Singapore introduces a new SPAC framework allowing investors to conduct direct deals but experts are skeptical of whether it will bring liquidity.
Singapore has announced their completed framework for blank-cheque company listings. Many industry professionals are welcoming these changes as minimum capitalisation is lowered and detachable warrants (convertible securities) are now included, however some have raised concerns for liquidity deficits. Following these changes, special purpose acquisition companies (SPACs) have been allowed to apply to be listed on the Singapore Exchange (SGX), since September 3rd, 2021.
In January, Singapore had mentioned a SPAC framework evaluation following a US market boom where SPACs raised the total amount in 2020- US$79 billion- by mid-March 2021. After industry studies, the SGX halved minimum market capitalisation and opened opportunities for investors to trade shares and warrants separately.
“SGX took a very commercial attitude, listened to the points that people made in response to the consultation paper and made the right decisions,” Marcia Ellis, Partner and Global Chair of Private Equity at Morrison & Foerster, said, “The inclusion of detachable warrants, which was not a part of SGX’s original proposal, is one of the features that makes US SPACs popular. Similarly, the SG$300 million (US$223 million) minimum capitalisation in the earlier proposal would have implied target sizes of almost a million dollars, since target companies are usually multiple times the size of the SPAC when listed.”
The Singapore Exchange decided on a SG$150 million minimum capitalisation, in contrast with the Nasdaq Global Market’s $75 million and the New York Stock Exchange’s $100 million.
Multiple firms are already going to work on SPAC listings in the region. Singapore-based private equity firms Turmeric Capital, Novo Tellus Capital Partners, and Vertex Holdings, as well as French asset manager Tikehau Capital are reported to be seeking listings.
On Friday, September 17th, Singapore’s government said they will be introducing initiatives to assist firms nearing an initial public offering (IPO). This includes a co-investment fund between the government and Temasek called Anchor Fund @ 65, which will start with SG$1.5 billion alongside a SG$500 million Growth IPO Fund from the Economic Development Board (EDB)’s investment arm.
Meanwhile, as Hong Kong has yet to introduce a similar framework, investors are likely to look to Singapore. Currently, Hong Kong SPACs need to raise at least HK$1 billion in funding, with only professional investors allowed to take part. The city is currently undergoing a 45 day consultation period, after which they should introduce a renewed framework for SPACs.