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Singapore Exchange cuts required SPAC market cap by 50% to $112m

Such entities must merge with targets within 24 months under new framework

The Singapore Exchange cut the required market cap for SPACs by half after consultation revealed that stakeholders found the previous level prohibitively high.   © Reuters

SINGAPORE -- The Singapore Exchange is cutting by half the minimum market capitalization required of special purpose acquisition companies, or SPACs, to list on the bourse, responding to concerns that the previous level was too high.

SGX on Thursday announced SPACs must list with a minimum market cap of $150 million Singapore dollars ($111.6 million), half the level it suggested in March, after months of mulling over market feedback.

Sometimes called "blank check" companies, SPACs are shell entities established to raise money through an initial public offering to eventually acquire -- or merge with -- a target company.

This lets the target company, typically a highflying startup, go public more quickly than through a traditional IPO.

Grab Holdings, one of Southeast Asia's most valued startups, for instance, has announced a plan to go public in the U.S. via a SPAC, in a deal with Altimeter Growth that would value the "superapp" provider at almost $40 billion.

SGX wants to ride the wave of interest in SPACs and introduced a framework for the vehicle in March that drew criticism for its high SG$300 million market cap threshold, which would have excluded some smaller players from participating in the process.

The bourse said over 80 respondents provided feedback for its proposed SPAC framework, possibly the highest response rate to an SGX consultation in recent times.

They included financial institutions, investment banks, private equity and venture capital funds, corporate finance firms, private investors, lawyers, auditors and stakeholder associations.

Aside from the reduced minimum market cap, SGX said that within its framework, a "de-SPAC" -- when a SPAC merges with a target -- must take place within 24 months of the IPO with an extension of up to 12 months subject to certain conditions.

"We want the SPAC process to result in good target companies listing on SGX, providing investors with more choice and opportunities," said Tan Boon Gin, CEO of Singapore Exchange Regulation in a press release issued on Thursday. "To achieve this, you can expect us to focus on the sponsors' quality and track record," he added.

The SGX has struggled to draw high-profile tech IPOs. Southeast Asia's biggest public company Sea, gaming hardware maker Razer and others have opted for listings elsewhere, despite having strong links to the country through their Singaporean founders.

The bourse in August reported a 20.5% dip to SG$205.6 million in earnings in the six months to end-June, its second half, from a year ago.

The introduction of SPACs on SGX could be a gateway for the bourse to add buzz to its listings calendar. Meanwhile, its rival the Stock Exchange of Hong Kong is mulling over its SPACs framework, and has yet to announce clearly defined rules for the vehicle.

"The introduction of SPACs in Singapore will provide retail investors with new investment opportunities," said David Gerald, president of retail investors' lobby group Securities Investors Association (Singapore).

"SPACs make venture capital and private equity investments more democratic because shares in a SPAC that is listed on a stock exchange can be acquired by anyone, including retail investors," he said.

"As with any new product introduction, there is a fine line between regulation and over-regulation," Gerald noted. "The framework by SGX provides the opportunity for SPAC sponsors and companies to tap into Singapore's capital markets."

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