Singapore’s stock exchange is accelerating plans to become the first major bourse in Asia to list special purpose acquisition companies, aiming to capitalise on a surge of foreign investment in fast-growing technology start-ups.
SGX said it would begin a formal consultation within two months into allowing blank cheque companies to list in the city-state. The exchange has already held talks with global banks and issuers, according to multiple people involved in the discussions.
Singapore would be the first exchange in Asia to join the rush of tech-focused Spacs, one of the hottest asset classes in the US, where blank cheque vehicles raised a record $80bn in 2020.
Sponsors raise capital by listing Spacs and then hunting for a company to acquire or merge with. The structure provides companies an alternative route to going public to expensive and time-consuming initial public offerings.
Tan Boon Gin, chief executive of SGX’s regulatory unit, said this month that the exchange had received a number of expressions of interest. By giving issuers a faster path to market and more certainty on pricing, Spacs “would benefit capital markets both locally and regionally”, according to the exchange.
Bankers said SGX would be well positioned to attract Asia-based and regionally focused acquisition vehicles that have listed in the US, such as Bridgetown Holdings, a Spac backed by Hong Kong businessman Richard Li and Silicon Valley investor Peter Thiel.
Bridgetown raised $595m in a US IPO in October, making it the biggest Spac focused on south-east Asia. Bridgetown 2, which launched this month, is seeking to raise $200m to target additional Asian companies.
Udhay Furtado, co-head of Citigroup’s Asia equity capital markets business, said there was a “backlog building” of financial sponsors aiming to list Spacs targeting Asian companies, especially in south-east Asia.
More than five Spacs by Asia-based sponsors in the US have announced plans to list or have gone public in the first two weeks of 2021, including one by Hong Kong-based Primavera Capital and Princeville Capital.
SGX’s pursuit of Spacs comes as some of south-east Asia’s highest-profile unicorns, or private companies worth at least $1bn, are expected to seek public listings this year. Those include ride-hailing apps Grab and Gojek, valued at $16bn and $10bn, respectively, and Indonesian ecommerce start-up Tokopedia, recently valued at $7.5bn.
SGX, which has suffered a string of delistings, could be an early mover because it has greater incentive to allow in Spacs, Mr Furtado said. The exchange’s push follows earlier, less fruitful attempts to attract tech names, such as partnerships with the Nasdaq and Tel Aviv exchanges.
The Singapore exchange is also facing competition from regional rival Hong Kong, which has drawn a steady stream of “homecoming” listings by Chinese tech groups seeking to reduce their dependence on Wall Street amid tensions between Washington and Beijing.
“[SGX] may not be able to compete with the Hong Kong exchange in terms of tech IPOs so it’s trying to find another edge,” said Margaret Yang, a strategist at DailyFX.
The Hong Kong stock exchange has not been an option for Spacs in Asia because of its tight rules around “backdoor” listings, imposed over concerns about listed cash shells that can access funding without full IPO scrutiny.
However, Spacs have been criticised for lacking transparency and providing greater returns for sponsors than for shareholders.
One investment banker in Singapore said SGX had proposed changes to the US Spacs model to make blank cheque vehicles more “investor-friendly”, including requirements to ensure only qualified sponsors could raise a Spac and changes to incentives so that sponsors could not walk away with an outsized financial gain.