Special Purpose Acquisition Companies (“SPAC”) are companies (“Issuer”) set up with cash and listed on the Singapore Exchange Securities Trading Securities Trading Limited (“SGX-ST”).
Who are the key Stakeholders in a SPAC deal?
- Sponsors of such SPACs aim to merge their Issuer entities with fast growing counterparties so that the share price of the Issuer will rise and the sponsor can make money from the free shares that they get for sponsoring the SPAC. Jefferies reports that SPAC sponsors typically receive 20% of the common equity in the SPAC for an investment of approximately 3% to 4% of the IPO proceeds. For example, in a $250 million SPAC, the sponsor typically receives approximately $60 million of common stock for a $7 million investment in warrants[1].
- Investors in a SPAC deal. They usually subscribe for shares and warrants (which can be exercised after a “De-SPAC”). Investor’s monies are ring-fenced in an escrow account and invested in treasury bills and have a strict use of proceeds so most of such funds are protected until a suitable target is found by the Issuer. Investors can buy and sell the shares like a normal listed company until a de-spac where they have to vote on whether to approve the De-Spac transaction.
- Target: Usually the Issuer would want to find a company that grows really fast so that after a de-SPAC, the price of the Issuer will shoot up so that the Sponsors and the Investors can make money. Sometimes, if the valuation of the target is pushed really high, then the price of the stock will fall after the de-SPAC. A prime example of this was Grab where half of its market cap was wiped off after the merger.
Some typical questions about SGX SPAC Listings
- What is the minimum listing price per share?
On the SGX, the minimum listing price per share is S$5.
- What is the minimum market cap on the SGX for an Issuer?
S$150 million. What this means is that each Issuer needs to hunt for a target with a valuation of between 3 to 4 times its market cap (i.e. target valuation between S$450 million to S$600 million).
- What is the maximum promote for the sponsors of the SPAC?
The promote refers to the maximum free percentage of free shares that sponsors can get for each SPAC deal. On the SGX, the maximum promote that the sponsors can get is 20%.
- Timeframe for De-SPAC
Some equity traders would stare hard at the probability of the SPAC undergoing a de-SPAC and trade on this. Thus, it is important to learn the rules governing the De-SPAC timeline. Most SPACs have up to 24 months to find a target. However there are provisions to allow for an extension of this timeline:
- Automatic extension: Subject to 36 months and certain conditions, the Issuer can apply for extension;
- On-automatic extension: If the Issuer has not found a target by 24 months, it has to convene an extra ordinary general meeting of its shareholders to get the necessary approvals (75%) to allow for an extension of this timeline.
- What is the minimum equity participation of the Sponsor?
| Market capitalisation (S$) | Proportion of Subscription (%) |
| More than or = to 150 million, but less than 300 million | 3.5 |
| More than or = to 300 million, but less than 500 million | 3.0 |
| More than or = to 500 million | 2.5 |
In conclusion, listing a SGX SPAC Listing is a new development on the SGX. Appointing a suitable corporate finance lawyer in Singapore to do your SPAC Listing is one of the key steps of building sustainable platform. If you have questions on SPAC listings, so leave some comments below this page and we will addresses some of these queries in our next article on SPAC listings on the SGX.
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[1] https://www.jefferies.com/OurFirm/2/1616
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