Out-Law / Your Daily Need-To-Know
Special purpose acquisition companies (SPACs) are now allowed to list on the Singapore stock exchange.
SPACs are shell companies that raise funds through an initial public offering (IPO) to acquire an existing company. After raising funds, SPAC sponsors are usually given two years to 'de-SPAC': to find a target company and complete an acquisition. If no suitable deal is secured, the SPAC is liquidated, and the funds returned to shareholders.
Effective 3 September 2021, SPACs are allowed to list on Singapore Exchange’s (SGX) mainboard provided that they comply with the prescribed rules, including having a minimum S$150 million (US$112m) market capitalisation. This is a 50% reduction from the S$300m it initially proposed in March.
SGX’s rules also require that de-SPAC takes place within 24 months of initial public offering (IPO), with an extension of up to 12 months permitted if prescribed conditions are fulfilled. Sponsors need to subscribe at least 2.5% to 3.5% of the IPO units depending on the SPAC’s market capitalisation.
The rules also require a moratorium on the sponsors' shares from IPO to de-SPAC; a 6-month moratorium following de-SPAC; and a further 6-month moratorium for applicable resulting issuers on 50% of their shareholdings.
All independent shareholders are entitled to their redemption rights under the rules. Additionally, warrants issued to shareholders will be detachable and there is a 50% cap on any dilution to shareholders following the conversion of warrants issued at IPO.
Over 80 respondents contributed feedback to the SGX’s March consultation. Respondents included financial institutions, investment banks, private equity and venture capital funds, corporate finance firms, private investors, lawyers, auditors and stakeholder associations.
Tax and private wealth expert Valerie Wu of Pinsent Masons MPillay, the Singapore joint law venture between MPillay and Pinsent Masons, the law firm behind Out-Law, said: “SPAC investors should be mindful of the tax and succession planning implications resulting from a successful IPO, de-SPAC transaction and other key events in a SPAC’s life cycle. Similar to traditional IPOs, investors should take tax and succession planning advice if they anticipate a profitable exit.”
Zhu Lin of Pinsent Masons MPillay, said: “SGX’s SPAC regime adds depth to the line-up of fund raising platforms in Singapore and, together with the Variable Capital Company (VCC) regime launched last year, continues to position Singapore as a leading investment and wealth management hub.”
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