs to find a merger target within 24 months and complete the deal in a year. When the merger is completed, the SPAC becomes a newly listed company, with the process called de-SPAC.
The pace of SPAC listings has been slow in the city. While there were 14 applicants in 2022, only five listed, raising a combined US$639 million. That was a fraction of the US$13.4 billion raised by 86 SPACs in the US in the same year, according to Dealogic data. No new listings have taken place in Hong Kong since.
“It is not only SPACs, but the global IPO [market] has been on a downtrend since the US started a rate rise cycle in March 2022,” Chan said. “With the interest-rate cut that started in September, the market sentiment has improved, which will encourage more new listings via IPOs or SPACs.”
Chan described the past two years’ of involvement in SPAC and de-SPAC transactions as “enlightening and rewarding”.
“SPACs bring in a whole new way for companies to seek listings in Hong Kong,” he said. “It is important for Hong Kong as an international capital market to have diverse methods for companies to go public.”
The promoters of Hong Kong Acquisition are veteran financiers who are familiar with private equity, and they are the ones that identified the merger target with good growth potential for the de-SPAC process, Chan said.
The merger will also add capital to support the future growth of Synagistics, bolstered by HK$551 million of PIPE (Private Investment in Public Equity) investments from a diverse group of institutional investors, including Celestial Link, an indirect subsidiary of HKT Trust and HKT, and China Orient Enhanced Income Fund.
Synagistics was chosen as the de-SPAC target because of its high growth potential in Southeast Asia, said Katherine Tsang, the CEO of Hong Kong Acquisition.
“Synagistics provides digital solutions for more than 600 global brand partners,” Tsang said. “By securing a listing in Hong Kong, Synagistics’ key executives believe it can bring investor awareness to the company and benefit from its future expansion in China because Hong Kong is the connector between China and the world.”
Founded in 2014, Synagistics provides comprehensive digital commerce solutions to different fashion, beauty and lifestyle brands. It is backed by Alibaba Group Holding, which owns the South China Morning Post, and Gobi Partners, a leading Asia-focused venture capital firm.
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP’s Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.
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