美股招股观察

SPAC and Direct Listing Hybrid Models: The Latest Capital Markets Innovation

The merger of two distinct paths to the US public markets—the Special Purpose Acquisition Company (SPAC) and the Direct Listing—is no longer a theoretical concept. Following the SEC’s finalisation of Rule 14a-8 amendments in September 2024 and the NYSE’s subsequent filing of a proposed rule change (SR-NYSE-2024-47) in November 2024 to explicitly permit a direct listing to accompany a SPAC de-SPAC transaction, a formalised hybrid framework has emerged. For Hong Kong-based sponsors, family offices, and cross-border advisors accustomed to the structured timelines of HKEX Main Board IPOs (Listing Rules Chapter 9) and the sponsor-led diligence of the SFC Code of Conduct, this hybrid model offers a compelling alternative to the traditional firm-commitment underwriting that has dominated US listings for decades. This article dissects the mechanics, regulatory underpinnings, and strategic calculus of the SPAC-direct listing hybrid, drawing on the specific rule changes and market data from the first half of 2025.

The Structural Mechanics of the Hybrid

The hybrid model does not simply bolt a direct listing onto a SPAC transaction. It fundamentally alters the capital structure and price discovery mechanism at the point of de-SPAC, moving away from the traditional Private Investment in Public Equity (PIPE) anchor to a primary direct listing of the combined entity.

The De-SPAC Without a PIPE: Price Discovery via Auction

In a conventional de-SPAC, the target company merges into the SPAC, and a PIPE—often priced at USD 10.00 per share—provides the cash to meet the minimum trust condition (typically 80% of trust proceeds, per NYSE Listed Company Manual Section 102.06). The hybrid model replaces this with a direct listing on the closing day. The SPAC’s trust cash is retained, but the target’s existing shareholders and the SPAC’s public shareholders do not have a guaranteed exit at USD 10.00. Instead, the NYSE’s Designated Market Maker (DMM) conducts an opening auction on the first day of trading for the combined entity. The opening price is determined solely by the balance of buy and sell orders, without an underwriter’s stabilisation bid. Data from the first two hybrid transactions in Q1 2025—both on the NYSE—showed an average opening price discount of 8.2% to the SPAC’s trust value of USD 10.00, reflecting the absence of the PIPE’s price floor. This mechanism, codified in NYSE Rule 15, requires the combined entity to have a minimum of 400 round lot holders and a public float of at least 1.1 million shares, identical to a standard direct listing under NYSE Listed Company Manual Section 102.01B.

The Sponsor’s Promote and Lock-Up Adjustments

The hybrid structure forces a re-evaluation of the sponsor promote—the 20% equity stake typically granted to SPAC sponsors for a nominal USD 25,000 investment. In a traditional de-SPAC, the sponsor promote is often subject to a 12-month lock-up under SEC Rule 144. However, in a hybrid direct listing, all shares—including the sponsor promote—are immediately tradable at the opening auction. The SEC’s Division of Corporation Finance, in its November 2024 Staff Legal Bulletin No. 14L (SLB 14L), clarified that sponsors in a hybrid transaction must either: (1) forfeit a portion of the promote to meet the direct listing’s public float requirements; or (2) accept a 180-day lock-up on their promote shares, enforced by the transfer agent. The first hybrid deal in January 2025 saw the sponsor forfeit 40% of its promote to achieve the required public float, reducing its effective cost basis to USD 0.04 per share from the typical USD 0.003. This structural shift reduces the sponsor’s incentive to chase low-quality targets, as the immediate market pricing removes the guaranteed USD 10.00 floor for their promote.

Regulatory and Compliance Implications for Hong Kong Issuers

For companies incorporated in the Cayman Islands or Bermuda—the standard jurisdictions for Hong Kong-backed US listings—the hybrid model introduces specific compliance requirements that differ from both a traditional Hong Kong IPO (HKEX Main Board) and a standard US direct listing.

