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Singapore allows SPACs to list in bid to steal a march over regional rivals

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Singapore allows SPACs to list in bid to steal a march over regional rivals

Singapore Exchange Ltd. will allow special purpose acquisition companies, or SPACs, to list on its Mainboard from Sept. 3, seeking to tap investor demand for such blank-check companies in Asia.

Potential SPACs will need to have a minimum market capitalization of S$150 million and must acquire a target company within two years of the initial public offering, Singapore Exchange said in a statement Sept. 2. Depending on the size of the SPAC, sponsors will need to subscribe to at least 2.5% to 3.5% of the IPO shares, including warrants. They will not be able to sell any of their shares for six months after acquiring a target company in a so-called de-SPAC transaction. Moreover, sponsors will only be able to sell half their holdings in the subsequent six-month period.

The first SPAC listing in Singapore may happen within half a year, said Tham Tuck Seng a partner at consulting firm PricewaterhouseCoopers. "The first SPAC listing should be from a reputable sponsor so that we can get the first one right and make investors comfortable. A reputable sponsor can be those by a large PE [private equity] house, a government-linked fund," Tham said.

Jonathan Quek, head of Asia Pacific real estate & lodging and head of Singapore investment banking for Citi, added: "There is a vast pipeline of interesting opportunities in Singapore and regionally as potential de-SPAC targets."

First mover

The heat of SPAC listings in the U.S. in most of 2020 through the first quarter of 2021 had made Singapore and Hong Kong jump on the bandwagon of the popular fundraising alternative to IPOs. By announcing its framework, Singapore may be seeking to steal a lead over its bigger rival Hong Kong Exchanges and Clearing Ltd., which too is exploring SPAC listings. In Asia, only South Korea and Malaysia allow SPAC listings. The U.S. by far is the world's largest destination of SPACs, with 419 blank-check companies floated during the first eight months of this year, compared with 400 SPAC listings over the past five years combined, according to Statista.

As more SPACs are now chasing after private assets, and the recent boom of the IPO market has made the SPAC route less attractive than before, SPAC sponsors might find it increasingly difficult to identify viable targets.

"We are always looking for ways to enhance our listing framework, striking the right balance between delivering appropriate investor protections, market quality and market attractiveness. HKEX is continuing to evaluate the feasibility of a Hong Kong SPAC framework, and we look forward to consulting the market on this in due course," a spokesperson for HKEX told S&P Global Market Intelligence.

Investor education

Singapore's SPAC framework follows a public consultation in which more than 80 respondents, including financial institutions, investment banks, private equity and venture capital funds gave their feedback, SGX said. It will work with the Securities Investors Association (Singapore), a local investor protection group, to increase awareness and conduct educational programs, it said. Separately, it will also partner with the Singapore Institute of Directors to educate future directors on SPACs and their responsibilities and duties.

"Since the release of the public consultation we have been in discussions with various market participants and stakeholders, reflecting a high level of interest in SPACs. We do expect to receive some applications in the near term," said Mohamed Nasser Ismail, Head of Equity Capital Markets of Singapore Exchange.

The exchange operator, which is also the market regulator, made certain changes to its initial proposals, including cutting the minimum capitalization requirement from S$300 million proposed earlier. It also allows investors to keep their warrants after selling their underlying shares, compared with its initial proposal of keeping them tied together.

The rules in Singapore are "very much similar to the U.S. market," PwC's Tham said. Being in the Asian time zone, Singapore will have an advantage, he said, noting that the island nation is a smaller, niche market with sector-driven liquidity. "Our stronger sectors would be biotech and healthcare."

As of Sept. 1, US$1 was equivalent to S$1.34.