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.
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 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.