A special purpose acquisition company (Spac) backed by China Merchants Bank filed for an initial public offering (IPO) on the Hong Kong Exchange on Monday, the first such application after the financial hub’s introduction of its Spac listing rules in December 2021.  

The Spac, Aquila Acquisition Corporation, will focus on acquiring environmental, social and governance (ESG)-conscious technology-enabled companies in new-economy sectors like green energy, life sciences, and advanced technology and manufacturing in Asia, with an emphasis on China.

The application was filed by CMB International Asset Management, whose ultimate parent is China Merchants Bank, and AAC Mgmt Holding.  

The application outlines risk factors like the potential hindrance of the Covid-19 pandemic when searching for acquisition targets and a potential challenge in obtaining liability insurance as the Spac structure is new to the Hong Kong market.

Morgan Stanley and CMB International Capital Corporation acted as joint sponsors, global coordinators and bookrunners for the transaction.

A Spac is a blank-cheque vehicle that raises funds via public markets to subsequently combine with another firm and take it public, without having to go through the traditional IPO path. These blank-cheque vehicles gained huge momentum last year, raking in over US$160 billion from US markets, according to SPAC Track.

Asian sponsors have used Spacs in the US to raise money, with Artisan Acquisition Corporation, backed by Hong Kong's New World Development, using a blank-cheque vehicle to raised US$339 million on Nasdaq in May 2021. The Spac later merged with biotech company Prenetics in September 2021.

And Grab, the Southeast Asian ride-hailing superapp merged with Altimeter Growth via a Spac in November 2021. The share price of the superapp, however, has dipped to as low as US$5.8, a 42% slide from its IPO price of US$10.

Vying to attract more Greater Chinese and Southeast Asian companies to list in Hong Kong, the Hong Kong Exchange rolled out its Spac framework late last December and implemented the rules this January. However, the rules for Spac listings in Hong Kong are more strident and less flexible than those in other jurisdictions. Hong Kong’s Chief Executive Carrie Lam, speaking at the Asia Financial Forum last week, said the city’s regulations aimed to “balance market development and investor protection”.

Singapore launched its framework last September and is expecting its first Spac listing from Temasek-backed venture capital firm Vertex Venture Holdings this month.