The global capital markets saw a spike in popularity in IPOs of special purpose acquisition companies (SPACs), particularly in the U.S. where SPAC listings have grown exponentially in the past few years.
SPACs are shell companies established to raise capital in an IPO to acquire or merge with a target operating company. The completion of the acquisition or business combination (typically referred to as a “De-SPAC Transaction”) results in the De-SPAC Target achieving public listing (and typically thereafter referred to as a “Successor Company”). Investors find SPAC listings an attractive alternative to raise funds in lieu of traditional IPOs given the SPAC route’s typically faster execution, greater speed to capital, and lower costs.
Momentum of SPAC in Asia
Asia has been picking up the pace on the SPAC boom with Singapore and Hong Kong each launching its own SPAC listing regime in recent months.
The Singapore Exchange (SGX) established a listing regime for SPACs in Singapore in effect from September 3, 2021, making it the first stock exchange allowing SPAC listings in Asia. To maintain its competitiveness as a leading fundraising hub in Asia, the Hong Kong Stock Exchange (HKEX) followed closely and announced the final rules of its new listing regime for SPACs on December 17, 2021, which went into effect on January 1, 2022.
SPAC Listing Regime in Hong Kong and Singapore
Hong Kong SPAC IPOs are open to professional investors only. On the other hand, the SGX largely follows the U.S. framework and allows participation by all investors (including retail investors).
The following table presents an overview of additional key requirements of the SPAC listing regime in Hong Kong and Singapore:
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Hong Kong |
Singapore |
Formation of SPAC |
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SPAC Promoters / Sponsors |
At listing and during the lifetime of the SPAC, there must be at least one Promoter holding (i) a Type 6 (advising on corporate finance) or Type 9 (asset management) license issued by the Securities and Futures Commission (SFC); and (ii) at least 10% of the promoter shares beneficially. |
No specific licensing requirements. Sponsors and directors must subscribe for a minimum value of equity securities (between 2.5% to 3.5%) depending on the SPAC’s market capitalisation. |
SPAC Directors |
At least two Type 6 or Type 9 SFC-licensed individuals (including one director representing the licensed Promoter). |
No specific licensing requirements for individual directors. |
SPAC IPO |
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SPAC Fundraising Size |
At least HK$1 billion from IPO. |
Minimum market capitalisation of S$150 million. |
Open Market Requirements |
Each share of a SPAC and each warrant of a SPAC must be distributed to at least 75 professional investors, of whom at least 20 must be institutional professional investors holding at least 75% of the securities to be listed. All other open market requirements applicable to a new listing under the Listing Rules shall apply. |
At least 25% of SPAC’s total issued shares must be held by at least 300 public shareholders. |
Dilution Cap |
Promoter Shares – Capped at 20% of the total number of shares issued by SPAC at listing. Warrants – SPAC cannot issue warrants, in aggregate, that when exercised would result in more than 50% of the number of shares in issue at the time such warrants are issued. |
Sponsor’s Promote Interest – Capped at 20% of SPAC’s total issued shares at listing. Warrants – Maximum percentage dilution to shareholders arising from the conversion of warrants issued at listing is capped at 50%. |
De-SPAC Requirements |
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De-SPAC Targets |
De-SPAC Target must have a fair market value of at least 80% of funds raised by the SPAC from its initial offering. The Successor Company must meet all existing new listing requirements under the Listing Rules. |
De-SPAC Target must have a fair market value of at least 80% of the IPO proceeds required to be held in escrow pending De-SPAC. The Successor Company must meet all existing new listing requirements under the SGX Mainboard Rules. |
Mandatory Independent Third-Party Investments |
The SPAC must obtain a designated threshold of independent third-party investments from professional investors to complete the De-SPAC Transaction. |
No mandatory investment requirements but in the absence of PIPE investments, independent valuation of the De-SPAC Target is required. |
Deadline for De-SPAC Transaction |
The De-SPAC Transaction must be completed within 36 months of listing, with an extension of up to six months subject to fulfilment of prescribed conditions. |
The De-SPAC Transaction must be completed within 24 months of listing, with an extension of up to 12 months subject to fulfilment of prescribed conditions. |
Lock-up Period |
Promoters must not dispose of any securities of the Successor Company for a period of 12 months from the date on which the De-SPAC Transaction is completed. Controlling shareholder of the Successor Company is subject to current requirements of the Listing Rules regarding disposal by controlling shareholders following a new listing. |
Moratorium on Sponsors’ shares from IPO to De-SPAC Transaction, with an additional six months’ moratorium after the De-SPAC Transaction. A further six months’ moratorium thereafter on 50% of shareholdings of applicable resulting issuers. |
Share Redemption |
Shareholders are entitled to redeem their SPAC shares prior to a shareholder vote on any of the following matters: (i) the continuation of the SPAC following a material change in its Promoter or director; (ii) a De-SPAC Transaction; or (iii) a proposal to extend the De-SPAC Transaction deadline. |
All independent shareholders are entitled to redemption rights at the time of the shareholder vote on De-SPAC Transaction. |
Source: HKEX and SGX websites
Reference:
HKEX Main Board Listing Rules, Chapter 18B, Special Purpose Acquisition Companies: https://en-rules.hkex.com.hk/rulebook/chapter-18b-special-purpose-acquisition-companies
SGX Special Purpose Acquisition Companies Framework: https://www.sgx.com/research-education/securities-products#SPACs
First Batch of SPAC Listings in Singapore
The first SPAC listings in Asia made their debut in Singapore in January 2022. DFIN proudly supported the listing of Pegasus Asia (PGU.SI), which is among the first batch of SPAC listings on the SGX Mainboard.
Pegasus Asia plans to focus on businesses in technology-enabled sectors primarily, but not exclusively, in Asia-Pacific. It received strong institutional and retail investor support and raised US$170 million by offering 29.6 million units. Pegasus Asia is sponsored by, among others, Tikehau Capital, a global asset management group, and Financière Agache, a holding company forming part of the Agache group which controls Christian Dior and LVMH, making it the first SPAC backed by international sponsors to list in Singapore. Trading commenced on 21 January 2022.
In Hong Kong, there is excitement in the city’s capital market for its own SPAC listings. DFIN is working closely on several SPAC listings for the Hong Kong market and hope to share exciting news soon.
How can DFIN Help?
DFIN prides itself on providing leading-edge and unique end-to-end software solutions to help our clients plan and execute every stage of a SPAC deal smoothly and efficiently. DFIN has extensive listing experience in various jurisdictions, with a diverse and robust client portfolio around the globe. We have first-hand experience in navigating SPAC listings under the nascent regime in Hong Kong and Singapore.
DFIN has set new highs year after year, with over 500 successful cases of SPAC/De-SPAC projects recorded to date. This includes the largest SPAC merger in history, Grab, which went public via a US$40 billion deal in December 2021.
Our purpose-built and innovative services make clients’ life easier before and after they go public. Our SPAC solutions and services include but are not limited to:
- Comprehensive support for prospectus development, multilingual translation, and financial printing;
- Venue®, an industry-leading Virtual Data Room (VDR) purpose-built to accelerate due diligence and facilitate PIPE financing;
- Software solutions for investor communications and post-IPO regulatory compliance (such as for annual reports, quarterly reports, and ESG reports, etc.);
- Expert guidance on pre and post-IPO activities; and
- Client support at any stage of clients’ business and investment lifecycles.
Learn more about DFIN’s SPAC to De-SPAC Platform Solution. You may also read more about our SPAC/De-SPAC services.
Let DFIN help drive your SPAC deal forward. Contact our experts today.
