At the end of last week, the Singapore Exchange (SGX) presented the region’s financial markets with a welcome surprise when it introduced its regulatory framework for the listing of special purpose acquisition companies (SPACs). On September 3, Singapore became the third exchange in Asia—and arguably the most international so far—to accept such investment vehicles with requirements that were much less stringent than originally anticipated.
In a statement, the Monetary Authority of Singapore (MAS) commented, “the framework positions the SGX as a regional first-mover in serving Asia’s fast-growing new tech and new economy companies’ financing needs.” We’re inclined to agree. Given Singapore’s influence as a regional financial hub, we see the move as a positive one for Southeast Asia that offers an alternative pathway to growth and international expansion for some of the region’s most promising businesses.
In the U.S., Richard Branson’s space tourism business, Virgin Galactic, secured its listing through a merger with a SPAC. Opendoor, an online real estate platform with a market capitalization of USD 11.6 billion (bn) and that reconfigures the house-buying process, has also taken the same route.
Businesses across Asia have also been looking to get in on the action on U.S. exchanges. Asia Pacific-focused SPACs represent the largest share of geographically focused SPACs, with 11 of them having listed in the U.S. as of March 2021.1 A significant chunk of this SPAC activity has centered around Southeast Asia, thanks to the region’s vigorous tech startup scene and relatively small IPO market. A Google, Temasek, and Bain & Company study estimates that digital commerce will constitute a USD 390 bn market by 2025, with USD 124 bn coming from Indonesia.2
One of the world’s best-performing stocks in 2020, the Singapore-based startup Sea Limited debuted on the NYSE in 2017 and has seen its stock price soar by over 1,000% since Q1 20183 to Q3 2020. It has further increased in the past year.
And 2021’s most promising SPAC unfolded just this April, as Singapore-based ride-hailing conglomerate Grab, which is looking to close a SPAC deal by the end of the year, unveiled a U.S.-based listing with an estimated valuation of USD 40 bn—possibly the largest SPAC deal on record.4
These deals have drawn more SPACs to Southeast Asia in search of similarly lucrative deals. Traveloka, the region’s biggest online travel startup, is in talks with several SPACs with an eye towards listing in the U.S. in 2021 at a projected valuation of up to USD 4 bn.5
Some experts had warned that the level of interest in Southeast Asia startups could outweigh the number of suitable SPAC targets ready to list on the NASDAQ or NYSE. The majority of the region’s startups do not meet the valuation threshold required to take a company public in the U.S.6
Singapore’s decision then to reduce the minimal market capitalization for SPACs from the SGD 300 million (mn) originally proposed to SGD 150 mn is a smart and welcome one. It makes the American valuation thresholds less relevant and means that more Southeast Asian businesses will be able to fulfil their ambitions on an exchange in the region.
While Asia’s burgeoning tech unicorns may continue to seek SPAC mergers in the U.S. due to the larger investor pool, the pragmatic and manageable guidelines introduced by the SGX place it in a strong position to capture region-specific opportunities.
If Singapore has made clear its intention to capitalize on first-mover advantage, what does that mean for other exchanges across Asia?
In Hong Kong, the HKEX’s complex history with shell companies has kept investors and regulators wary about SPACs, and the exchange’s higher IPO volumes relative to Singapore’s leave Hong Kong with no incentive to rush things. Many recent mandates, like the 2019 revised rules that closed loopholes on backdoor listings and shell corporations, will need to be changed or eliminated altogether to allow SPAC listings—which local regulators are cautious about . The HKEX is presently working on a SPAC framework proposal with a consultation on rule changes due to launch before the end of September.8 It remains to be seen whether the differences between the two regional financial centres will see views at the HKEX shift now that Singapore has presented their framework. Another dynamic of course is Hong Kong’s opportunity to serve as the SPAC hub for Greater China.
The rest of Asia may also yet respond to recent SPAC developments by revising their own rules accordingly.
The confirmation of the SGX’s SPAC requirements increases the urgency for potential SPAC participants—sponsors and target companies alike—to seek external, independent and reliable advice. Beyond supporting research on a sponsor or target company, a third-party advisor can offer guidance throughout the SPAC lifecycle. Services like SPAC warrant valuations, comprehensive due diligence on SPACs and SPAC targets, and independent fairness opinions during the de-SPAC process will help ensure satisfaction of all regulators.
An experienced risk management partner can help you navigate past the complexities of SPACs, unearthing value no matter what side of the transaction you’re on.
1"Market Report: Special Purpose Acquisition Companies." Duff & Phelps, Spring 2021. https://www.duffandphelps.com/insights/publications/m-and-a/spac-market-report-spring-2021.
2 e-Conomy SEA 2020 report by Google, Temasek, Bain & Company. https://www.bain.com/insights/e-conomy-sea-2020/
3 Kuo, David. "Commentary: Singapore's Sea is world's best performing stock. And it can do better." Channel News Asia, October 8, 2020. https://www.channelnewsasia.com/news/commentary/sea-limited-group-garena-shopee-stock-share-price-market-cap-13220044.
5 Deepti Sri. "Sources: Traveloka selects JPMorgan for US IPO through SPAC." Tech in Asia, February 11, 2021. https://www.techinasia.com/report-traveloka-selects-jpmorgan-us-ipo-spac.
6 Ruehl, Mercedes et al. "Asian bourses look to join Spacs craze despite governance concerns." Financial Times, March 5, 2021. https://www.ft.com/content/52d27e05-6a36-4800-8863-b687a702d635.