Singapore Exchange (SGX) relaxed rules to list Special Purpose Acquisition Companies (SPACs) on the mainboard index. The new rules followed as some market participants viewed the earlier rules as too strict.
The bourse authority halved the minimum market capitalization to S$150 million from its earlier proposal. The rules also allow warrants to be detachable and shareholders to have redemption rights.
The rules are to be effective on September 3rd and SGX would be the first exchange in Asia to allow listing of SPACs. This would facilitate Asian companies to raise capital more efficiently than the traditional initial public offering (IPO) route.
Tan Boon Gin, CEO of Singapore Exchange Regulation said in a statement, “SGX’s SPAC framework will give companies an alternative capital fundraising route with greater certainty on price and execution”.
Earlier Asian unicorn Grab Holding Inc. merged and went public on Nasdaq via a $39.6 billion SPAC deal.
In 2020 alone SPACs raised $76.2 billion which is 557% more than in 2019 according to KPMG SPAC Intel Hub.
According to Wharton, SPACs often referred to a blank check company with no commercial operations of their own. The shell companies are formed by a group of investors known as sponsors and raise money through IPO with the promise of acquiring an operating company. However, investors beforehand do not have any prior information on which company to be acquired.
In recent times, SPACs became frenzy over IPOs as the listing takes roughly 3-6 months on average compared to over a year for an IPO’s executive according to a KPMG’s report. They further state that since companies can negotiate price with SPAC before a transaction closes, they are less exposed to volatile market prices.