Singapore’s finalised framework for the listing of blank-cheque companies has been largely praised by industry experts for its lowered minimum capitalisation requirement and inclusion of detachable warrants, but the local bourse’s lack of liquidity remains a concern for investors.

Special purpose acquisition companies (Spacs) were allowed to apply to list on the Singapore Exchange (SGX) from September 3 onwards. The Singapore bourse had announced in January that it was evaluating a Spac framework after a boom in the US market that saw $79 billion raised by Spacs by mid-March – the same amount raised in the whole of 2020.

Following market consultation, SGX relaxed some of the measures from its earlier proposal, such as halving the minimum market capitalisation and allowing investors to trade shares and warrants (convertible securities) 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.

Marcia Ellis,
Morrison & Foerster

 

The original proposed measures would have made Spac listings in Singapore less attractive compared to the US, the experts told AsianInvestor.

For example, 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, Ellis said. Similarly, the S$300 million ($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, she said.

SGX settled on a S$150 million minimum market cap in its finalised framework, compared with $75 million for Spacs listed on the Nasdaq Global Market and $100 million on the New York Stock Exchange.

ASSET OWNER APPEAL

A number of firms are reportedly already working on listing Spacs in Singapore, including French asset manager Tikehau Capital, Singaporean private equity firms Turmeric Capital and Novo Tellus Capital Partners, and Temasek-backed Vertex Holdings.

State investment firm Temasek and sovereign wealth fund GIC are also expected to be involved in Spac listings to encourage tech firms in their portfolios to go public, Bloomberg reported, citing people familiar with the matter.

Kelvin Fu, Gunung

On Friday (September 17), the Singapore government announced that several initiatives will be rolled out to support firms close to an initial public offering (IPO). The initiatives include a co-investment fund between the government and Temasek named Anchor Fund @ 65, which will have S$1.5 billion to start with, as well as a S$500 million Growth IPO Fund by the investment arm of the Economic Development Board (EDB).

Family offices are also expected to set up or invest in Spacs in Singapore, even though several were uncertain earlier this year, as AsianInvestor reported in May.

“I see family offices increasingly trying to get access to direct deals. Spacs would be another of the tools to do that,” commented Kelvin Fu, managing partner of single-family office Gunung Capital. “It’s worth highlighting the number of family offices being set up in Singapore,” added Fu, who will be relocating to Singapore from Jakarta next month to set up an investment office in the city-state.

The number of single-family offices (SFO) has increased five-fold between 2017 and 2019, with 200 established in Singapore as of late-2020, according to senior minister and Monetary Authority of Singapore (MAS) chair Tharman Shanmugaratnam. Singapore has also been rolling out new rules to strengthen its appeal to SFOs.

Singapore has lured a slew of billionaires in recent years, including Google co-founder Sergey Brin, vacuum cleaner tycoon James Dyson, and Bridgewater Associates founder Ray Dalio.

Asian tycoons who have listed Spacs in the US include private equity veteran Fred Hu and Hong Kong billionaire Richard Li. The latter’s Bridgetown Holdings was recently reported to have abandoned plans to merge with Indonesian unicorn Traveloka.

REGIONAL ADVANTAGE

Being the first major Asian bourse to allow Spacs listings, the SGX framework is likely to appeal to investors closer to home.

“Home bias is a strong factor for investors,” Herston Powers, managing partner and co-founder at Singapore-based 1982 Ventures noted. “The timing could not be better as there are plenty of targets that are too small for the US and an SGX listing would serve them well,” he added.

Herston Powers, 1982

It will also have an advantage over Hong Kong, which launched its consultation paper on Spacs last Friday (September 17). Under the proposals, Spacs in Hong Kong will have to raise at least HK$1 billion (S$173,155) and only professional investors will be able to participate before the de-Spac stage. Hong Kong is expected to finalise its Spac framework only after a 45-day consultation period.

Singapore has obtained a much-needed head start, Ellis said. In the absence of a Hong Kong framework, potential sponsors will turn to Singapore, particularly those who see value in being in that first tranche of Spac companies listed in Asia, she said.

But one expert familiar with Southeast Asia’s start-up ecosystem who declined to be named said he did not think a Hong Kong listing made sense for Southeast Asian companies. “Non-Chinese foreign listings in Hong Kong in the past 10 years did not live up to the expectations of capturing the Chinese investor.”

“Other than for Reits, the Singapore market is just not large enough yet. It’s a chicken and egg problem for Singapore, because how do you convince people to come to your market and increase the liquidity, when their biggest concern is liquidity?” Ellis said.

According to Bloomberg data, Real Estate Investment Trusts (Reits) make up a fifth of shares traded by volume in Singapore. In the first half of 2021, there were four listings on the SGX, which raised a total of S$337.8 million, a SGX spokesperson confirmed. Meanwhile, funds raised through the 69 IPOs listed in Hong Kong during the first eight months of 2021 totalled HK$269.8 billion ($34.6 billion).

Other Asian bourses that have allowed Spac listings include Malaysia, which had its first Spac listing in June 2011, but only four other companies have followed suit since then. South Korea has also allowed Spacs since 2009 but many initial Spacs have since been liquidated and their sizes have remained small.