Singapore to host SPAC listing, a first among Asian financial centers

On Thursday, the Singapore Exchange issued new rules for special purpose acquisition companies to be listed on its main board, ending a month-long consultation process as US regulators step up investigations into investment vehicles.

The framework follows a public consultation launched in March. The most notable amendment to the draft rules, after considering feedback from investment firms, banks, lawyers and others, was to raise the SPAC’s minimum market capitalization requirement to 150 million Singapore dollars, or roughly the equivalent of $111.6 million.

“We want the SPAC process to provide investors with more options and opportunities as a result of well-targeted companies listed on the SGX,” Tan Boon Jin, chief executive of the exchange’s regulatory arm, said in a statement.

The revised market-cap range is in line with that in the US, where the floor for listings on the Nasdaq stock market and boards operated by the New York Stock Exchange ranges from $50 million to $100 million.

SGX said the range strikes a balance between attracting high-quality sponsors and ensuring businesses are able to merge with SPAC. In SPAC, a sponsor refers to the management team of a shell company that is tasked with finding another company, also known as a target, to merge.

SPACs are shell companies that first raise money from public investors and are listed on stock exchanges, then seek mergers with private companies. They are touted as a more streamlined alternative to initial public offerings and, for a time, they took Wall Street by storm. However, since April, the more critical stance of the Securities and Exchange Commission has prevented new issuances.

Singapore’s framework formalizes some common US market practices into regulations that attempt to protect investor interests. For example, SPAC is required to merge with an operating business within two years of listing, with a one-year extension in some cases.

It also includes a number of provisions that reflect increased scrutiny in the US on issues such as financial projections made by companies that have merged with SPAC, as well as accounting treatment for warrants, which are a normal part of deal structures. For example, companies wishing to merge with SPAC in Singapore should have the same level of disclosure and due diligence as in an IPO.

Such requirements “would enhance the skin of sponsors in sport and their alignment with the interest of shareholders,” Mr Tan said in the statement.

Exchanges and other market participants expect the new rules to bring more deals to Singapore. The consultation was launched shortly after The Wall Street Journal reported that Grab Holdings Inc., a Southeast Asian ride-hailing giant based in Singapore, was planning to go public in the US through SPAC – showing that That the structure of this deal has appeal to some large businesses. in Southeast Asia.

“We are actively engaging with potential sponsors and look forward to a strong pipeline of Asian-focused SPACs,” said Mohamed Nasser Ismail, Head of Equity Capital Markets at the exchange.

Frank Trois, chief executive of Singapore-based Soho Advisors, a boutique advisory firm, said: “Singapore is going to see a flurry of SPAC activities. We have seen serial US sponsors who withdrew US listing efforts and are now shifting their focus here.”

Elsewhere in the region, South Korea and Malaysia both allow SPAC listings, but neither market has hosted a deal in years, according to DeLogic data. The Hong Kong Stock Exchange, which has seen a boom in Chinese IPOs, was asked by the city government earlier this year to explore allowing SPACs.

The exchange, which spent years ridding itself of shell companies that have low trading volumes or, in some cases, allowed problematic companies to join the market, provided no update on its plans to introduce SPACs. not done.

The new rules represent “an important strategic step forward for SGX relative to Hong Kong”, Mr Trois said.