Latest news with #SPAC
CNBC
3 hours ago
- Business
- CNBC
Hong Kong's IPO market is on fire — here's what's fueling the surge
Investors and businesses' enthusiasm for Hong Kong's equity capital markets is roaring back, as Chinese companies flocked to the city for fundraising, sparking a frenzy in the market that had been forsaken in recent years. Outsized deals and a state-backed push for companies listed in the mainland exchanges to seek a listing in Hong Kong have thrust capital-raising volume to the strongest first half-year since 2021, according to data from data provider Dealogic. New listing volumes on the Hong Kong Stock Exchange jumped around eight times to $14 billion in the first half of this year, from just $1.8 billion in the same period in 2024, according to Dealogic. That excluded SPAC listings, or special purpose acquisition companies established solely to raise capital through an IPO, with the aim of eventually acquiring or merging with another company. That puts the city on track to become the world's largest listing destination this year, surpassing the Nasdaq and the New York Stock Exchange. PwC projected up to 100 IPOs in Hong Kong this year, with total fundraising to exceed $25.5 billion. The frenzy came after years of lackluster IPO activity in the city amid post-pandemic risk-off sentiment and stuttering economic growth. In the first half of this year, there were 43 new listings in Hong Kong, with proceeds topping $13.6 billion, surpassing the total sum raised in 2024, data from financial data platform Wind Information showed. In comparison, there were only 73 listings in 2023, raising just $5.9 billion, according to HKEX data. The renewed interest is fueled by a confluence of factors, including Beijing's regulatory tailwinds, the muted pace of A-share listings, ample market liquidity, and delisting fears in U.S. markets, driving mainland companies to raise funds in Hong Kong, according to Steven Sun, head of China equity strategy at HSBC. "The IPO boom in the Hong Kong market is certainly driven by dual-listing of A-then-H [shares]," said Sun. A-shares refer to mainland-listed shares, while H-shares are those listed in Hong Kong. "More and more companies use the proceeds to fund their globalization strategy," Sun said, as the Hong Kong dollar is more fungible than the Chinese yuan in global markets. A jump in Chinese equity prices last September, triggered by expectations of stronger economic stimulus, helped turn the tide on bearish narratives about China. At the start of this year, the release of DeepSeek's low-cost but powerful model further fueled a rally in Chinese tech stocks as investors began to reassess China's capacity for innovation, spurring a rerating of Chinese equities. "Market valuations broadly have improved back to historical average levels, which provides a better backdrop for companies looking to fundraise," said Eugene Hsiao, head of China equity strategy at Macquarie. As of Wednesday's close, Hong Kong's Hang Seng index has gained a stellar 21% so far this year, making it one of the best-performing major markets globally. Hopes that Chinese authorities will likely unleash additional fiscal spending to shield the economy from any trade-related shock have further underpinned business and investors' confidence. In an apparent shift to support the private sector, Chinese President Xi Jinping told the nation's top business leaders in February that the country needs their help to deliver economic growth. That shift, coupled with the long-awaited approval by Beijing for mainland firms to list offshore, unleashed a wave of pent-up demand, particularly for high-quality, consumer-facing companies that are less exposed to geopolitical headwinds, said Lorraine Tan, director of equity research at Morningstar. Chinese securities regulator last year issued a slew of measures aimed at fast-tracking approval for eligible mainland tech companies to list in Hong Kong. Hong Kong regulators also launched a so-called "Technology Enterprises Channel" in May to facilitate IPO approvals for specialist technology and biotech companies, particularly those already listed in the mainland. "Policy encouraging leading corporate citizens to list in Hong Kong have provided a much-needed shot in the arm" in reviving IPO activity in the city, said Perris Lee, head of equity capital market at Dealogic. Another driver for Hong Kong's market rally has been the ample liquidity provided by mainland investors piling into Hong Kong shares, chasing an artificial intelligence frenzy sparked by Deepseek's breakthroughs and tapping into major capital-raising deals. The southbound net inflows, tracked through the cross-border link Stock Connect scheme, surged to a record high in the April-June quarter, since the scheme was launched in 2014, according to Wind Information. In stark contrast, China's benchmark CSI 300 has barely budged this year, up 0.2% year to date, according to LSEG data. That has prompted onshore investors to shift money to Hong Kong-listed equities, bolstering the Southbound inflows to account for nearly half of Hong Kong's daily stock turnover, according to Sun's estimates. These