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Temasek unit to supercharge anemic Singapore Exchange tech listings

As SPACs beckon, city-state unveils plan to draw likes of high-growth startups

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 will get help from government-linked sources to boost anemic technology listings as it prepares to welcome special-purpose acquisition companies (SPACs) to the stock market.

Southeast Asia's financial hub on Friday announced a concerted drive to lure the likes of high-growth startups to the SGX, which has been noted for lacking rival Hong Kong's ability to draw new-economy companies in droves to seek initial public offerings.

Within the boost the city-state plans to give to its equities market is an initial tranche of 1.5 billion Singapore dollars ($1.1 billion) in funding managed by 65 Equity Partners, a wholly owned investment platform of Singapore state investor Temasek.

This initiative, named Anchor Fund @ 65, will prop up promising high-growth enterprises for public fundraising through the SGX, as well as provide pre-IPO financing to encourage the growth of target companies and support them in a bid toward an eventual public listing in Singapore.

The SGX recently updated a framework for SPAC listings, which is expected to attract high-growth enterprises such as tech startups. Earlier this month, the bourse cut by half a proposed minimum market capitalization for SPACs to list in Singapore.

The market cap threshold is now pegged at SG$150 million, down from SG$300 million earlier, which certain stakeholders had criticized as being too high a barrier for some smaller players to participate in the SPAC process.

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

This lets the target company, typically a high-flying startup, go public more quickly than through a traditional IPO. In Singapore, the merging of a SPAC and its target has to take place within 24 months of the IPO, with an extension of up to 12 months subject to certain conditions.

SPAC listings on the SGX will also get further support from the government, it was announced on Friday.

An existing program managed by the Monetary Authority of Singapore to strengthen the country's equity capital market through a grant to help issuers defray some of their listing costs has been enlarged to cover SPACs.

Notably, the MAS is moving to increase the co-funding of listing expenses for companies from SG$1 million to SG$2 million under the Enhanced Grant for Equity Markets Singapore (GEMS), as the program is known.

This enlarged listing grant to defray IPO costs will fund up to 70% of eligible expenses, with a limit of SG$2 million, for companies that are unicorns in Singapore dollar terms, with market capitalization of SG$1 billion or more.

In addition, SG$500 million has been earmarked by EDBI, the investment arm of the Singapore Economic Development Board, to target later-stage enterprises, typically at two or more funding rounds away from a public listing.

Through this fund, EDBI will work with target companies to grow their operations in Singapore and work toward an eventual public listing in the city-state.

EDBI is eyeing high-growth, globally competitive and innovative startups, typically at a Series B funding stage or later, with the aim of drawing them to take root in Singapore to grow new-economy sectors in the country.

The city-state is angling to boost its proposition as a financing hub in Asia as interest in Southeast Asia's high-flying tech enterprises escalates amid the COVID-19 pandemic, which has fueled businesses in the digital economy serving people who rely on technology to get through the health crisis.

The SGX, however, has struggled to draw high numbers of tech startups to seek IPOs in Singapore, with the bourse's most well-known listed companies -- like Singapore Airlines and DBS Group Holdings, Southeast Asia's largest lender -- mainly hailing from traditional sectors like transportation, finance and real estate.

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

Southeast Asia's biggest public company, Sea, gaming hardware maker Razer and others have opted for listings elsewhere, despite having strong links to the city-state through their Singaporean founders.

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

SGX Chief Executive Loh Boon Chye said in a pitch on Friday that the Singapore bourse provides an international platform, network and ecosystem for Asian and homegrown companies at the cusp of global success to access growth capital from private to public markets and across asset classes.

"This interagency initiative further sets Singapore apart as a capital markets hub and is a first of its kind within the region that ensures success for market leaders through deep collaboration between public and private sectors," he said on the announcements aimed at propping up Singapore listings.

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