28 Sep 2021

Singapore Exchange publishes its SPAC Listing Framework

Background

On 2 September 2021, the Singapore Exchange (the “SGX”) has released the “Responses to Comments on Consultation Paper (the “Consultation Paper”) on SPACs” (the “Responses”) in relation to its proposed listing framework for SPACs. It allows SPACs to be listed on the Mainboard (“Mainboard”) of Singapore Exchange Securities Trading Limited (“SGX-ST”) with effect from 3 September 2021, making it the very first Exchange to allow SPAC listings in Asia.

This article follows up with our news update in May 2021 on the Consultation Paper. In particular, we discuss about the main commercial features introduced by the Singapore Exchange in their SPACs framework, as summarised in the Responses.

Key features of SGX SPACs

Relaxation of Original Proposals

In the Responses, SGX agreed to relax some of the original proposals in the Consultation Paper in relation to the SPAC’s listing framework.  The below table sets out a comparison between the two:

Original Proposals Conclusions
Minimum market capitalisation requirement

S$300 million S$150 million (equivalent to approximately US$111 million or approximately HK$864 million)
Timeframe for completing the business combination Proposed a maximum timeframe of 36 months for a SPAC to complete the business combination from the date of listing

Imposed a limit of 24 months from the date of listing for the SPAC to complete the business combination, but it may be extended for up to 12 months through (a) automatic extension or (b) extension with approvals from SGX and shareholders

Redemption rights of all independent shareholders To allow shareholders which voted against the business combination to redeem their shares

All shareholders, whether voted for or against the business combination, will be entitled to redeem their shares

Independent valuation Independent valuation of the target is necessary

Independent valuation of the target is necessary if (a) a PIPE (private investment in public equity) investment is absent or (b) the target is a mineral, oil or gas company or property investment / development targets

Public float requirement 500 public shareholders 300 public shareholders, in which 25% of the total number of issued shares of the SPAC must be held by the public shareholders

Choice of jurisdiction of incorporation of SPAC

Incorporation of SPAC must be in Singapore Incorporation of SPAC need not be in Singapore
Issue price for SPAC units

Proposed S$10 per SPAC unit and any warrant issued must be non-detachable from the underlying ordinary shares of the SPAC for trading on SGX

S$5 per SPAC unit and any warrant issued will be detachable from the SPAC’s underlying ordinary shares which permits the warrants to trade separately on the SGX

SPAC Sponsors have “More Skin in the Game”

Moratorium

Unlike the traditional IPO, there is a moratorium (akin to a lock-up undertaking) on the 100% of shares of the sponsor from IPO to the completion of the business combination, and a further 6-month moratorium on 50% of their shareholdings after the completion of business combination. The aim is to align the interests of the key persons and other shareholders that involved in the IPO and ensure the commitment of the key persons towards the long-term success after the business combination.

Minimum Equity Participation

In response to the market feedback, SGX also imposed a minimum equity participation on the SPAC’s sponsor and management team as to ensure they have “skin-in-the-game”. They are required to subscribe the shares and/or warrants, as the case may be, in accordance with the following requirements:

Market capitalisation of the SPAC
(S$ million)
Proportion of subscription
150 ≤ M ≤ 300 3.5%
300 ≤ M ≤ 500 3.0%
M ≥ 500 2.5%

Limit on Sponsor’s Promote

When the sponsors form a new SPAC, it shall have an opportunity to invest in a SPAC at nominal or without consideration for sponsoring the SPAC (i.e. sponsor’s promote).  SGX has limited the sponsoring to 20% of the issued share capital of the SPAC immediately after the IPO.

Measures pending and in relation to Business Combination

Gross Proceeds in Escrow Account

In addition, SGX also required the SPAC to allocate at least 90% of the gross proceeds raised from its IPO in an escrow account immediately upon the IPO. Except for business combination, liquidation or other specified circumstances, the escrow account shall not be drawn down, and the account shall be operated by an independent escrow agent.

Approvals of Business Combination by Independent Directors and Shareholders

After listing, in addition to the permitted timeframe as discussed above to complete the business combination, SGX further required the business combination to be approved by a simple majority of independent directors and an ordinary resolution passed by the shareholders at a general meeting.

Liquidation Distribution Right

The SPAC will be liquidated if it: (a) fails to complete a business combination within the permitted time frame as discussed above; or (b) fails to obtain specific shareholders’ approval for an event of material change regarding the profile of the founding shareholders and/or the management team before the completion of the business combination.  The pre-IPO investors are entitled to participate in the liquidation distribution while the sponsor and the management team must waive their liquidation distribution rights under the SGX’s SPACs framework.

Analysis and Takeaways

The SPAC listings on SGX is the first Exchange that allows “blank check” companies to list in Asia. We note that the usual features for SPAC listings are present in SGX SPACs, such as minimum market capitalisation, the focus on the management’s profile, 24-month de-SPAC time limit, 90% use of proceeds on business combination, 90% IPO proceeds escrow and shareholders’ approval of the business combination.  In overall, the SGX’s SPAC listing requirements are relatively less stringent.

The introduction of SPACs by SGX makes Singapore stay one step ahead of Hong Kong in implementing its SPAC regime.  In this regard, the Hong Kong Stock Exchange has also just released its SPAC conclusion paper on 17 September 2021.  Such development can be seen as an increasing confluence of promoters and investors in facilitating IPOs and listings.

Please contact our Partner Mr. Rodney Teoh for any enquiries or further information.

This newsletter is for information purposes only. Its content does not constitute legal advice and should not be treated as such. Stevenson, Wong & Co. will not be liable to you in respect of any special, indirect or consequential loss or damage arising from or in connection with any decision made, action or inaction taken in reliance on the information set out herein.