Special Purpose Acquisition Company in Singapore
With effect from 3 September 2021, the Singapore Exchange (SGX) has announced new rules that enable Special Purpose Acquisition Companies (SPACs) to list on its Mainboard of the Singapore Exchange Securities Trading Limited. The SPAC Framework covers the broad admission criteria for a SPAC listing: conditions for founding shareholders, the management team, and controlling shareholders and the business combination requirements.
SGX is the first major bourse in Asia to offer SPACs listings. It would give firms an alternative route to raise capital, that could allow faster access to public capital and liquidity compared to a traditional Initial Public Offer (IPO). The SPAC merger process and procedure are much faster than a traditional IPO and can generate strong valuations.
In general, SPACs are called blank-cheque or shell companies formed by a group of investors, called sponsors who raise cash through an initial public offering (IPO) and then acquire a target company.
Once the funds are raised, the SPAC sponsor has a fixed timeframe to "de-SPAC", which is to identify a target company and complete a merger or acquisition. If a suitable deal is not found, investors can redeem their capital.
Singapore companies are already involved in SPAC deals include ride-hailing and food delivery giant Grab Holdings and online real estate firm PropertyGuru.
The SGX listing under the SPAC framework must have the following key features:
- Minimum market capitalisation of S$150 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% of shareholdings.
- Sponsors must subscribe to at least 2.5% to 3.5% of the IPO shares/units/warrants depending on the market capitalisation of the SPAC
- De-SPAC can proceed if more than 50% 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%
- All independent shareholders are entitled to redemption rights
- Sponsor’s promote limit of up to 20% of issued shares at IPO
SPACs could continue to gain popularity as a potential liquidity option for many companies. It would enhance the diversity of investment products offered and boost the vibrancy of the local capital market, ensuring that Singapore keeps up with global trends and stays competitive. Investors in turn would gain opportunities to invest in private companies that would otherwise have been only available in the private equity space.
Source: Singapore Exchange
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