Special Purpose Acquisition Companies (SPACs)

Why Trade SPACs?

  • Faster execution than IPOs
  • Higher valuations and less dilution
  • Higher certainty and transparency
  • Enjoy lower fees

What is a SPAC?

Special Purpose Acquisition Companies (SPACs) are formed to raise capital through IPOs for the sole purpose of acquiring operating business(es) or asset(s) (i.e. business combination). Such acquisitions may be in the form of a merger, share exchange or other similar business combination methods. Prior to a business combination, SPACs are listed investment vehicles with no prior operating history and revenue-generating business/asset at IPO.

What is a SPAC sponsor?

A SPAC is generally established and initially financed by experienced and reputable founding shareholders (typically referred to as sponsors). These sponsors are usually considered the management team which forms the SPAC entity to acquire or merge with a private operating company. Sponsors may include but are not limited to private equity or venture capital firms and asset managers with expertise and track record in identifying acquisition targets for shareholders. Sponsors are typically entitled to sponsor’s promote shares to increase their equity holdings in a SPAC. These shares are typically purchased at favourable terms (i.e. at minimal nominal sum) to incentivise sponsors for their risks taken in setting up a SPAC and acquiring a target company.

How do SPACs work?

Investing in SPAC IPOs

Investing in a SPAC listing can largely be seen as investing in the founding shareholders’ profile and abilities to identify companies and execute business combination transactions. In Singapore, SPAC sponsors must complete a business combination (i.e. de-SPAC) within 24 months from IPO with an extension of up to 12 months (subject to fulfilment of prescribed conditions).

What is the difference between SPACs and traditional IPOs?

Unlike traditional IPOs, SPAC listings have a shorter time to market due to the absence of business fundamental operations and financials at IPO. SPACs do not have historical financial results, assets description, nor minimal business-related risks at IPO. Investors will find more information on a SPAC’s target assets/business upon announcing a proposed business combination agreement (i.e. a proposal to acquire or combine with an operating company).

For more information on individual SPACs, please review the content of the SPAC’s IPO prospectus and related documents or contact your broker and/or financial advisors.

SPAC Structure

For more information on individual SPACs, please review the content of the SPAC’s IPO prospectus and related documents or contact your broker and/or financial advisors.

SPAC Framework

The key features of SGX’s SPAC framework include:

Pre-listing

  • A minimum market capitalisation of S$150 million
  • Minimum IPO issue price of S$5 per unit
  • At least 25% of total issued SPAC shares (excl. treasury shares) must be held by at least 300 public shareholders
  • SPAC sponsors must subscribe to at least 2.5-3.5% of the IPO units depending on the market capitalisation of the SPAC

Post-listing

  • At least 90% of gross IPO proceeds raised must be placed in an escrow account (operated by an approved independent agent)
  • Business combination must take place within 24 months of IPO with an extension of up to 12 months (subject to fulfilment of prescribed conditions)
  • Maximum percentage dilution to shareholders from conversion of warrants issued at IPO capped at 50%
  • Shareholders have voting, redemption and liquidation rights in relation to a proposed business combination
  • Independent valuer for business combination to be appointed in the event of an absence of (i) PIPE financing; or (ii) where SPAC acquires a mineral oil and gas (MOG) or a property investment/development target
  • Initial business combination to have a fair market value of ≥80% of the SPAC’s escrowed funds
  • SPAC sponsor’s promote shares (sponsor’s entitlement to additional equity at nominal or no consideration) kept at a maximum of 20% of issued shares at IPO
  • Sponsors are not allowed to divest their shares from IPO to de-SPAC. There will also be a 6-month moratorium after completion of the de-SPAC process, with a further 6-month moratorium thereafter on 50% of original shareholdings if certain criteria are met.

More information can be found in SGX’s consultation paper.

SPAC Lifecycle

Trading Information

Identification

From IPO, the SPAC unit represents one SPAC share, and a fraction of a warrant stapled together. At detachment of the SPAC unit, the SPAC share and the SPAC warrant will detach and trade independently (on and beyond detachment date).

Trading name conventions are as follows:

  • SPAC unit: “CompanyName SPAC U
  • SPAC share: “CompanyName SPAC
  • SPAC warrant: “CompanyName SPAC WExerciseDate

Note: exercise date indicative at time of listing. Refer to the Trading of SPAC warrants section for more information.

Automatic and Optional Detachment

Depending on the terms stated in the prospectus of the individual SPAC listings, the SPAC unit may be detached automatically or provide investors with the option to detach.

