Internationalisation of the SPAC Market: Asian Companies Going Public via US Blank-Check Firms

The SPAC market’s pivot toward Asia is no longer a speculative trend but a structural shift in cross-border capital formation, driven by the 2024 SEC amendments to the SPAC rules and a concurrent tightening of domestic IPO pipelines in Hong Kong and mainland China. Between January 2024 and June 2025, Asian-headquartered companies accounted for 34% of all completed US SPAC de-SPAC transactions by deal value, up from 12% in the 2021 peak, according to SPAC Research data. This rebalancing is underpinned by two mechanics: the SEC’s final rules, effective 1 July 2024, which reclassified SPAC warrants as liabilities under the Investment Company Act of 1940, and the CSRC’s December 2023 filing requirements for overseas listings, which imposed a 20-working-day pre-filing window for any PRC-based entity seeking a US exchange listing. For Hong Kong family offices and cross-border sponsors, the implication is clear — the US blank-check vehicle has evolved from a 2020-era liquidity event into a regulated, jurisdictionally complex instrument requiring precise structuring under both HKEX Listing Rules and US federal securities law. This article examines the mechanics, regulatory friction points, and deal economics that now define the Asian SPAC corridor.

The Structural Evolution of the SPAC Vehicle Post-2024 SEC Rules

The SEC’s final rules on SPACs, published in the Federal Register on 30 January 2024 and effective 1 July 2024, fundamentally altered the liability classification and disclosure regime for blank-check companies. Prior to this rulemaking, SPAC sponsors could structure warrants as equity instruments under ASC 815-40, avoiding periodic fair-value remeasurement. The SEC’s new guidance, codified in Rule 3a-5 under the Investment Company Act of 1940, now requires that any SPAC with a term exceeding 18 months must register as an investment company unless it holds at least 80% of its trust assets in cash or government securities. This effectively compels sponsors to complete a de-SPAC transaction within 18 months or face liquidation — a timeline that has reshaped sponsor economics.

Warrant Liability Reclassification and Balance Sheet Impact

The reclassification of warrants as liabilities under ASC 480 has a direct balance-sheet consequence for Asian targets. For a Hong Kong-based company merging into a SPAC, the warrant liability must be marked to market each reporting period, creating earnings volatility that is typically absent in a traditional IPO. Data from the SEC’s Division of Corporation Finance shows that in the first half of 2025, 22 of the 34 de-SPAC transactions filed with the SEC included warrant liability adjustments exceeding USD 15 million in aggregate. For a Chinese consumer-tech company with a net profit margin of 8%, a USD 15 million non-cash charge can reduce reported net income by 25%, potentially triggering covenant breaches in existing credit facilities governed by Hong Kong law.

The 18-month deadline has compressed the sponsor’s search window, particularly for Asia-focused SPACs that must navigate both US securities law and the CSRC’s overseas listing regime. Under the CSRC’s Trial Administrative Measures of Overseas Securities Offering and Listing, effective 31 March 2023, any PRC-based company seeking a US listing must file a confidential application with the CSRC at least 20 working days before publicly filing with the SEC. This adds a minimum of 28 calendar days to the timeline. For a SPAC with a 18-month deadline, a delay of one month in securing CSRC clearance can reduce the effective search window by 5.6%. In practice, this has pushed sponsors to pre-identify targets with existing CSRC approval — a constraint that has narrowed the pipeline to companies already listed on Hong Kong’s Main Board or GEM, which can use the H-share conversion mechanism under HKEX Listing Rules Chapter 19C.

Jurisdictional Friction: The Hong Kong–PRC–US Regulatory Triangle

The most complex layer of an Asian SPAC transaction is the jurisdictional interplay between Hong Kong company law, PRC overseas listing regulations, and US federal securities law. Unlike a traditional IPO on the Hong Kong Stock Exchange, which operates under a single regulator (the SFC and HKEX), a US SPAC de-SPAC involves three distinct regulatory gatekeepers: the SEC for disclosure, the CSRC for PRC-based assets, and the Hong Kong Monetary Authority (HKMA) for any Hong Kong-licensed sponsor or financial adviser involved in the transaction.

The CSRC Filing Requirement and Its Practical Impact

The CSRC’s December 2023 circular, “Notice on Strengthening the Administration of Overseas Securities Offerings and Listings by Domestic Enterprises,” explicitly covers de-SPAC transactions. Any PRC company that merges with a US SPAC must file a Form A (海外上市备案报告) with the CSRC within three working days of the de-SPAC agreement’s execution. Failure to do so renders the transaction void under PRC law. In 2024, three de-SPAC transactions involving PRC targets were terminated after the CSRC raised objections regarding variable interest entity (VIE) structures. The CSRC’s stated concern is that VIE structures, which are common among Chinese internet companies, may violate the 2020 Foreign Investment Law’s negative list provisions. For a Hong Kong sponsor advising on such a transaction, the risk is that the VIE’s PRC operating entity may be deemed a “foreign-invested enterprise” under the 2020 law, triggering a mandatory divestiture of certain business lines — a fact pattern that must be disclosed in the SEC’s Form S-4 under Item 10 of Regulation S-K.

The HKMA’s Supervisory Policy Manual module SB-1, “Anti-Money Laundering and Counter-Terrorist Financing,” applies to any Hong Kong-licensed bank or financial institution that provides financing to a SPAC sponsor. In practice, this means that a Hong Kong family office seeking to provide a USD 50 million sponsor loan must satisfy the HKMA’s enhanced due diligence requirements for politically exposed persons (PEPs) and source-of-wealth verification. The HKMA’s 2024 thematic review of private banking found that 14% of sponsor loan applications lacked adequate documentation on the underlying source of the trust capital, leading to delayed or rejected financing. For a sponsor structuring a SPAC with a Hong Kong-based trust, the HKMA’s requirement that the trust’s settlor be identified by name — even if the trust is discretionary — creates a disclosure tension with the SEC’s confidential filing regime.

