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Can new SPAC rules lure tech IPOs to Singapore?

Written by Khamila Mulia Published on   3 mins read

The 2020 SGX-Nasdaq partnership to attract dual listings has not led to an influx of high tech companies filing IPO applications in Singapore.

The Singapore Exchange, or SGX, has issued new rules that say the bourse will accept listings of special purpose acquisition companies (SPACs), making Singapore the first major financial hub in Asia to fold in blank-check companies. In an official statement, Singapore Exchange Regulation CEO Tan Boon Gin said the new framework will give companies an alternative fundraising route with a higher degree of certainty regarding the price and execution.

The new rules require SPAC target companies to have a minimum market capitalization of SGD 150 million (USD 111.7 million). The de-SPAC process must take place within 24 months after the IPO, with an extension of up to 12 months if prescribed conditions are fulfilled.

This development was welcomed by industry players and capital market analysts. “The new ground rules for SPACs in Singapore provide 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 SPACs,” said Robson Lee, partner at law firm Gibson Dunn Singapore, who specializes in corporate finance and capital markets.

SPAC listings have gained popularity in the United States in the past year. Some companies have opted to go public by merging with a SPAC as this route is faster than the conventional IPO process and often generates strong valuations. Southeast Asian tech giants are currently racing to go public in New York in this manner. Grab will likely be the first regional company to complete the process, as it is set for an IPO by the end of 2021 via SPAC merger with Altimeter Growth Corp. Other tech companies such as GoTo, Traveloka, PropertyGuru, and FinAccel have also expressed their intention to gain ticker symbols in New York.

Meanwhile, US-listed Sea Group and Hong Kong-listed Razer are reportedly mulling secondary listings in Singapore, according to the Financial Times. Temasek’s Vertex Holdings is also said to be weighing a SPAC listing in the city-state to raise funds for future deals. Vertex Holdings CEO Kee Lock Chua told KrASIA in a previous interview that the green light for SPACs will give SGX a competitive advantage over regional rivals. And since a company needs to have a valuation of at least USD 5 billion to attract investors’ interest in the US stock market, listing in Singapore could be an option for tech companies with smaller valuations.

Robson Lee offers a slightly different view. “Whether SPACs will take pride of place in the Singapore market will depend on whether there is a perceptible track record of good valuations and liquidity post-SPAC mergers,” Lee told KrASIA. SGX formed a partnership with Nasdaq in 2020 to attract dual listings, but that did not lead to an influx of high tech companies filing applications for IPOs in Singapore, he said.

Lee expects to see some initial interest from promoters and cornerstone investors in setting up SPACs in Singapore now that SGX’s rules permit them. However, the presence of a congregation of shell companies flush with cash—and seeking to merge with potential unicorns—is not a reliable nor sustainable proposition to boost market liquidity and valuations, which are cardinal in any stock market.

“Fundamentally, there appears to be an ingrained perception that liquidity and valuations in the Singapore market are comparatively low vis-à-vis other stock markets in the region. At the end of the day, market fundamentals are still paramount,” Lee said.

Even so, the new policy will increase the Singapore Exchange’s reputation on the global stage, Lee believes. “While the Singapore Exchange doesn’t have mega-corporations right now, implementing the long-term [SPAC] policy and action plans will enable us to fully leverage Singapore’s international reputation as a well-regulated market for global investors and businesses,” he explained.

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