Stocks
Why invest in SPACs with Us?
Special Purpose Acquisition Companies ("SPACs") is a new listing
vehicle to the Singapore market. SPACs offer investors the
opportunity to have a stake in acquisition targets identified by
generally established and reputable founding shareholders of the
SPAC. SPACs in themselves have no prior operating history. They
are set up for the purpose of acquiring businesses identified
with specific growth objectives or sectors in mind.
SGX launched the Special Purpose Acquisition Companies (SPACs)
Framework to introduce a new listing vehicle to the Singapore
market, in light of market developments, increased interest, and
potential M&A opportunities in the Asia Pacific region. SGX
believes that the introduction of SPACs will generate benefits
to capital market participants and become a viable alternative
to traditional IPOs for fundraising in Singapore and the region.
As a Maybank Securities client, you can take advantage of the
wide range of financing facilities available. In addition, you
will always have flexibility, choice and market information at
your disposal whether you choose to trade online and through our
trading representatives.
How it Works
Special Purpose Acquisition Companies ("SPACs") are formed to
raise capital through IPOs for the sole purpose of acquiring
operating business(es) or asset(s) (i.e. business combination).
Such acquisitions may be in the form of a merger, share exchange
or other similar business combination methods. Prior to a
business combination, SPACs are listed investment vehicles with
no prior operating history and revenue-generating business/asset
at IPO.
In light of market developments, increased interest, and
potential M&A opportunities in the Asia Pacific, SGX has
launched the Special Purpose Acquisition Companies (SPACs)
Framework to introduce a new listing vehicle to the Singapore
market. SGX believes that the introduction of SPACs will
generate benefits to capital market participants and become a
viable alternative to traditional IPOs for fundraising in
Singapore and the region.
More information on
Special Purpose Acquisition Companies (SPACs).
Traded Like Stocks
Similar to trading stocks, you may buy or sell SPACs through your trading representative or on our online and mobile platforms.
What is a SPAC Sponsor?
A SPAC is generally established and initially financed by experienced and reputable founding shareholders (typically referred to as sponsors). These sponsors are usually considered the management team which forms the SPAC entity to acquire or merge with a private operating company. Sponsors may include but are not limited to private equity or venture capital firms and asset managers with expertise and track record in identifying acquisition targets for shareholders. The sponsors will sometimes announce their intention (at IPO) to focus their search within a specific geographical region and/or industry to find a suitable acquisition target. Sponsors are typically entitled to sponsor's promote shares to increase their equity holdings in a SPAC. These shares are typically purchased at favourable terms (i.e. at minimal nominal sum) to incentivise sponsors for their risks taken in setting up a SPAC and acquiring a target company.
Where will Shareholders' Funds be Kept?
At least 90% of the gross proceeds raised at a SPAC listing must be placed in an escrow account. Under such escrow arrangement, funds are held by a third party (i.e. an independent escrow agent or financial institution licensed and approved by MAS). It is required to place, immediately upon the listing, at least 90% of a SPAC's gross proceeds raised in an escrow account which can only be drawn down in the event of a business combination, SPAC liquidation or other specific circumstances. Sponsors can only invest escrow account funds in approved investments (e.g. cash or cash equivalent short-dated securities). The utilisation of the funds in the escrow account will be primarily used for business combination.
Risks of Investing in SPACs
As with all financial market investments, investing in SPACs
involves a certain level of risk. Here are some risks to take
note of before you start investing in SPACs.
More risks specific to a SPAC can be found in the IPO prospectus
and/or shareholder circular of the respective SPAC listing.
SPAC Risk
A listed SPAC (pre-de-SPAC) is a recently incorporated
company with no operating history and revenue, and no basis
for investors to evaluate the SPAC's ability to achieve its
business objective.
Sponsor Risk
Investors will need to rely on the sponsor's quality and
execution track record to identify and acquire companies to
enhance shareholder value. A sponsor may not be able to
acquire a target within the approved timeframe to complete a
business combination. Up to 10% of the IPO proceeds may also
be expensed as the sponsor performs the search and attempts
to execute a business combination.
Dilution Risk
Additional funding from the sponsors may potentially dilute
an investor's existing stake in the combined company. The
three sources of potential dilution are: sponsor's promote
(up to 20% dilution), warrants (capped at 50%), and PIPE
investors (unlimited and dependent on investment terms).
Liquidation Risk
Should a SPAC be unable to complete a business combination
(i.e. de-SPAC) within the allowed timeframe, the SPAC may be
liquidated. While its assets will be returned to investors,
the proceeds received by investors may be less than what
they invested in at the time of IPO.
Price Risk
Prices may also be impacted and fall below your purchase
price due to macroeconomic or sector/SPAC-specific factors.
Volatility Risk
Refers to the fluctuation in the value of a stock due to the
changes in its stock price.
Liquidity Risk
Stock liquidity is the degree to which stocks can be bought
or sold in the market without materially impacting their
market price. Liquidity risk refers to the risk where a
stock cannot be transacted in a timely manner.
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FAQs
What is SPAC investing?
Investing in a SPAC listing can largely be seen as investing
in the founding shareholders' profile and abilities to
identify companies and execute business combination
transaction. In Singapore, SPAC sponsors must complete a
business combination (i.e. de-SPAC) within 24 months from
IPO, with an extension of up to 12 months subject to
fulfilment of prescribed conditions.
What is the difference between SPACs and traditional IPOs?
Unlike traditional IPOs, SPAC listings have a shorter time
to market due to the absence of business fundamental
operations and financials at IPO. SPACs have no historical
financial results to disclose, assets description, and
minimal business-related risks at IPO. Investors will find
more information on a SPAC's target assets/business upon
announcing a proposed business combination agreement (i.e. a
proposal to acquire or combine with an operating company)
What are the key features of the SPAC framework?
Key features of SGX's SPAC framework include:
Pre-listing
Post-listing
Pre-listing
- A minimum market capitalisation of S$150 million.
- Minimum IPO issue price of S$5 per unit.
- At least 25% of total issued SPAC shares (excl. treasury shares) must be held by at least 300 public shareholders.
- SPAC sponsors must subscribe to at least 2.5-3.5% of the IPO units depending on the market capitalisation of the SPAC.
Post-listing
- At least 90% of gross IPO proceeds raised must be placed in an escrow account (operated by an approved independent agent).
- Business combination must take place within 24 months of IPO, with an extension of up to 12 months, subject to fulfilment of prescribed conditions.
- Maximum percentage dilution to shareholders from conversion of warrants issued at IPO capped at 50%
- Shareholders have voting, redemption and liquidation rights in relation to a proposed business combination.
- Independent valuer for business combination to be appointed in the event of an absence of (i) PIPE financing; or (ii) where SPAC acquires a mineral oil and gas (MOG) or a property investment/development target.
- Initial business combination to have a fair market value of ≥80% of the SPAC's escrowed funds
- SPAC sponsor's promote (sponsor's entitlement to additional equity at nominal or no consideration) is kept at up to 20% of issued shares at IPO.
- Sponsors are not allowed to divest their shares from IPO to de-SPAC. There will also be a 6-month moratorium after completion of the de-SPAC process, with a further 6-month moratorium thereafter on 50% of original shareholdings if certain criteria are met.
