Investors based in the US, Australia and China have evinced interest in sponsoring special purpose acquisition companies (SPACs) in Singapore amid efforts by the city-state to breathe new life into its bourse.
A SPAC, also known as a blank cheque company, is formed for the sole purpose of raising money through an initial public offering (IPO) to acquire an existing company. Sponsors are the initiators of a SPAC and put in a nominal investment. They are paid in the form of a “promote,” which usually involves 20% equity in the SPAC.
“It is fair to say that more international sponsors are interested to know the details [of listing a SPAC on the Singapore exchange] compared to earlier when only regional players were interested,” said an underwriter involved in IPO and SPAC transactions in Singapore.
According to multiple sources, these keen candidates include repeat SPAC sponsors who have previously listed blank cheque firms in the United States. The US is one of the world’s most liquid markets with deep exposure to SPAC transactions.
One of those interested in listing a SPAC on the Singapore Exchange (SGX) is former E*Trade CEO Karl Roessner, who now spearheads Nasdaq-listed blank cheque company Lefteris Acquisition Corp. According to a source close to the matter, Roessner is eyeing a S$150 million ($110 million) vehicle and has even identified acquisition targets for the subsequent SPAC merger.
DealStreetAsia has reached out to Lefteris Acquisition for comment.
The subtle shift in investor sentiment will be a welcome move for the SGX, which needs SPACs to take off to keep up with an upswell of private companies in Southeast Asia seeking growth capital and suitable avenues to list.
According to DealStreetAsia – DATA VANTAGE, the region has already produced 19 new unicorns – or private companies worth $1 billion or more – in this year alone.
While Singapore has been home to many Southeast Asian tech giants, it has already lost three tech unicorns to foreign exchanges. These are NYSE-listed Sea Ltd, Hong Kong-listed Razer, and Nasdaq-bound Grab, which will list by the end of this year as part of a record $40 billion SPAC merger with Altimeter Acquisition Corp.
Southeast Asia’s unicorns: A timeline
Singapore listings have also been on the decline over the last decade. There have only been four listings so far this year on the SGX Mainboard that raised S$314 million ($231 million) in total.
Lacklustre trading, serial delistings and corporate governance issues have also further weighed on investor sentiment. According to the bourse, the number of listed equities slipped from 705 to 673 between September 2020 and 2021.
Still, there are efforts underway to boost interest in the exchange.
Industry observers highlight the enormous effort undertaken by Singapore to corral multiple stakeholders — these include sovereign wealth fund GIC, Temasek and central bank Monetary Authority of Singapore (MAS) — to move so quickly in a coherent direction.
“Temasek has eliminated much of the concern regarding market depth. In addition, SGX has built the framework so that participants aren’t only looking for a quick short-term arbitrage. So, while on the surface, it may look different than the US, it is actually built with a much longer-term focus,” said Frank Troise, managing director at corporate advisory firm SoHo Advisors.
The SGX’s responsiveness to market feedback has also surprised some.
“They [SGX and MAS] have come up with very well-balanced rules – more balanced than many expected,” said Vertex Holdings chief executive Chua Kee Lock at DealStreetAsia’s Asia PE-VC Summit 2021 recently.
“I think this should create a lot of interest for people to try to create a blank cheque company on the SGX and use these companies to acquire companies in Southeast Asia,” he added.
Vertex is reportedly in talks to launch a SPAC on the SGX. Chua declined to comment on his firm’s plans.
Investors looking to capitalise on the SGX’s new SPAC listing rules will be closely watching indicators such as deal quality, deal volume, and SPAC investors’ calibre. Another yardstick would be the interest in PIPE, or private investment in public equity, deals that allow institutional investors to buy shares in a SPAC at a discounted price. A strong PIPE reflects investor confidence in a SPAC’s prospects.
The SGX expects SPAC submissions to arrive within weeks, with its first set of blank cheque companies to launch this quarter. The initial listings will be critical in driving momentum for the asset class, say some sponsors.
“The first 3-10 SPACs are going to be the real test [for Singapore]… If we can get it going, I think we’ll have a great stead in front of us,” said Ravi Thakran, managing partner of Turmeric Capital and chairman and CEO of Aspirational Consumer Lifestyle Corp at DealStreetAsia’s Asia PE-VC Summit 2021.
Turmeric Capital is among the Asian fund managers that have publicly expressed interest in sponsoring a SPAC on the SGX so far. Others include Vickers Venture Partners and Novo Tellus. Meanwhile, private equity firm Northstar Group, an early investor in Indonesian unicorn Gojek, is evaluating the opportunity, its co-founder and managing partner Patrick Walujo told DealStreetAsia recently.
Walujo pointed out that unlike US-listed SPACs, Singapore SPACs are attractive because the SGX has allowed smaller companies to participate, calling the move a potential “game-changer.”