SPAC listings have finally been allowed on the SGX — making it the first in Asia to offer this option for private companies. Here’s what it means for investors in Singapore.
In an attempt to make the Singapore Exchange (SGX) more enticing to both local and overseas companies looking to go public, the SGX has announced that they will be offering special purpose acquisition companies (SPAC) listings from 3 September 2021.
For a SPAC listing on the SGX, the company must have a minimum market capitalisation of S$150 million (US$112 million). To put things into perspective, the minimum market cap requirement for SPAC listings on the Nasdaq is US$160 million. Grab’s SPAC merger with Altimeter Growth Corp. has a valuation of close to US$40 billion — the largest SPAC deal by a company from Southeast Asia.
Here’s what you need to know about this latest rule and about SPACs.
What is a SPAC and what’s the big deal?
Special purpose acquisition companies (SPAC) listings have exploded in popularity the last couple of years due to the uncertainty brought about by COVID-19 — 2020 was even dubbed the year of the SPAC.
In 2020, 219 SPACs raised a total of US$73 billion — a 462% year-over-year jump that outpaces traditional IPOs by US$6 billion. Over in London, the rise in popularity of SPACs have also led to the scrapping of the rule for SPACs to suspend their listing when they reveal their deal plans.
A SPAC listing gives companies an alternative way to raise capital and this is also the main reason companies choose a SPAC listing, as it takes a shorter time period to get listed.
A SPAC is essentially a shell-company formed by a group of investors (referred to as sponsors) that is set up to raise capital via an IPO, solely for the purpose of acquiring private companies. Once the capital has been raised, the SPAC sponsor has a predetermined period to identify a company that they would like to merge with or acquire.
For example in the case of Grab’s upcoming SPAC listing, if you’d like to own Grab’s shares in the future, you can purchase units of Altimeter Growth Corp. (Nasdaq: AGC) today. After the merger, the stock will trade with the ticker symbol ‘GRAB’.
What’s in it for the SGX?
The SGX has long been known for being a ‘boring’ market for traders and investors, compared to the likes of the Nasdaq, NYSE and Hong Kong Exchange. The trading volume isn’t as high, price movements aren’t as significant and just a handful of companies choose to list on the SGX each year.
By offering companies the opportunity to list on the SGX via a SPAC, there is hope that more companies will choose to go public on the SGX rather than on other stock exchanges, in turn attracting more investors to trade on the SGX.
This also makes the SGX the first major exchange in Asia to offer SPAC listings, beating Hong Kong to the punch. SPAC listings are currently only available in markets including Nasdaq, NYSE and the London Exchange.
What can investors expect?
There could be the possibility of companies looking to go public opting for a SPAC listing on the SGX. This could offer investors the chance to invest in such companies that would otherwise have been kept private.
However, it’s worthwhile to note that while the SGX now offers SPAC listings, companies could still opt to go for a SPAC listing in other exchanges instead, for reasons such as greater liquidity, market size, target audience and more. For example, besides Grab, local companies Carousell and PropertyGuru are said to be considering a SPAC listing in the US as well.
To start trading stocks on the market, you’ll need a brokerage account that provides access to the specific markets you’re looking at. Get started by comparing the best ones on SingSaver.
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By Ching Sue Mae
A flat white, an adventure-filled travel and a good workout is her fuel. This Manchester United fan enjoys sharing knowledge on personal finance while chasing the dream of financial independence.