For years, Singapore has struggled to attract high-profile technology players for initial public offerings (IPOs). Popular Southeast Asian technology companies such as Sea Ltd and gaming hardware manufacturer Razer have opted for listings anywhere other than their home country.
Recently, it has also announced the country’s technological unicorn Grab is scheduled to be made public through a special purpose acquisition company or a SPAC agreement on the US Nasdaq, as has been PropertyGuru and supposedly Carousel in overseas bags.
Singapore has a move that may be ready to run this year to attract these high-profile local companies listed on the Singapore Stock Exchange (SGX): in March, SGX launched proposed regulatory framework to list SPAC in the local market. He asked for market feedback.
SGX plans to take advantage of global interest in SPACs and has said it expects to see the framework completed by mid-year and that it can be “published” by the end of this year.
The SPAC offering can provide SGX with the visibility needed to attract companies that are ready to trade amid a competitive global public market.
What is the SPAC structure of SGX?
SPACs, also known as “blank check companies,” have existed since the 1990s. They have recently gained popularity due to the favorable framework that benefits many companies and investors, such as a faster timetable for making fundraising public.
SPACs raise money from investors and then seek to acquire another business, usually private, within a designated period of time.
Last year, more than 165 global SPAC companies were listed, five times more than in 2015.
The SGX published a regulatory framework in March for SPACs to be listed on the SGX and searched the market for information. He sought opinions on how to address the risks of SPACs and on the creation of reliable listing vehicles. Through SPAC, SGX aimed to increase investor options and generate value creation opportunities for shareholders.
RegCo, the SGX’s regulatory arm, proposed a minimum market capitalization for SPACs at $ 300 million (US $ 222.6 million). There is also a three-year period for SPACs to be combined with their objectives.
It was also proposed to raise the minimum issue price of SPACs to $ 10 S per share or unit, among other criteria. For comparison, S $ 0.50 is the existing minimum issue price of securities on the main board.
A main list of SPACs on the SGX motherboard was also proposed. The SGX also requested information on whether SPACs were allowed to request a secondary list on the main board.
Why do SGX SPACs work?
There has been a growing local and regional interest in SPACs. State investment firm Temasek Holdings said so sees increased interest among Southeast Asian companies listed by SPAC, adding that some of the companies in their portfolio are looking to do just that.
Temasek’s influence in creating winning bids may influence regional investment funds to also participate in the SGX’s SPAC listings.
Last month it was said to be the unit of Temasek Vertex Holdings planning to raise funds to do business by listing a SPAC in the SGX. Vertex operates six funds with assets under management worth more than US $ 5 billion (US $ 6.7 billion).
Vertex’s active investments include giant Grab, cryptocurrency exchange Binance Holdings and Horizon Robotics, a Chinese artificial intelligence chip start-up backed by Intel Capital.
Grab co-founder Tan Hooi Ling had said in previous reports that while the company had chosen to go public in the United States so that it could take advantage of a larger investor base, the group is not ruling out the possibility of a simultaneous local listing.
Sources had said so the potential listing on the SGX would allow Grab to have an investor base close to where its regional business is based. This will give customers, drivers and trading partners easier access to trade their shares.
In an interview with Bloomberg in February, SGX chief Loh Boon Chye told Bloomberg that Singapore could see its first SPAC list this year if it receives enough support from the industry.
In addition, the insertion of SPAC in the SGX will provide the local market with much-needed commercial activity. Despite last year’s global market volatility that led to an increase in trading volumes, the value of the shares traded the SGX remained below the five-year average over the same period.
In addition investors are also offered alternative trading options such as cryptocurrencies and faster access to foreign markets through fintech technology providers. With a portfolio of high-profile companies listed on the SGX, it will give SGX the opportunity to secure local and global interest.
Govern the key issue for companies and investors
The SPAC concept is no stranger to SGX, as it was in 2010 reflected on the idea to put SPAC on the main board. The response from the public at the time was not receptive, and the venue left the idea behind.
More than ten years later, SGX is revisiting the idea, believing that the introduction of SPAC can benefit capital market participants and become a viable alternative to traditional IPOs for fundraising in both Singapore and the region.
However, since major markets already have SPAC vehicles in operation, the stricter regulatory rules governing local SPACs could discourage companies from reflecting on the idea.
Some market participants have already said that the minimum market capitalization of A $ 300 million is too steep.
The SPAC exchanges out there include the sophisticated US market and it can be an uphill challenge for SGX to attract SPAC listings with its stricter regime.
In addition, the concept of SPAC and its rapid track record of raising funds can attract companies looking for cash and may have worse funding than typical companies looking for public listings. This can lead to worse results or returns for investors.
Investor protection would be an aspect to consider, but over-regulation can also deter potential value-generating companies. Investors should take full responsibility for understanding the basics of how SPACs work before trading.
One option would be for SPACs to be open only to investors who meet certain criteria, such as investor knowledge or educational level, but which should also be handled with care to avoid preferential treatment.
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Featured Image Credit: Bloomberg, Sea Limited