Hong Kong regulators are preparing to roll out a new framework regarding retail investment in blank check companies. With the new regulatory framework, professional investors with assets worth more than HK$8 Million ($1 Million) only shall be allowed to be involved in Special Purpose Acquisition Companies (SPACs). Professional inventor’s portfolio of at least HK$8 million shall also include stocks, bonds, cash, bank deposits. This will be applicable to both the Primary and the Secondary Markets. The final draft is yet to be made public.
People initially expected a wider investor base of market participants, but most participants agreed with the limit to be set in the framework. This limit is estimated to mitigate initial phase risks and help in ensuring a smooth expansion process later.
Presently, the market capitalization requirement for SPACs is still in question. SPACs may have the same market capitalization requirement at a minimum of HK$ 500 million ($64 Million) as a regular main board company. But this draft can still have changes in the final edits.
SPACs have become very popular this year. But this has also increased scrutiny by regulators due to huge numbers of issuances. Hong Kong regulators now wish to focus more on investor protection and regulatory compliances.
A spokesperson of the Hong Kong Exchange & Clearing Limited mentioned in one of the e-mails that regulators look for ways to enhance the Listing Framework, to perform efficient investor protection, improve market attraction, and market quality.
Professional investors can bear more risk than retail investors. They are willing to expose themselves to more complex and riskier products, as compared to risk-averse retail investors.