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SPACs (Special Purpose Acquisition Companies)

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SPACs stands for Special Purpose Acquisition Companies. These are often called “blank cheque” companies because they have no commercial operations and are formed strictly to raise capital through initial purpose offering (IPO). The SPAC will either acquire or merge with an existing company once a company has been identified.

Last year, the popularity of SPACs have soared and you have seen many SPACs listed on the US stock exchanges.

The advantages of SPACs over traditional IPOs are lower transaction fees and shorter timeline to become a public listed company.

Singapore SPACs

If you like to invest in SPACs, you will be happy to know that SPACs have been allowed to list on SGX Mainboard effective 3 September 2021 with the following rules.

  1. Minimum market capitalisation of S$150 million.
  2. De-SPAC must take place within 24 months of IPO with an extension of up to 12 months subject to fulfilment of prescribed conditions.
  3. Moratorium on Sponsors’ shares from IPO to de-SPAC, a 6-month moratorium after de-SPAC and for applicable resulting issuers, a further 6-month moratorium thereafter on 50% of shareholdings.
  4. Sponsors must subscribe to at least 2.5% to 3.5% of the IPO shares/units/warrants depending on the market capitalisation of the SPAC.
  5. De-SPAC can proceed if more than 50% of independent directors approve the transaction and more than 50% of shareholders vote in support of the transaction
  6. Warrants issued to shareholders will be detachable and maximum percentage dilution to shareholders arising from the conversion of warrants issued at IPO is capped at 50%.
  7. All independent shareholders are entitled to redemption rights.
  8. Sponsor’s promote limit of up to 20% of issued shares at IPO.

De-SPAC – How Does it Work?

The SPAC has 24 months to identify and complete a merger with a target company.

Once the merger is announced, the SPAC’s public shareholders may vote against the transaction and elect to redeem their shares.

If the merger is not completed within that time frame, the SPAC liquidates and the IPO proceeds are returned to the public shareholders.

As per the rules stated above, the SPAC can seek an extension of up to 12 months subject to fulfilment of prescribed conditions.

First SPAC to list on SGX –

Vertex Technology Acquisition Corporation Ltd (“VTAC”)

On Thursday, 20th January 2022, Vertex Technology Acquisition Corporation Ltd (“VTAC”) became the first SPAC to be listed on the SGX.

VTAC (SGX: VTA) intends to identify, acquire and manage a business with a core technology focus, highly differentiated products and scalable business models, with the aim to improve people’s lives by transforming businesses, markets and economies.

At an issue price of S$5, the SPAC aims to raise S$200 million with 13 cornerstone investors such as Temasek-linked entities and a fund operated by Dymon Asia, contributing 55 per cent.

Units of VTAC closed at S$5.05 on Friday, 21st Jan 2022, little unchanged from its offer price of S$5.

Second SPAC to list on SGX – Pegasus Asia

Pegasus Asia was the second SPAC to be listed on the SGX on Friday, 21st January 2022. Pegasus Asia is backed by European asset manager Tikehau Capital and a holding firm of LVMH chairman Bernard Arnault.

The Company plans to focus on companies and businesses in technology-enabled sectors, including but not limited to consumer-technology, financial technology, property-technology, insurance-technology, healthcare and medical technology, and digital services, primarily, but not exclusively, in Asia Pacific.

The share price closed at S$5.02, little unchanged from the offer price of S$5.

 

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