US SPAC frenzy urges restart in Asia

Texas News Today

Although SPAC has lost some luster in the United States, the Singapore and Hong Kong stock exchanges are confident the vehicle will make the region more attractive to global investors and start-ups.

The two Asian financial centers are pursuing competing plans to allow special purpose acquisition companies to raise and publish funds before finding businesses to merge. Singapore launched the SPAC rules in September, but Hong Kong is seeking public comment on the proposed rules by the end of this month.

Both exchanges seek to execute the difficult balancing act of providing the flexibility offered by SPAC, while ensuring that the interests of investors are protected.

In the United States, the SPAC issuance boom has largely disappeared. Share prices of many listed companies have fallen and regulators are taking a tough stance.

Asian exchanges intend to scrutinize companies planning to raise funds and the businesses they merge.

“I call it SPAC 2.0,” said Atlas Growth Acquisition Ltd., a SPAC that plans to raise $110 million on the Nasdaq. Sung Joon Hwang, Founder and Chief Executive Officer. “Both Hong Kong and Singapore had the vision to see the growth of SPAC in the United States, which is very valuable,” he said.

While many reputable companies and professional investors sponsor and manage New York-listed SPAC, the recent boom has attracted celebrities, athletes, and even inexperienced investors. I added that.

Previously neither Hong Kong nor Singapore allowed this, so Asian investor-sponsored SPAC also gathered in the United States to raise funds. According to Dealogic, since its inception last year, 35 such SPACs have raised a total of $6.8 billion by listing on the US stock exchange.

US-listed SPACs, whether Western or Asian investors, have sought acquisition targets in Asia. According to Dealogic, 15 mergers involving Asian companies have been announced during the same period, with a total value of $52.8 billion. The largest to date is a pending $40 billion deal involving ride-hailing giant Grab Holdings Inc.

Johnny Lim, director of Resource Law LLC, a law firm in Singapore, said: SPAC partnered with US law firm Reed Smith LLP in terms of exchanging regulations.

Last month, the Stock Exchange of Singapore announced the rules for listing SPAC on the main board.

Photo:
Roslan Rahman / Agence France-Presse / Getty Images

Industry watchers say a series of transactions are likely to continue. Michael Marcourt, Asia CEO of IQ-EQ, which serves investment funds, said clients are very interested in launching SPACs in Asia.

John Lee, Vice Chairman of Global Banking and Head of Greater China at UBS Group AG, said: They also hope that as a result of the discussions, some requirements will be improved to allow for easier implementation. “

Hong Kong, which has spent years cleaning up Chicany’s made by backdoor list, has proposed some strict rules regarding SPAC and set “investor suitability” criteria.

“It’s nice to see Hong Kong and Singapore learn to raise that level from the United States,” said IQ-EQ’s Marquardt.

“But it’s about getting the right balance,” he said. “I don’t think investors should rely solely on regulatory agencies. They have their own responsibilities.”

The biggest merger ever between US-listed SPAC and an Asian company is a pending $40 billion transaction involving ridehailing giant Grab Holdings.

Photo:
Dimas Ardian / Bloomberg News

Hong Kong’s proposed rules would limit access to SPAC shares by institutional and wealthy individual investors until the vehicle was merged with the covered company. In the United States, small investors can build on the SPAC before a deal is announced or closed, causing a large but volatile increase in stock prices.

The Hong Kong Stock Exchange also stated that at least one entity promoting SPAC must have a financial or securities license from the city’s market regulator. There is no such requirement in the United States.

Targets wishing to merge with SPAC will need to conduct due diligence and hire an investment bank to manage the company through the listing process, following the same steps as an initial public offering in Hong Kong.

September 29, 2020: There has been a flurry of Special Purpose Acquisition Companies (SPACs) with private companies looking to bypass traditional IPO processes and go public. The WSJ explains why some critics say that investing in these so-called blank-checking companies isn’t worth the risk. Illustration: Zoe Soriano / WSJ

Auditors and these investment banks are also required to approve the financial forecasts provided by Target. Given Hong Kong’s strict liability regulations, this may limit a company’s ability to claim high-value business valuations using long-term forecasts. In the United States, this is one of SPAC’s main selling points for IPOs.

The Hong Kong Exchange also requires that at least 15% to 25% of the market value of the merged company should come from PIPE investments by independent investors from the SPAC team. PIPE stands for Private Investment in Public Equity.

Many SPAC mergers include such funding, but it is not mandatory in the US or Singapore, and US PIPE investors are not always independent.

PIPE, a Hong Kong-based law firm, said it could attract a China-focused private equity fund that was reluctant to invest in private start-ups due to regulatory and market uncertainties. said Marcia Ellis, a partner at Morrison & Foster. “It’s a much safer investment than investing in a private company that doesn’t know when to exit,” she said.

write to Jing Yang at [email protected]

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