SGX unveils initial framework for SPACs, proposes minimum m-cap of $223m

The SGX Centre at Shenton Way. Credit: DEALSTREETASIA

The Singapore Exchange (SGX) has outlined a proposed framework for the listing of Special Purpose Acquisition Companies (SPACs), indicating serious intent to capitalise on the SPAC boom seen in global markets.

In a media briefing on Tuesday, SGX covered a range of aspects pertaining to blank cheque companies including their board admission criteria, business combination requirements, and investor safeguards for SPAC listings.

Key items included setting a minimum S$300 million ($223 million) market capitalisation for the SPAC vehicle, confirming an earlier story by DealStreetAsia. SPACs listed on SGX will be given a three-year deadline to complete a successful merger, and should have a proposed business combination eligible to meet mainboard listing criteria.

Expand Table

SGX Consultation Paper for SPACs: Key Items

Broad admission criteria:
1. A minimum S$300 million market capitalisation and at least 25% of the total number of issued shares to be held by at least 500 public shareholders at IPO
2. A minimum IPO price of S$10 a share
3. At least 90% of IPO proceeds placed in escrow pending the acquisition of a target company (known as the business combination). Cash will be returned on a pro rata basis from the amount in escrow to any shareholder voting against the business combination or upon the liquidation of the SPAC
4. Any warrant (or other convertible securities) issued with the ordinary shares of the SPAC at IPO must be non-detachable from the underlying ordinary shares of the SPAC for trading on SGX.
Conditions for founding shareholders, management team and controlling shareholders:
5. Founding shareholders and/or the management team must hold minimum equity at IPO of between 1.5% to 3.3%, depending on the SPAC market capitalisation then.
6. Moratorium on the shareholding interests held by the key parties such as the founding shareholders and controlling shareholder(s) at various junctures.
Business combination requirements:
7. Three-year permitted time frame from IPO date to complete the business combination
8. Business combination must comprise at least one principal core business with a fair market value forming at least 80% of the gross IPO proceeds in escrow
9. Resulting business combination will have to meet the initial Mainboard listing criteria
10. The business combination can only proceed with approval from a simple majority of the SPAC’s independent directors and a simple majority of the independent shareholders
11. Liquidation of the SPAC may occur under certain conditions including when a material change in the profile of the founding shareholders and/or management team critical to the successful founding of the SPAC and/or completion of the business combination occurs prior to the consummation of the business combination, unless independent shareholders vote for the continued listing of the SPAC.
12. Appoint:
a. an accredited Issue Manager as Financial Advisor to advise on the business combination; and
b. an independent valuer to value the target company
13. Shareholders’ circular on the business combination must contain prospectus-level
disclosures including on key areas such as:
a. financial position and operating control;
b. character and integrity of the incoming directors and management;
c. compliance history;
d. material licences, permits and approvals required to operate the business; and
e. resolution of conflicts of interests.

According to Tan Boon Gin, CEO of Singapore Exchange Regulation (SGX RegCo), SGX sees growth-stage companies from the Technology, Media and Telecom (TMT) sector as potential SPAC targets. Few Southeast Asian venture-backed technology companies meet this criterion now.

In Southeast Asia, there are about 15 unicorns that may be eligible, including names like Grab, Tokopedia, and Gojek. However, many of these are already actively sought by US-listed SPACs such as Bridgetown Holdings and Altimeter Growth Corp.

“The starting point of S$300 million is really striking middle ground between camps. It’s also aligned with our current Mainboard admission criteria…However, we want to acknowledge there is no magic number. That is why we are consulting the public and we want to hear voices. That will inform the final number that we arrived at,” said Tan during the press briefing.

Industry reaction

Industry observers have so far provided mixed responses.

“Drumming up public markets investor interest could also be another reason why the minimum SPAC value was set at a relatively high value and why the eligibility is the same as listing on the Mainboard. This could potentially limit the types of companies that can list, but we can also see it as a “go big or go home” strategy by SGX,” said Tan Yinglan, founding managing partner, Insignia Ventures Partners.

Joel Shen and Leong Chuo Ming, corporate partners at international law firm Withersworldwide, acknowledged that SGX’s latest proposal may not necessarily give SGX a competitive edge in capturing deals from the Asian market.

“The criteria and disclosure obligations imposed by SGX are similar to those of a reverse takeover (RTO) exercise, which means that a SPAC will confer no material advantage in terms of speed of execution,” they wrote.

This is not the first time the SGX has considered SPAC listings. The Asian bourse previously entered discussions to launch them in 2010, but held back due to poor market timing and conditions. Industry observers note that the SGX’s seriousness in looking into SPACs this time is largely in response to market exuberance in the US.

According to Refinitiv data, SPACs have raised $64.2 billion through IPOs so far this year, or 76% of the total equity raised by IPOs in the market as of early March. Global blank cheque deal volumes or mergers through SPACs have surged to a record $170 billion in 2021, already outstripping last year’s total of $157 billion, Refinitiv data showed.

Several stakeholders who were approached during SGX’s consultation process acknowledged that SGX is already late to the game.

“SGX’s move is a response to the current exuberance around SPACs in the US. However, if SGX manages to drum up enough interest as an alternative platform for companies, which do not qualify for a SPAC deal, Singapore is in a relatively good position to capture this secondary market compared to neighbouring SEA countries which have had the SPAC framework but have not seen much activity from it,” wrote Shen and Leong from Withersworldwide.

SGX’s public consultation will remain open until April 28. It seeks to conclude its findings by mid-2021.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.