The rise of blank cheque companies has been mostly a Wall Street phenomenon but the investment structure is taking hold in other parts of the world, such as Hong Kong and mainland China.

A number of mainland technology start-ups are considering using the capital-raising ploy of special purpose acquisition companies (SPACs) which have already been booming in the US. 

A report by the South China Morning Post yesterday said that several businesses, such as those backed by industry big players including Legend Holdings and Baidu, are looking into these blank cheque company ideas. 

SPACs can go to public markets rapidly, removing some regulatory barriers, promising investors the option of getting their money back if, for any reason, the SPAC doesn’t find a suitable target. In some way, they are seen as disintermediating private equity funds and avoiding some of their lock-ups on capital. 

“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,” Jason Wong, a SPAC sponsor and partner at Whiz Partners Asia, the Asian affiliate of Japan’s Whiz Partners, was quoted as saying.

Some of those firms are subsidiaries or affiliates of big tech companies, including Baidu and Legend, according to Wong.

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, Wong claimed.

In March this year, a SPAC backed by Hony Capital, one of China’s biggest private-equity firms, controlled by Legend, said it would try to raise up to $300 million in order to merge with technology-enabled companies with strong China links, according to a filing with the US Securities and Exchange Commission.

A source has told WealthBriefingAsia that SPACs resemble going on a blind date: the prospective “daters” may not know the other party, trusting in the reputation and wisdom of the date arranger.

As the SCMP article noted, the SPAC idea plays to Hong Kong’s traditional strengths as a hub for initial public offerings.