SINGAPORE - The Singapore Exchange (SGX) will be the first major bourse in Asia to offer special purpose acquisition companies (Spac) listings, with new rules to take effect from Friday (Sept 3).
The rules were finalised after an extensive public consultation exercise that found broad acceptance for the exchange's framework.
Spacs are blank-cheque or shell companies formed by a group of investors - called sponsors - that raise cash through an initial public offering (IPO) and then acquire an existing company.
The process is much faster than a traditional IPO and can generate strong valuations.
Once the funds are raised, the Spac sponsor has a fixed timeframe to "de-Spac", which is to identify a target company and complete a merger or acquisition. If a suitable deal is not found, investors can redeem their capital.
The SGX said on Thursday that a listing under the Spac framework must have certain key features, including a minimum market capitalisation of $150 million.
A de-Spac must occur within 24 months of the IPO with an extension of up to 12 months, subject to conditions.
Singapore companies already involved in Spac deals include ride-hailing and food delivery giant Grab Holdings and online real estate firm PropertyGuru.
The Spac listing framework outlined on Thursday comes after a consultation process between March 31 and April 28.
Around 80 respondents, including financial institutions, investment banks, private equity and venture capital funds - "possibly the highest response rate to an SGX consultation in recent times" - provided feedback, the exchange noted.
Almost all respondents backed the introduction of a Spac framework, saying it would benefit companies, investors and the Singapore capital market.
It would give firms an alternative route to raise capital, one that could allow faster access to public capital and liquidity compared to a traditional IPO.
Investors in turn would gain opportunities to invest in private companies that would otherwise have been only available in the private equity space, the respondents said.
They also noted that a Spac framework would add to the diversity of investment products offered here and enhance the vibrancy of the local capital market, ensuring that Singapore keeps up with global trends and stays competitive.
Mr Justin Tang, head of Asian research at United First Partners in Singapore, welcomed the move to allow Spac listings but noted that it is a little late, given that they have already gained prominence in other global financial hubs.
"It's not just about getting listed but also about liquidity... Investors want to be able to buy and sell close to quoted prices," he added.
National University of Singapore Professor Mak Yuen Teen, who is a corporate governance advocate, said the SGX will have to ensure it does substantial due diligence on Spac sponsors when they apply for listings.
"A Spac is an empty company, so it comes down to the people behind it," said Prof Mak.
Even if the sponsors are well-known private equity or venture capital investors, it does not necessarily mean that they would be successful in a Spac deal, he warned.
The SGX said respondents were also asked to comment on a minimum market capitalisation criterion of $300 million, or if it should be raised to $500 million.
A significant proportion said the $300 million requirement was too high.
"These respondents pointed out that the target company for business combination will be typically between three to eight times the initial size of the Spac," it noted.
A minimum market capitalisation of $300 million would mean suitable acquisition target companies would have to have a market capitalisation of more than $1 billion.
"There are few targets with valuation above $1 billion in Asia and the proposed requirement limits the available target pool of companies for Spacs listed in Singapore," said the SGX.
Singapore Exchange Regulation chief executive Tan Boon Gin said: "We want the Spac process to result in good target companies listed on SGX, providing investors with more choice and opportunities."
The Monetary Authority of Singapore noted that the framework “positions SGX as a regional first-mover” in serving the financing needs of Asia’s fast-growing companies. At the same time, there are safeguards to help retail investors understand the unique features of Spacs, said a spokesman.
Investor watchdog Securities Investors Association (Singapore) said that it will appoint research firms to provide independent research on de-Spacs to guide nvestors on how to vote for the proposal merger with the target company.