factors helped push a flurry of mainland China-traded companies to seek secondary listing in Hong Kong, including battery maker Contemporary Amperex Technology. Already listed in Shenzhen, the company raised more than $5 billion in a secondary listing in Hong Kong in May, in what is the world's biggest such offering so far this year. Additionally, Hong Kong's market is more "inclusive" of emerging sectors, like AI, renewable energy, digital consumption and biotech, which align with mainland firms' needs, said Wei Li, head of multi-asset investments for China at BNP Paribas. Among the over 200 active IPO applicants in the pipeline to be listed on HKEX, over 40 are companies already listed on mainland stock exchanges, Wind Information showed. Other high-profile companies that have sought a primary listing in Hong Kong this year include bubble tea retailers Mixue Group, Guming Holding and ride-hailing platform operator Caocao Inc. A Hong Kong listing for Chinese companies would also aid their global expansion plans. Amid cutthroat competition at home and flared-up trade tensions with the U.S., Beijing has called on its leading companies to expand globally and diversify their manufacturing locations. "The appetite to raise offshore funds, especially in HKD, is a reflection of broader plans to expand into overseas markets," said Hsiao. The heightened U.S.-China tensions have made Hong Kong a preferred IPO destination for many Chinese firms, over concerns that the Trump administration could order a delisting from U.S. exchanges. "A secondary listing essentially provides extra insurance for U.S.-listed Chinese companies in an unlikely event that a delisting becomes unnegotiable," said Lee, suggesting that companies are likely to have engaged financial advisors to hammer out a "plan B," with or without delisting.
Bloomberg
7 hours ago
- Business
- Bloomberg
SPACs Regain Popularity as IPO Alternative for Mid-Sized Firms
After years out in the cold, special purpose acquisition companies are again positioning themselves as an alternative to traditional initial public offerings for businesses that have been left out of the nascent recovery in first-time stock sales. Only nine of the 100 traditional IPOs priced in 2025 have raised more than $500 million, while two-thirds of these brought in less than $50 million, according to data compiled by Bloomberg. The figures highlight the IPO markets' barbell shape this year, consisting of large, well-established companies on the one hand and riskier small-cap companies on the other.
Yahoo
9 hours ago
- Business
- Yahoo
SPACs are back: This year's crop of blank check companies lack celebrity sponsors, and that's likely a good thing
Special purpose acquisition companies, or SPACs, were big business in 2021 when everyone from lifestyle mogul Martha Stewart to politicians like Paul Ryan was investing in them. Also known as blank check companies, SPACs offered firms a back door route to becoming a public company by getting acquired by a shell company. But the 2021 trend didn't last long as more than 60% of blank check companies from that year couldn't complete a merger and had to return money to investors, giving SPACs a dodgy name in the process. Now, blank check companies have returned, but this year's crop is a different breed. The celebrities are gone, the buzz has faded, and many SPACs are coming from serial sponsors who are, well, just a little dull. So far in 2025, 61 blank check companies have gone public, raising $12.4 billion as of June 26, though it's hard to assess their success since it typically takes months for a SPAC to complete an acquisition. This compares to just 16 SPACs for the same period last year that collected $2.5 billion, according to Dealogic. So far none of this year's deals have found a merger partner. The $12.4 billion is the most raised by blank check companies since 2021, when the SPAC market was on fire. That year, a record 613 blank check companies went public, raising about $162.6 billion in proceeds. SPACs are enjoying 'a bit of a revival,' said Ben Kwasnick, founder of SPAC Research. Blank check companies are on track this year to raise $25 billion, a nearly 85% drop from 2021, but a total Kwasnick thinks is more sustainable. 'There's still huge demand for the SPAC market,' he said. A closer look shows that SPACs never really left. But their disappointing outcome cast a pall on the sector and drove many investors away. Blank check companies typically have between 18 to 24 months to buy a company, or they must return the money to investors. Roughly 39% of the Class of 2021 was able to complete a merger, or de-SPAC, according to SPAC Research. This led to many deals that initially traded well but then crashed. One of the more famous was BuzzFeed's combination with a blank check company in December 2021. BuzzFeed initially spiked to $14.77 from $10 a share and ended its first day as a public company down 11%. The stock currently trades at $2 a share. Still, some investors of 2021 SPACs were able to get their money back. There were many blank check companies in 2021 chasing a small number of acquisitions, said Stephen Ashley, a partner with law firm Pillsbury Winthrop Shaw Pittman. When they couldn't complete a merger before their deadline, the SPACs were forced to liquidate. Some investors also redeemed their shares before the blank check company completed a merger. Both groups got their money back, Ashley said. 