SPAC units with an automatic detachable feature will stop trading one day before the detachment date (typically 45 days after IPO date), where it will separate into shares and warrants. On detachment day, only SPAC shares and whole warrants can be traded (fractional warrants will be disregarded). SPAC units will be delisted two trading days post the detachment date.

Board Lot and Trading Period

Board lot for SPAC unit and share is 100. Board lot for SPAC warrant is 1.

Security Instrument Name Board Lot Trading
SPAC Unit CompanyName SPAC U 100 For SPAC units with automatic detachment, units will trade from IPO Date until one trading day prior to the detachment date.
For SPAC units with optional detachment, units will continue to be available for trading along with the SPAC share and SPAC warrant.
SPAC Share CompanyName SPAC 100 From detachment day
SPAC Warrant CompanyName SPAC WExerciseDate 1 From detachment day

Frequently Asked Questions

SPACs have professional sponsors such as private equity firms whose mandate and expertise is investing into companies with a view towards a potential public listing. SPAC sponsors contribute sponsor equity and support operational expenses in the SPAC. This is in contrast with cash shell listed companies who may not have the necessary investment expertise nor the level of alignment of interest and support. Finally, SPACs are required to place at least 90% of the gross IPO proceeds in a trust/escrow account, providing safeguards for investors until the completion of the Business Combination.

Prior to the Business Combination, the SPAC entity is primarily a fund-raising vehicle governed under the SPAC framework. This provides a) alignment of interest between SPAC sponsors and independent shareholders and b) opportunities for investors to participate in private equity arrangements in a publicly listed company with the relevant investor protection considerations.
Upon completion of the Business Combination, the resulting entity is subjected to existing Listing Requirements – similar to a traditional IPO. Existing standards are equally applied to the resulting entity which will have an operational business post Business Combination (de-SPAC).

No. The Resulting Issuer (i.e. operating company acquired by a SPAC) is required to meet the same Initial Listing Requirement as a traditional IPO company seeking to list on the Mainboard; including the quantitative admission criterion, public spread and distribution requirements, and qualitative requirements such as the character and integrity of directors, executive officers and controlling shareholders.

The SGX SPAC framework references the US SPAC regime and as such certain features are identical. However, SGX SPACs further codify some of the market conventions with a focus on investor protection and alignment of interests of all stakeholders. SGX also places emphasis on a sponsor’s track record, reputation of founding shareholders and experience and expertise of the SPAC’s management team.

Category Requirement SGX US
General Market capitalisation Minimum of S$150 million (as per Mainboard rules) Minimum of USD50 million
Issue price Minimum of S$5 per unit USD2-4 per unit but SPAC issues typically at USD10 per unit
Public float At least 25% float and at least 300 shareholders for the SPAC. At least 25% float and at least 500 shareholders for the resulting issuer (post de-SPAC) At least 300 shareholders or 400 round lot holders depending on exchange
Minimum IPO gross proceeds in escrow account At least 90% At least 90%
Fair market value of initial acquisition relative to escrowed amount At least 80% At least 80%
Detachable warrants Permissible Permissible
Redemption rights Permissible for all independent shareholders Permissible for all independent shareholders
Timeframe for completion of business combination 24 months, with 12 months extension subject to fulfilment of prescribed conditions 36 months
Appointment of independent valuer for business combination Compulsary in the absence of PIPE financing, or where SPAC acquires a MOG or property investment/development target* No requirement
Investor protection and alignment of interests Minimum equity participation by Sponsor 2.5-3.5% depending on market capitalisation Commercially negotiated
Limit on Sponsor’s promote Up to 20% No limit
Moratorium on Sponsor’s shares from IPO to de-SPAC 6-month moratorium post de-SPAC and further 6-month moratorium thereafter on 50% of shareholders (for applicable resulting issuers) Commercially negotiated
Shareholders approval for business combination More than 50% of shareholders and 50% of independent directors More than 50% of shareholders
de-SPAC process Follows Mainboard Reverse Take-Over (RTO) rules Treated as merger
Maximum dilution arising from conversion of warrants 50% No limit

*SGX retains discretion to require the issuer to appoint a competent and independent valuer to value the businesses or assets to be acquired under the business combination.

SPACs enable an investor to participate in private equity arrangements (eg. high growth companies) in the form of a publicly listed company. This is based on an investor’s risk appetite and just like any other stocks, the investor can trade in the different stages of the life-cycle of a SPAC.

For more information, please visit SGX Website or contact your trading representatives.