The Singapore Exchange (SGX) is considering the listing of special purpose acquisition companies (SPACs) as it is reportedly planning to launch consultations on the matter.
SGX Chief Executive Officer Tan Boon Gin tackled the idea in a January 11 media briefing, pointing out the apparent popularity of SPACs in other markets. “We have received enquiries and expressions of interest to do so with such a structure,” Tan said.
The SGX CEO mentioned that SGX already had a consultation about it more than ten years ago. He then intimated that the stock exchange may revive the discussions about it, after acknowledging the rising prevalence of using blank check companies for businesses that seek to go public.
“We are now considering, given the current popularity of such a listing structure, whether to revive that consultation,” Tan stated. He also suggested that public consultation may be conducted soon. “It is possible that we will have a public consultation as early as this quarter,” Tan indicated.
Tan suggests that the interest in SPACs is attributable to the current economic situation in Asia and the rest of the world. “I think that the interest in SPACs is being driven by the current volatile conditions that we see,” Tan surmised. He also explained that SPACs come with the advantage of faster time-to-market as well as relative price certainty and better execution as compared to other modes of IPO.
The SGX chief acknowledges that some SPACs are more successful than others. “Since 2010, we have had the benefit and experience of observing other jurisdictions that have listed SPACs. We will examine carefully the hallmarks of success and how we can encourage this structurally,” he explained.
SPACs are notably popular in the United States. Companies from different parts of the world are listing blank check or shell corporations with the US Securities and Exchange Commission to raise funds that can then be used to finance an acquisition or merger. It serves as a shortcut and less tedious alternative to a traditional IPO. It allows companies to do away with the lengthy procedures, meticulous requirements, and high underwriting expense of their own IPO.
While the practice is becoming slightly controversial and attracting the attention of policymakers, it continues to be prominently undertaken. More than a week ago, the United States introduced a provision in its National Defense Authorization Act to ban anonymous shell companies from raising funds in the country.
Last year saw a record number of SPACs. Data from Refinitiv show that around $56 billion worth of investments has been directed to global SPAC listings in the ten months of 2020. Despite the lingering pandemic, SPAC funding has grown significantly.
Japanese conglomerate SoftBank Group seeks to raise at least $525M for SPAC in the US
In a CNBC interview, Asian Institute of Digital Finance Head of FinTech training Dr. Emir Hrnjic noted how traditionally-raised capital suffered. “The Covid-19 pandemic and U.S. presidential election created massive uncertainty in global markets. SPACs have found the way to inject needed funds into capital-starving companies,” Hrnjic said.
The SoftBank Group’s recent US SEC filing is one of the prominent examples of the growing popularity of SPACs in Asia. The Japanese conglomerate is seeking to raise up to $604 million with its SPAC.
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