Singapore Exchange Eyes SPACs

Singapore Exchange Ltd. is formally exploring whether to begin trafficking in special-purpose acquisition companies (SPACs), the blank-check companies that have become a favorite tool for investors taking companies public on major Western exchanges but aren’t allowed on many Asian exchanges, according to a notice posted on the exchange’s website.

“SPAC listings have attracted interest in major markets due to their speed to market and ability to offer price certainty in valuing target companies. In reviewing the viability of SPACs, we note that recent SPACs developments have brought to the fore certain risks, in particular excessive dilution and the rush to de-SPAC,” Tan Boon Gin, chief executive of Singapore Exchange Regulation (SGX RegCo), said in a prepared statement. “We are therefore proposing measures to address these risks, with the aim of creating credible listing vehicles that will increase investor choice and result in successful, value-creating combinations for their shareholders.”

In a typical deployment of a SPAC, investors fund the shell company even though it doesn’t have ongoing business operations. That shell company then merges with a privately held company — usually it adopts the acquired company’s name — and then continues operating as a publicly held company conducting the previously-private companies business operations.

Their enormous popularity prompted the interest in Singapore, and formal exploration of SPACs by Singapore Exchange Ltd. does not come as a surprise. Exchange Chief Executive Loh Boon Chye said in February: “If the market is supportive, we hope to be able to do that sometime this year.”

Use of SPACs soared in 2020 — and in just the first quarter of 2021, the number of companies taken public via the method has surpassed the 2020 figure.

The Singapore Exchange inquiry includes the publication of a document listing numerous criteria leaders of the exchange will consider in deciding whether to list SPACs, such as how investors will be protected before businesses are combined and how many of a SPAC’s directors will be required to approve acquisitions.