SGX targets SPAC listings amid IPO drought and increased global scrutiny

Singapore SGX Centre. Image by tang90246 | Bigstockphoto

Singapore’s stock market has struggled to bring in IPOs in the last year and is now looking to blank-check companies or special purpose acquisition companies (SPACs) to spur activity. 

SGX, which has hosted just three IPOs this year, has struggled to attract big companies amidst long-running problems like low liquidity and squeezed valuations. Historically dominated by finance and property firms, SGX has also lagged partly because of the lack of new tech companies compared to other exchanges.

“I can see why SGX would want to develop a market for SPACs to list in Singapore, particularly given the buzz at the moment around ASEAN technology companies, but whether it moves the needle remains to be seen,” said David Smith, senior investment director for Asian equities at Aberdeen Standard Investments.

Vineet Mishra, co-head of ASEAN investment banking at JPMorgan Chase & Co, agrees, saying, “The interest is not surprising because Southeast Asia as a region, with its early-stage and high-growth tech businesses, has resulted in a lot of interest.”

SPACs, which have surged in popularity during the pandemic, are designed to carry out an IPO and merge with another business looking to go public without the tedious process of doing so. 

Deloitte analysts highlight that SPAC mergers give sponsors the opportunity to raise additional capital through private investment in public equity (PIPEs), like convertible senior notes and warrants. They can use this cash for financing a significant portion of the target’s acquisition price and provide post-merger operating cash.

“If you need money, an IPO, for all its flaws, makes the most sense and is probably the best option; if you don’t, a direct listing may be preferable; if you need money, speed, and certainty, a SPAC may be best,” said Alex Rampell and Scott Kupor of a16z.

CNBC notes that SPACs have suddenly become all the rage because the market volatility caused by a global pandemic has made it difficult to raise money through traditional means. However, in the United States, SPACs are now being put under the regulatory microscope and asked to provide disclosures after the global surge in SPAC transactions in Q42020 and Q12021.

As American interest in SPACs wanes, international sponsors are now looking even more closely into Southeast Asia, a rapidly growing global tech hub with local firms eyeing worldwide expansion.

In a conversation with Bloomberg, Tan Boon Gin, chief executive officer at Singapore Exchange Regulation, said that from the initial proposal by SGX that restricted shareholder rights, they had accommodated market demand to align sponsor interest with shareholder interest. Tan said they would allow listing on the bourse as early as Friday, 10 September, under a more liberal rulebook for SPACs and with a minimum market cap of S$150m. Their target is to have the first SPAC listing by the end of this year.

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