Singapore Exchange (SGX) announced on Thursday new rules that enable Special Purpose Acquisition Companies (SPACs) to list on its Mainboard, effective Friday, September 3rd.
“SGX’s SPAC framework will give companies an alternative capital fundraising route with greater certainty on price and execution. We want the SPAC process to result in good target companies listed on SGX, providing investors with more choice and opportunities,” Singapore Exchange Regulation (SGX RegCo) Chief Executive Officer Tan Boon Gin said in a statement.
“To achieve this, you can expect us to focus on the sponsors’ quality and track record. We have also introduced requirements that increase sponsors’ skin in the game and their alignment with shareholders’ interest,” he added.
An SGX listing under the SPAC framework must have the following key features:
- Minimum market capitalization of S$150 million ($111.63 million);
- De-SPAC must take place within 24 months of IPO with an extension of up to 12 months subject to fulfilment of prescribed conditions;
- Moratorium on Sponsors’ shares from IPO to de-SPAC, a 6-month moratorium after de-SPAC and for applicable resulting issuers, a further 6-month moratorium thereafter on 50 percent of shareholdings;
- Sponsors must subscribe to at least 2.5 percent to 3.5 percent of the IPO shares/units/warrants depending on the market capitalization of the SPAC;
- De-SPAC can proceed if more than 50 percent of independent directors approve the transaction and more than 50% of shareholders vote in support of the transaction;
- Warrants issued to shareholders will be detachable and maximum percentage dilution to shareholders arising from the conversion of warrants issued at IPO is capped at 50 percent;
- All independent shareholders are entitled to redemption rights;
- Sponsor’s promote limit of up to 20 percent of issued shares at IPO.
SGX said over 80 respondents provided feedback, “possibly the highest response rate to an SGX consultation in recent times”. They included financial institutions, investment banks, private equity and venture capital funds, corporate finance firms, private investors, lawyers, auditors, and stakeholder associations whose views “have been carefully considered” in arriving at the framework.
The stock exchange said it will work with the Securities Investors Association (Singapore) to increase retail investors’ understanding of SPACs through collaborative efforts including the conduct of educational programs.
“SGX will separately partner Singapore Institute of Directors to educate future directors of SPACs on the responsibilities and duties expected of them,” the stock exchange said.
SGX announced in March it is seeking market feedback on a proposed regulatory framework for the listing of SPACs on its Mainboard. One of the broad admission criteria listed then includes a minimum S$300 million ($223.27 million) market capitalization.
SGX’s move to introduce SPACs listing framework comes as the exchange hopes to ride on the hottest fundraising trend in the US and become a listing venue for these blank-check companies. Tech unicorns in Southeast Asia including Singapore-based ride-hailing giant Grab have agreed in April to go public in the US via a SPAC backed by Altimeter Capital Management in a $40 billion deal.
In July, Southeast Asian online realty firm PropertyGuru agreed to go public through a merger with a blank-check firm Bridgetown 2 Holdings, in a deal that would give the combined company an equity value of about $1.78 billion.
Elsewhere, it was reported that Hong Kong and Indonesia are also considering allowing SPACs to list. Investor interest, however, has seen subsided in recent months amid a US regulatory crackdown over their disclosures, lawsuits, and many cases of weak financial performance, Reuters reported last month.
SPACs are not totally new to Southeast Asia. In Malaysia, the first SPAC was launched in June 2011 with the listing of Hibiscus Petroleum Bhd. This was followed by four more SPACs. There were no other SPAC listed on Malaysia’s bourse after the fifth SPAC, Red Sena Bhd, which was listed in December 2015. Of the five SPACs listed, three had gone through the liquidation phase and monies were returned to shareholders.
Singapore first considered approving SPAC listing in 2010 but shelved the plan after a public consultation.
Featured image credits: Unsplash