SINGAPORE -- Singapore is considering options to lure capital for special purpose acquisition companies, or SPACs, away from the current boom in the U.S., although challenges await the Asian financial hub. The Singapore Exchange announced on Wednesday a regulatory framework for SPACs to list on the SGX and asked the market for feedback.
Sometimes called "blank check" companies, SPACs are shell companies established to raise money through an initial public offering to eventually acquire -- or merge with -- the target company. This lets the target company go public more quickly than through a traditional initial public offering.
Notable startups like Singapore's Grab, its Indonesian rival Gojek and e-commerce giant Tokopedia, also from Indonesia, are reportedly being circled by SPACs.
SGX plans to ride the wave of interest in the vehicle and hopes to see its SPAC framework finalized around the middle of the year, paving the way for IPOs of "blank check" companies to roll in after the feedback phase ends on April 28.
RegCo, the SGX's regulatory arm, has proposed a minimum market capitalization for SPACs at 300 million Singapore dollars ($222.6 million), with a time frame of three years for a SPAC to combine with a target.
"We always anticipated that the market cap would be a contentious number," said RegCo CEO Tan Boon Gin in announcing SGX's proposed framework, acknowledging concerns over the high hurdle that may be a barrier for lower-value SPACs to list in Singapore.
"You have advocates who are very much focused on the target, in which case, they would be calling for a smaller market cap," he said.
"On the other hand, you would have advocates who are very much focused on the sponsors, and they would be calling for a higher market cap because they believe that this assures a better-quality sponsor," Tan added.
"Our starting point of SG$300 million is really trying to strike a middle ground between these two camps," he said, explaining that Singapore's proposal for SPACs is now subject to market feedback and could change.
The SGX has struggled to draw high-profile tech players for 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.
Meanwhile, the Stock Exchange of Hong Kong -- Singapore's rival -- may also start listing SPACs.