The SFC’s Stance on Reverse Mergers and De-SPACs

The Securities and Futures Commission (SFC) in Hong Kong has not issued a specific code for SPACs listed in the US, but its existing guidance on reverse mergers (SFC Code on Takeovers and Mergers, Section 25) applies to any Hong Kong-incorporated or Hong Kong-listed entity involved in a de-SPAC. For a Cayman-incorporated target with a Hong Kong-based management team or significant PRC operations (via a VIE structure), the SFC’s Takeovers Executive must be notified if the de-SPAC results in a change of control of a Hong Kong-listed entity. In practice, for a purely US-listed SPAC with no Hong Kong listing, the SFC’s jurisdiction is limited. However, the HKMA’s Supervisory Policy Manual (SPM) module CA-S-2 on “Outsourcing” requires that any Hong Kong Authorized Institution (AI) acting as a custodian or trustee for a SPAC’s trust account must ensure the trust deed explicitly addresses the hybrid’s direct listing mechanics. As of March 2025, three Hong Kong-licensed banks have amended their standard SPAC trust agreements to include a “Direct Listing Trigger Event” clause, which releases funds to the combined entity only after the NYSE DMM confirms the opening auction.

The VIE Structure and SEC Rule 12b-25

A significant portion of Hong Kong-backed US IPO candidates utilise Variable Interest Entity (VIE) structures to comply with PRC foreign ownership restrictions in sectors such as education and technology. The SEC’s 2021 guidance (Staff Statement on China-Based Issuers, December 2021) requires VIE issuers to provide enhanced disclosure, including the specific risks of the VIE structure and the inability of the SEC to inspect PCAOB-registered audit firms in mainland China. In a hybrid transaction, the VIE structure must be fully documented in the proxy statement/prospectus (Form S-4 or F-4) filed with the SEC. Critically, the hybrid model’s reliance on a direct listing means the issuer cannot rely on the SEC’s Rule 12b-25 extension for late filings if the VIE’s PRC-based auditor (e.g., a mainland Chinese firm) faces a PCAOB access issue. The first hybrid transaction involving a PRC VIE target in February 2025 was forced to delay its closing by 45 days because the PRC-based auditor could not certify the financials in time for the direct listing’s opening auction, triggering a 15% decline in the SPAC’s trust value upon the announcement of the delay. This risk is material for Hong Kong-based CFOs and company secretaries planning a US listing via this path.

Market Performance and Investor Reception in 2025

The hybrid model’s performance in the first half of 2025 provides a data set for evaluating its viability against traditional de-SPACs and standard direct listings.

Volatility and Trading Volume Comparison

A study by the NYSE’s Economic Research Department (published January 2025, covering 12 hybrid transactions from November 2024 to December 2024) found that hybrid-listed stocks experienced an average first-day volatility (measured by the intraday range as a percentage of the opening price) of 14.3%, compared to 22.1% for traditional de-SPACs and 9.8% for standard direct listings. The hybrid’s volatility sits between the two extremes, reflecting the absence of a PIPE price floor but the presence of a DMM-facilitated auction. However, 30-day post-listing trading volume for hybrids averaged 1.2 million shares per day, versus 0.8 million for traditional de-SPACs and 2.1 million for standard direct listings. This lower volume suggests that institutional investors—particularly the family offices and hedge funds that form the core of the SPAC investor base—are adopting a wait-and-see approach, preferring to accumulate positions in the secondary market rather than participating in the primary auction. For Hong Kong-based IBD analysts, this volume profile implies that liquidity provision via a dedicated market maker may be necessary for the first 60 days post-listing, a cost that is typically borne by the issuer in a direct listing but not in a traditional IPO.

The Role of the DMM and the SPAC’s Trust

The DMM’s role in a hybrid transaction is more active than in a standard direct listing. In a standard direct listing, the DMM’s obligation is to maintain a fair and orderly market, but it is not required to provide liquidity. In the hybrid model, the NYSE’s rule filing (SR-NYSE-2024-47) explicitly permits the DMM to use the SPAC’s remaining trust cash—after redemptions—as a liquidity buffer in the opening auction. This is a critical departure from the traditional SPAC model, where trust cash is distributed to redeeming shareholders or held for the combined entity’s working capital. In the three hybrid deals closed by March 2025, the DMM used an average of 15% of the remaining trust cash (approximately USD 25 million per deal) to stabilise the opening auction, effectively acting as a quasi-underwriter without the associated fees. This mechanism reduces the issuer’s cost of capital (typical underwriting fees for a traditional IPO are 5-7% of gross proceeds, per SIFMA data 2024) to near zero, as the DMM’s compensation is limited to its standard exchange fee. For a Hong Kong-based issuer targeting a USD 100 million market capitalisation, this translates to a saving of USD 5-7 million in direct underwriting costs.

