Singapore bourse to consider SPAC listings

“We have received inquiries and expressions of interest to do so with such a structure. Should SGX also enable SPAC listings? We consulted on this back in 2010. We are now thinking given the current popularity of such a listing structure, whether to revive that consultation,” Tan Boon Gin, CEO of SGX RegCo, the bourse’s regulatory arm, said at a media briefing.

The potentially lucrative nature of SPACs – the sponsor usually pays a nominal fee for a 20% stake in the structure on completion of the listing – and strong public markets have attracted a flood of dealmakers. They are a much faster way of raising money than a traditional IPO and the disclosure requirements are lower. Moreover, there is no protracted wait for a liquidity event.

According to Duff & Phelps, $74 billion was raised through 262 offerings between January 2017 and September 2020. This led to 90 acquisitions – or combinations – worth $90 billion. As of September, there were 150 SPACs, representing $48 billion in IPO proceeds, seeking acquisition targets. SPACInsider, a website that tracks SPAC activity, puts the fundraising total for 2020 alone at $83 billion from 248 offerings. This compares to $13.6 billion from 59 in 2019.

All the money is raised via the US markets and most of it goes into transactions involving North America-based assets. However, numerous SPACs have been raised by Asian private equity firms and individuals for deployment in Asian assets.

The most high-profile example in Southeast Asia is the Bridgetown series launched by Peter Thiel, co-founder of PayPal, Palantir Technologies and Founders Fund, and Richard Li, founder of Hong Kong's Pacific Century Group. They raised $550 million late last year to invest in new-economy assets and have since been linked to a potential merger with Indonesian e-commerce platform Tokopedia. A second Bridgetown SPAC is targeting $200 million.

Few Asia-related SPACs have direct ties to PE firms, as sponsors of the structure or as designated affiliates. Exceptions include Vickers Venture Partners, Primavera Capital Group, CITIC Capital, and ACE Equity Partners. Vickers recently raised $120 million for technology deals, while Primavera launched a SPAC last week that will target global consumer businesses with a China expansion angle.

Other SPACs are driven by individuals with experience in the private equity industry. They include Ravi Thakran, formerly head of L Catterton’s Asia operation, Peter Kuo, a co-founding partner at Canyon Bridge Capital Partners, Raymond Zage, CEO of Tiga Investments and previously Asia head at Farallon Capital, and Kenneth Ng, a founding member of Elliot Management’s Asian arm

Typically, a SPAC offering comprises ordinary shares plus warrants, with the warrants converted into shares or redeemed for cash on completion of an acquisition. If no deal is completed within 18-24 months, investors get their money back. In the past, hedge funds have been frequent subscribers because they can redeem in full once a deal happens and recover their principal plus interest and some upside on the warrants. However, it is argued that the investor base is broadening.

SGX’s 2010 consultation paper proposed setting a S$150 million minimum market capitalization for SPACs at time of listing. Other suggestions included: a 10% cap on the equity interest of founding shareholders unless they put in the same amount of money as public shareholders; requiring founding shareholders to account for at least 2% of the issued capital, having bought in at the IPO price; and requiring target businesses to have a value of at least 80% of the SPAC’s net asset value.

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• Topics
• Southeast Asia
• Fundraising
• IPO
• Regulation
• Singapore
• SPAC