Spacs can help Singapore break its driest IPO spell in years

SGX hosted just three IPOs this year and has struggled to attract big newcomers amid long-time woes of low liquidity and squeezed valuations. PHOTO: ST FILE

SINGAPORE (BLOOMBERG) - Blank-cheque companies could revive Singapore's languishing market for initial public offerings as stock exchanges from Mumbai to Seoul profit from blockbuster deals.

Singapore Exchange last week presented rules for the listing of special purpose acquisition companies, or Spacs, as it attempts to get a slice of what has become a worldwide frenzy. It is allowing Spacs to list under a rulebook that is more lenient than initially envisioned and more in line with the framework in the United States.

SGX hosted just three IPOs this year and has struggled to attract big newcomers amid long-time woes of low liquidity and squeezed valuations. The move on Spacs, which is expected to draw in listings from sectors including technology, comes as global financial regulators are raising scrutiny of these structures.

"The SGX is sending a clear signal that it's engaged with market participants and is very much open for business," said Ms Stefanie Yuen Thio, joint managing partner at TSMP Law Corp, a law firm. "What we need are top flight sponsors to launch their Spacs here, and attract quality companies."

India's Zomato, Indonesia's and South Korea's Krafton are some examples of Asian start-ups that listed in recent weeks in their home markets in deals worth more than US$1 billion (S$1.34 billion) each. Singapore's most recent tech debut, Aztech Global, raised around US$220 million in March.

Singapore's stock market has been traditionally dominated by finance and property firms, held mostly as dividend plays, and is short on tech names - the hottest theme in global equity markets since the pandemic began.

Three of the four most-heavily weighted stocks on the SGX are banks, the biggest of which - DBS Group Holdings - is partly owned by state investment company Temasek Holdings. The fourth, Singapore Telecommunications, is controlled by Temasek.

While listings by real estate investment trusts have been a success for SGX - the most recent Reit listing, United Hampshire US Reit, happened 18 months ago. Part of the difficulties are due to broader economic factors, such as the city-state's size and small population compared with other South-east Asian markets such as Indonesia and Thailand, said Mr Robson Lee, a partner at Gibson Dunn, a law firm.

"I can see why SGX would want to develop a market for Spacs to list in Singapore, particularly given the buzz at the moment around Asean technology companies, but whether it moves the needle remains to be seen," said Mr David Smith, senior investment director for Asian equities at Aberdeen Standard Investments.

"We are actively engaging with potential sponsors and are expecting a robust pipeline of Asia-focused Spacs," Mr Mohamed Nasser Ismail, SGX's head of equity capital markets, said last Thursday (Sept 2) following the launch of the framework.

Turmeric Capital, an investment firm led by former L Catterton Asia head Ravi Thakran, is working with an adviser for a Spac IPO in the order of $300 million, Bloomberg reported last month.

It will be joining Novo Tellus Capital Partners, a technology and industrials-focused private equity firm, and Temasek's Vertex Holdings in seeking to be among the first to set up a blank-check company in Singapore.

"There is an ecosystem of companies in Singapore that have a regional footprint and they may choose to list in Singapore; tech will definitely be a relevant sector as Spacs take off," said Mr Vineet Mishra, co-head of Asean investment banking at JPMorgan Chase & Co.

Still, competing with more liquid foreign markets will remain a challenge. Three Singapore-based Spacs listed in New York since the start of the year, raising nearly US$700 million. Further, Singapore's Grab Holdings, South-east Asia's most valuable start-up, is set to go public in the US, in what could be a US$40 billion merger with a Spac there.

Olam International, one of Asia's biggest agricultural commodity traders and suppliers, said last month that it picked London to list its food ingredients unit.

Singapore's "home-grown businesses" reached a level of success that allows companies "to seek IPOs in the US and Hong Kong, where the valuations are higher and there's more liquidity", said TSMP's Ms Yuen Thio.

Foreigners coming to Singapore "will want a full-service business environment, which includes a vibrant and welcoming stock exchange. Spacs could be an important offering".

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