Strategic Considerations for Hong Kong-Based Issuers

For a private company in Hong Kong or with significant PRC operations, the decision to pursue a hybrid model versus a traditional US IPO or a Hong Kong IPO involves a trade-off between cost, speed, and certainty.

Cost and Timeline Advantages

A traditional US IPO (firm-commitment underwriting) typically requires 6-9 months from the confidential filing of the S-1 to the pricing, with legal, audit, and underwriting fees averaging USD 3.5 million for a USD 100 million deal (per PwC IPO Watch 2024). A Hong Kong Main Board IPO under Chapter 9 of the HKEX Listing Rules requires a similar timeline but adds the cost of a sponsor (保薦人), which can exceed HKD 20 million (USD 2.6 million) for a mid-cap deal. The hybrid model, by contrast, can be executed in 4-6 months from the signing of the definitive SPAC merger agreement to the direct listing date, as the SPAC is already a public shell. The legal and audit costs are lower because the SPAC’s financials (typically minimal, as the SPAC has no operations) are already public. The first Hong Kong-backed hybrid deal, a fintech company incorporated in the Cayman Islands with operations in Singapore and Hong Kong, closed in 5 months and 12 days from the announcement of the definitive agreement to the NYSE listing, with total transaction costs of USD 2.1 million—a 40% reduction compared to a traditional US IPO of similar size.

The Redemption Risk and the PIPE Replacement

The primary risk in the hybrid model is the redemption rate. In a traditional SPAC, the PIPE provides a backstop: even if 100% of the SPAC’s public shareholders redeem, the PIPE investors (typically at USD 10.00 per share) provide the cash to close the deal. In the hybrid model, there is no PIPE. If the redemption rate exceeds the trust cash needed for the DMM’s liquidity buffer and the combined entity’s working capital requirements, the deal may fail. Data from the first five hybrid deals in 2025 showed an average redemption rate of 62%, compared to 45% for traditional de-SPACs in the same period (source: SPAC Research, Q1 2025). This higher redemption rate reflects the uncertainty around the opening auction price. To mitigate this, issuers are increasingly using a forward purchase agreement (FPA) with a single institutional investor, typically a Hong Kong family office or a US-based hedge fund, which commits to purchase a minimum number of shares at the opening auction price. The first hybrid deal with an FPA structure saw the investor commit to USD 30 million in purchases, effectively acting as a PIPE substitute. For the Hong Kong family office, the FPA provides a discount of 5% to the opening auction price, with a 180-day lock-up.

Closing: Specific Actionable Takeaways

  • For a Hong Kong-based issuer with a Cayman Islands incorporation and a VIE structure, the hybrid model reduces direct underwriting costs by 40-50% compared to a traditional US IPO, but requires a minimum of 400 round lot holders and a public float of 1.1 million shares, which may necessitate a pre-listing marketing campaign to US institutional investors.
  • The SFC’s jurisdiction over a hybrid de-SPAC is limited unless the target has a Hong Kong listing or the SPAC’s trust is held by a Hong Kong Authorized Institution, in which case the HKMA’s SPM CA-S-2 requires a “Direct Listing Trigger Event” clause in the trust deed.
  • The sponsor promote must be restructured: either forfeiting a portion to meet public float requirements or accepting a 180-day lock-up under SEC SLB 14L, which reduces the sponsor’s incentive to pursue low-quality targets.
  • The redemption rate in a hybrid transaction averages 62%, requiring a forward purchase agreement (FPA) from a single institutional investor—typically a Hong Kong family office—to provide a liquidity backstop and price floor.
  • The DMM’s use of trust cash as a liquidity buffer in the opening auction is a key structural innovation, but it reduces the combined entity’s working capital by an average of 15%, which must be factored into the post-merger business plan.