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Mainland Chinese tech start-ups hope to tap SPAC trend to go public
- Tech start-ups backed by Legend Holdings, Baidu are among those exploring options regarding special purpose acquisition companies (SPACs), industry insiders say
- Start-ups see SPACs as a way to go public quickly, avoid volatility of traditional IPO
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Tech start-ups in mainland China, including those backed by industry titans such as Legend Holdings and Baidu, are exploring options to join what has been one of the hottest capital-raising trends this year and go public via blank-cheque companies known as SPACs, according to industry players.
SPACs, shorthand for special purpose acquisition companies, are drawing the attention of technology companies because the investment vehicle allows them to go public quickly with less regulatory scrutiny and more certainty over the valuation, tech insiders said. Capital can also be raised without the same level of volatility associated with a traditional initial public offering, they said.
“We are in talks with more than 10 tech companies with businesses from electric vehicle components, e-commerce technology, biotech to media. Many of them are in Beijing’s tech hub, Zhongguancun,” said Jason Wong, a SPAC sponsor and partner at Whiz Partners Asia, the Asian affiliate of Japan’s Whiz Partners.
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Some of those firms are subsidiaries or affiliates of big tech companies, including Baidu and Legend, Wong said.
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Many of these companies have already raised seed capital from offshore investors, and some investors now want to exit. SPACs provide the ability to exit and reap high-reward investments with limited risk, according to Wong.
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