'A large number of these investors may be willing to consider investments in another round of SPACs with more seasoned sponsors,' he said. Of course, some 2021 investors held onto their shares after a SPAC completed its merger with a business and ended up owning stock in the surviving entity, though many of them likely lost money. Most deals that closed in 2021 are trading below $10, the price that SPACs typically price at, said Kwasnick of SPAC Research. 'These investors will be more wary,' Pillsbury's Ashley said. In 2024, the SEC adopted new rules for SPACs, requiring them to provide more disclosure about items including conflicts of interest, sponsor compensation, and dilution. They also limited the use of forward-looking statements by SPACs. 'The SEC clearly had concerns about the performance of SPACs for a while leading up to the rule changes, and the final rules they settled on will probably focus market participants on better and more grounded disclosure,' Ashley said. SPACs, as we know them, have been around since at least the early 1990s. This year's class is coming from executives who are very experienced. Instead of Jay-Z pitching a cannabis blank check company or Colin Kaepernick's social justice SPAC, there's Michael Klein, a former Citigroup banker, who launched his tenth blank check company, Churchill Capital X, earlier this year. Or Gores Holdings X, the latest SPAC from private equity firm The Gores Group, which raised nearly $360 million in May. Some of this year's SPAC crop, though, are connected to prominent individuals. This includes Renatus Tactical Acquisition, which raised $241.5 million in May and has ties to Trump Media & Technology Group. Eric Swider, CEO of Renatus, is the former head of Digital World Acquisition, the SPAC that merged with Trump Media, the parent of Truth Social, in 2024. Devin Nunes, Renatus's chairman, is a former Republican congressman and the current CEO of Trump Media. (After completing its SPAC merger in September 2024, Trump Media, during its debut, peaked at $79.38, then experienced volatility and is trading at about $18 a share.) 'It's encouraging to see serial sponsors doing most of this year's IPOs, as they're likely more realistic about their prospects than first-time sponsors are,' said Kwasnick. The banks underwriting this year's SPACs are another big change. In 2021, bulge bracket firms like Goldman Sachs and Morgan Stanley worked on many of the blank check offerings but have largely left the sector. Citi and UBS were No. 1 and No. 2 in terms of SPAC underwriters in 2021. Neither bank completely exited the SPAC market, but both pulled back significantly. Citi worked on 113 deals in 2021, giving it bragging rights as the top SPAC banker. This year, Citi has only two SPACs to its credit. UBS has worked on one or two blank check transactions every year since 2021 when it underwrote 92 transactions. This year, UBS has only worked on one SPAC. These rankings might still change. Goldman is wading back into the market for SPACs and is open to underwriting new deals for SPAC companies, Bloomberg reported on June 17. Goldman declined to comment. Without the bulge bracket firms, lesser-known banks have emerged to take their place. This year's lead underwriter so far is Cantor Fitzgerald, the financial services firm formerly led by U.S. Commerce Secretary Howard Lutnick. Cantor has worked on 14 deals valued at around $3.6 billion. BTIG, the broker backed by Goldman and Blackstone, ranked second with a dozen SPAC deals valued at $2.6 billion. And in third place is Santander, the Spanish bank, which has worked on five deals this year, totaling $1.3 billion. Not everyone is happy with the revival. 'I hate SPACs,' said one fintech banker, who has worked on mergers involving blank check companies. They pointed to payments companies like Repay, Payoneer Global, and Paysafe. Each used SPACs as a way to go public and two of the three are trading below $10. All three companies have experienced volatility with their stock prices, and all three have been up for sale recently. 'They're just not performing well,' the banker said of the payments companies. 'I've made money off [of SPACs] but I don't really understand their purpose.' This story was originally featured on
Yahoo
10 hours ago
- Business
- Yahoo
Hotel 101 CEO Talks Growth and Investor Returns
Hotel 101 Global started trading on the Nasdaq yesterday by going public via SPAC, the company's CEO, Hannah Yulo-Luccini, joins Open Interest to talk about why the company is not a timeshare. Sign in to access your portfolio
Bloomberg
11 hours ago
- Business
- Bloomberg
Hotel 101 CEO Talks Growth and Investor Returns
Hotel 101 Global started trading on the Nasdaq yesterday by going public via SPAC, the company's CEO, Hannah Yulo-Luccini, joins Open Interest to talk about why the company is not a timeshare. (Source: Bloomberg)
