Reed Smith Client Alerts

The SPAC wave is sweeping across the world, led by market activity in the United States. Leading international exchanges are accelerating their efforts to seize a piece of that action and emerge as a forerunner. The Singapore Exchange released its public consultation on SPAC listings on 31 March 2021. On the same date, the UK Financial Conduct Authority announced an intent to consult on SPAC listings, and Hong Kong also looks likely to embrace the trend. How does Singapore’s proposal differentiate itself and match up against the competition in the United States, London and Hong Kong? Will upcoming proposals from London and Hong Kong be similarly crafted? Find out more about Singapore’s proposed SPAC listing framework, benchmarked against United States and London, in this update.

On 31 March 2021, the Singapore Exchange (SGX) released a consultation paper seeking public feedback on its proposed listing framework for special purpose acquisition companies (SPACs). The consultation closes on 28 April 2021.

What are SPACs? Why SPACs?

SPACs, also known as ‘blank check companies’, are listed entities with no prior operating history, operating and revenue-generating business, or assets at the time of listing. SPACs raise funds for the sole purpose of acquiring viable businesses or assets, typically implemented via a merger, share exchange or other, similar method of business combination, typically referred to as a ‘de-SPAC’ transaction. If a SPAC is not able to successfully execute a ‘de-SPAC’ within a prescribed period of time, the SPAC is liquidated and the funds raised are returned to public shareholders.

The rise in popularity of SPACs can be attributed to two key reasons:

  1. Time to market. This is perceived to be one of the greatest advantages of a SPAC listing. Unlike a traditional IPO process that can stretch over months and sometimes years, SPAC listings in certain jurisdictions can be rolled out in a matter of weeks.
  2. Certainty. This certainty is in terms of both funding and pricing. In a traditional IPO, there is a book-building process where issuer managers or sponsors conduct road shows, etc., to work out whether it is viable to raise the extent of the funds that the issuer is asking for, and also how the issuer is to be priced. There would inevitably be uncertainties associated with fund-raising and pricing given volatile and unpredictable market conditions and sentiment. The SPAC, on the other hand, raises the funds in advance. There is certainty in funding when a SPAC seeks to explore a business combination or ‘de-SPAC’ with a target. The pricing for the ‘de-SPAC’ is then negotiated by the management of the SPAC, who are usually experienced fund managers or investment professionals, with the support of an independent valuation.