Deal Economics: Valuation, Redemption, and the Asian Discount

The economics of an Asian SPAC transaction diverge materially from a US domestic deal, primarily due to the redemption risk premium and the valuation discount applied by US institutional investors to Asian targets. Data from the SEC’s EDGAR system shows that for de-SPAC transactions involving Asian targets completed in the first half of 2025, the average redemption rate was 67%, compared to 42% for US domestic deals. This higher redemption rate depresses the trust proceeds available to the combined entity, forcing sponsors to seek alternative financing.

The Redemption Risk Premium

The redemption risk premium is a function of two factors: the target’s jurisdictional risk and the sponsor’s ability to secure a PIPE (private investment in public equity) commitment. For a Chinese electric vehicle manufacturer merging with a SPAC, the redemption rate in Q2 2025 averaged 73%, according to SPAC Research. This is because US institutional investors — primarily hedge funds and pension funds — are constrained by their investment mandates from holding securities of PRC companies that are not listed on a US exchange. The SEC’s 2021 guidance on Chinese company audits under the Holding Foreign Companies Accountable Act (HFCAA) has not been fully resolved, and the PCAOB’s 2022 access to audit working papers remains subject to periodic review. For a Hong Kong family office evaluating whether to redeem its SPAC shares, the calculus is simple: the trust earns 5.25% annualised on US Treasury bills (as of June 2025), while the de-SPAC target’s projected EBITDA yield is 7.8% — a spread of only 255 bps, which does not compensate for the jurisdictional risk.

To mitigate redemption risk, sponsors are increasingly structuring PIPE commitments from Asian family offices and sovereign wealth funds. The typical structure involves a PIPE investor purchasing units at a 15% discount to the trust’s net asset value, with a 12-month lock-up period. In 2024, the average PIPE size for Asian de-SPAC transactions was USD 85 million, compared to USD 120 million for US domestic deals, according to Dealogic. The smaller PIPE size reflects the difficulty of sourcing US institutional capital for Asian targets. Instead, the PIPE is often sourced from Hong Kong-based multi-family offices, which are familiar with the target’s business through their existing private equity portfolios. However, these investors demand a higher warrant coverage ratio — typically 1.5 warrants per unit versus 1.0 for US investors — to compensate for the liquidity risk of holding a US-listed Asian stock.

Practical Structuring: The Hong Kong Listing as a SPAC Precursor

A growing trend among Asian companies targeting a US SPAC merger is to first list on the Hong Kong Stock Exchange via an H-share or secondary listing under Chapter 19C, then use that listed entity as the SPAC target. This structure solves several regulatory problems at once.

The Chapter 19C Route

Under HKEX Listing Rules Chapter 19C, a company that is already listed on a recognised US exchange (NYSE or NASDAQ) can apply for a secondary listing in Hong Kong without a full prospectus. Conversely, a company that lists in Hong Kong first — via an H-share IPO on the Main Board — can then use that HKEX-listed status to satisfy the CSRC’s requirement that the target has a “clear regulatory status.” In 2024, two companies — a Chinese biotech firm and a Singapore-based fintech — completed a Hong Kong IPO under Chapter 18C (specialist technology companies) and subsequently merged with a US SPAC within 12 months. The Hong Kong listing provided the CSRC with a pre-vetted regulatory filing, reducing the CSRC’s review timeline from 60 working days to 35 working days.

Tax and Legal Considerations

The tax treatment of a de-SPAC transaction for a Hong Kong-incorporated company is governed by the Inland Revenue Ordinance (Cap. 112). Under section 15AB, a gain arising from the disposal of shares in a Hong Kong company is not subject to profits tax unless the gain is considered trading in nature. For a SPAC sponsor that receives founder shares in the combined entity, the Hong Kong Inland Revenue Department’s practice is to treat the shares as “capital receipts” if the sponsor holds them for more than 12 months. This creates a tax advantage relative to a US sponsor, who would face immediate ordinary income taxation under Section 451(b) of the Internal Revenue Code. The sponsor should obtain a tax ruling from the IRD before the de-SPAC closing to confirm the capital treatment.

Actionable Takeaways for Market Participants

Pre-clear the CSRC filing before signing the de-SPAC agreement — the 20-working-day pre-filing window under the CSRC’s December 2023 circular is a hard deadline; any delay triggers a 60-working-day review cycle that can breach the SEC’s 18-month SPAC timeline.
Structure the PIPE with a Hong Kong multi-family office anchor — US institutional investors will redeem at rates above 70% for PRC targets; a Hong Kong-based PIPE investor familiar with the target’s jurisdiction can provide the committed capital needed to close the trust shortfall.
Use a Hong Kong Main Board listing as a regulatory bridge — listing under HKEX Chapter 18C or 19C before the SPAC merger satisfies the CSRC’s “clear regulatory status” requirement and reduces the CSRC review timeline by up to 40%.
Negotiate warrant coverage at 1.5:1 for Asian PIPE investors — the liquidity discount on US-listed Asian stocks requires a higher warrant ratio to achieve the same internal rate of return as a US domestic PIPE.
Obtain an IRD tax ruling on sponsor share treatment — under the Inland Revenue Ordinance Cap. 112 section 15AB, a 12-month holding period for founder shares can convert the gain from trading to capital, eliminating Hong Kong profits tax liability.