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For startups and industry giants alike, listing on the stock market is not only a pivotal milestone in corporate development but also a crucial springboard into broader markets. Major global exchanges offer diverse listing routes to accommodate varying business needs, with the two most common being initial public offerings (IPOs) and special purpose acquisition companies (SPACs).
This article offers a comparative analysis of the two listing routes, with particular emphasis on the features and applicable scenarios of SPAC listings to guide corporate decision-making.
Definitions
Yan Ge
Senior Partner
Joint-Win Partners
In simple terms, an IPO is the process by which mature companies raise capital by issuing shares in the public market. When a business reaches a certain size, its shareholders may engage investment banks and other intermediaries to sell a portion of shares to public investors, thereby securing funds and enhancing market influence. A SPAC listing is an innovative approach to capital operations. Sponsors establish a shell company with no underlying business and raise funds through an IPO, before seeking to merge with or acquire a promising target company (a process known as a de-SPAC) within a stipulated period.
Whereas a traditional IPO sees a business seeking capital, a SPAC listing essentially has funds looking for a suitable company – hence it is often referred to as a reverse or shell listing. This approach offers small and medium-sized enterprises (SMEs) swift access to the capital markets and, due to its efficiency and flexibility, has become an increasingly favoured option in recent years.
Evolution and threshold criteria
The US introduced the SPAC listing mechanism in 1993, but it truly exploded in 2020, with 248 SPAC listings raising a total of USD83.4 billion. In 2021, records were set with 613 transactions and USD162.5 billion raised.
Following tighter regulation and a more cautious investor sentiment, the market has shifted its focus from quantity to quality, leading to a marked decline in SPAC listings between 2022 and 2023. Since the second half of 2024, market activity has reawakened, underscoring the enduring appeal of SPACs as a flexible and efficient listing route.
Yuan Yao
Partner
Joint-Win Partners
Globally, SPAC listings are primarily concentrated in the US. While financial hubs such as Singapore and Hong Kong have introduced their own SPAC listing frameworks, the US market maintains a competitive edge in both scale and procedural efficiency. Below is a brief comparison of the listing conditions for SPACs on the Nasdaq, the Singapore exchange (SGX) and the Hong Kong exchange (HKEX).
Fundraising size.The Nasdaq mandates a minimum of USD50 million, while the SGX requires SGD150 million (USD110 million), and the HKEX stipulates HKD1 billion (USD128.9 million).
Promoters.The Nasdaq has no specific requirements on promoters, while the SGX evaluates promoters based on their track record, reputation and management team’s expertise, and the HKEX requires at least one promoter to hold a designated licence issued by the Securities and Futures Commission of Hong Kong and maintain a minimum 10% of the promoter shares.
Investors.The Nasdaq and the SGX impose no restrictions on investors, while the HKEX admits only professional investors.
Overall, the stricter regulatory frameworks in Singapore and Hong Kong make their SPAC listing regimes less flexible and appealing compared to the US, which remains the preferred venue for both businesses and SPAC promoters.
Comparison and advantages
Fundamentally, SPAC listings differ from traditional IPOs in several critical aspects.
Time efficiency.SPAC listings typically complete within three to six months (minimum 30 days), whereas conventional IPOs require 12-24 months.
Issuers.SPAC promoters establish shell companies without operational history, while IPO candidates must demonstrate active business operations.
Escrow requirements. SPACs mandate full deposit of raised capital in designated trust accounts, with mandatory investor refunds if mergers fail or shares are redeemed. IPOs face no equivalent capital preservation rules.
Valuation mechanism.SPAC targets negotiate valuations directly with promoters, contrasting with IPO pricing determined by secondary market demand during bookbuilding.
Investor protection.SPAC investors may redeem shares for principal plus interest pre-merger (de-SPAC) but lose capital protection post-merger. IPO participants receive no principal guarantees at any stage. SPACs bypass the complexities of traditional IPO procedures, enabling private companies to list faster. This advantage renders them ideal for SMEs seeking access to capital markets. The SPAC route offers several key benefits.
- Higher success rate.As listed entities, SPACs only require mutual agreement between parties to complete mergers or acquisitions (plus the China Securities Regulatory Commission filing for Chinese targets), significantly improving listing success probability.
- Shorter timeline.With proper preparation, de-SPAC transactions can conclude within six months, helping targets capitalise on optimal market windows.
- Lower costs.SPAC expenses focus primarily on merger-related service fees, proving more economical than traditional IPOs.
- Price certainty.Target company valuations and share issuance prices are predetermined through negotiation, enhancing transaction predictability.
- Investor protection.Public investors retain redemption rights for principal plus interest, while quality targets may deliver share price appreciation and excess returns.
- Clean structure.SPACs provide debt-free, litigation-free shell companies, offering a pristine listing platform.
Opportunities
The Nasdaq officially introduced new liquidity requirements for initial listings on 11 April 2025, significantly raising the entry threshold for IPOs. Under the new rules, the resale of existing shares will no longer count towards the market value of unrestricted publicly held shares. As a result, the common practice of secondary offering is rendered invalid, compelling companies to rely solely on primary share issuance to meet the threshold.
While the stricter requirements make the IPO process more challenging, SPAC listings – with their inherent advantages of valuation flexibility, predictable timelines and built-in liquidity mechanisms – are well positioned to become a preferred option for new economy companies seeking to enter the US stock market.
Yan Ge is a senior partner and Yuan Yao is a partner at Joint-Win Partners.
Joint-Win PartnersRoom 6101, Shanghai Tower
479 Lujiazui Ring Road, Pudong New Area
Shanghai 200122, China
Tel: +86 21 6037 5888
Fax: +86 21 6037 5899
E-mail:zhangyichen@joint-win.comwww.joint-win.com
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