(Oct 12): The globetrotting dealmakers starting blank-cheque companies are increasingly telling investors there’s one place they won’t go: China. 

At least four special purpose acquisition companies have revised their IPO filings in recent months to remove China from their areas of interest. The changes come as the US securities regulator demands volumes of disclosures on the risks of doing business in China, while Beijing authorities are scaring the market with their widening crackdown on corporate excesses. 

When Asia-focused Pacifico Acquisition Corp first unveiled its listing plans in July, it said its search would focus on Chinese new energy, biotech and education companies. “China” appeared 45 times in that initial filing as Pacifico touted the hot prospects for those industries in Asia’s biggest economy. 

Just two weeks later, it amended its prospectus to say it would look everywhere in the region except for China. It eventually raised US$57.5 million and started trading last month.

Former UBS Group AG banker Patrick Ngan’s Nova Vision Acquisition Corp and Kairous Acquisition Corp, started by Malaysia venture capital investor Joseph Lee, also updated their plans to explicitly say they’ll avoid China on their hunt for an Asian deal. 

China Ban

The SPAC boom encouraged many dealmakers with China connections to start their own blank-cheque firms, hopeful that the country would prove a good place to find hot startups seeking a shortcut to the public markets. Things changed over the summer, when the US Securities and Exchange Commission began demanding that issuers include increasingly strident warnings about how Chinese deals could go wrong. 

Across the ocean, Chinese authorities have also started making it harder for companies to seek a foreign listing by requiring cybersecurity reviews. While certain firms have found ways to comply, some SPAC bosses are now deciding it’s not worth the trouble and are shifting their focus to other countries. 

Singapore businessman James Tan is going even further with his latest SPAC, which is seeking US$50 million for an Asian acquisition. 8i Acquisition 2 Corp updated its offering documents last month to say that it’s expressly forbidden under its articles of association from merging with a company that’s based in China or does most of its business there. 

“Having a Chinese target makes things more complicated at this moment,” said Yoann Delwarde, who leads an Asia-focused tech SPAC that filed listing plans in July. “It’s not impossible, but legal counsel needs to work harder to get things done.”

New Focus

Delwarde, who’s aiming to raise US$50 million for Embrace Change Acquisition Corp, said he’ll have to keep an open mind and build a pipeline of potential acquisitions across Asia. The Shanghai-based executive said he’ll likely spend more time than expected looking at targets outside of China. 

Another SPAC team planning a New York listing decided to shift their investment focus from China to India in the hopes they would get SEC approval for the offering more quickly, a person with knowledge of the matter said. Bankers say many of the Asia SPACs already trading are also going further afield in their acquisition hunts. 

Serial dealmaker Suying Liu, who helped take Playboy public last year, is staying away from the country with his latest blank-cheque company. He filed plans last week to raise US$50 million for Mountain Crest Acquisition Corp V, which will focus on North America and Asia Pacific, excluding China. 

SPAC dealmakers are narrowing their focus at a time when the market is increasingly under pressure. The IPOX SPAC Index, which tracks the performance of blank-cheque companies, is down about 30% from a February peak. The new entrants will also face a lot of competition, as there are roughly 470 SPACs listed in New York that are hunting for a target and hundreds more in the pipeline to list.