Special purpose acquisition companies updates
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Singapore Exchange has become the first major bourse in Asia to allow blank cheque companies to list, even as the market attracts more intense scrutiny from global regulators.
Special purpose acquisition companies (Spacs) will be able to apply to list on the SGX from Friday, the bourse said on Thursday.
Entities will require a minimum market capitalisation of S$150m (US$111m) — half of the SGX’s earlier proposed amount — while limits on shareholder redemption rights have been removed. Following a market consultation, the SGX softened some measures it had initially proposed.
“We want the Spac process to result in good target companies listed on SGX, providing investors with more choice and opportunities” said Tan Boon Gin, chief executive of Singapore Exchange Regulation, SGX’s regulatory arm. SGX will focus on the sponsors’ quality and record, he added.
Singapore has struggled for years to attract fast-growing and high profile companies to its exchange. Low liquidity and valuations have prompted a string of companies to delist, while some of the city’s most promising homegrown technology start-ups such as Sea and Razer have chosen to list in the US and Hong Kong.
In response, SGX has tried to bolster other growth areas, including boosting its appeal as a hub for investors to trade bonds, foreign exchange, commodities and derivatives.
It has also encouraged some of Singapore’s offshore listed companies to consider “homecoming” or secondary listings in the city-state.
Singaporean companies that have discussed the move include Sea, a gaming and online commerce company that listed in New York in 2017, ride-hailing and food delivery app Grab and Hong Kong-listed gaming group Razer, the Financial Times reported in June.
Spacs have been one of the hottest asset classes in the US, raising $79.4bn globally last year. Spacs are shell companies that raise money by listing on the stock market before hunting for a target to merge with. In the past year major funds, Wall Street luminaries and celebrities have competed fiercely to sponsor promising private targets, mainly tech companies.
The SGX’s move will be welcomed by both Spac sponsors and targets, said Jonathan Quek, Citigroup’s head of investment banking in Singapore.
There is a “vast pipeline of interesting opportunities in Singapore and regionally”, he added.
However, SGX’s move comes as the global Spac mania has started to subside. The sheer number of deals has attracted the attention of the US securities regulator, while some analysts say prices have become too rich for what are often speculative ventures.
Singapore Exchange Regulation, or RegCo, has spent “considerable time” listening to industry feedback, as well as taking on board recent regulatory developments in the US, said Robson Lee, a partner at law firm Gibson Dunn.
“The new ground rules for Spacs in Singapore encompass two cardinal components — providing investors with opportunities to participate in the growth and development of promising private enterprises, while ensuring safeguards to protect public investors without distorting the concept and substance of [the vehicles],” Lee said.