Intertrust N : Singapore SPACs are bringing home advantage into play

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A surge of new listings is expected at Singapore's SGX as SPACs come online. Cliff Pearce, Intertrust Group's Global Head of Capital Markets, and fellow team members Gaganpreet Kalra, Christopher Wong and Jocelyn Oh discuss what's happening

In sport, the home team usually has an edge. Yet China and South-east Asian sponsors of special purpose acquisition companies (SPACs) and their target companies have largely ignored home advantage.

They have opted to list on US stock exchanges rather than wait for local exchanges to approve the blank cheque companies.

Now that the SGX financial regulators have given the SGX first-mover advantage as the first major Asian exchange to approve SPACs. That means more homegrown SPAC stories may start to emerge in the city state.

There are several reasons why:

• A SPAC listing requirement of S$150m (US$112m), which is higher than US listing requirements (NYSE $100m; Nasdaq $50m), yet aims to attract growth companies that have slightly higher market capitalisations. This gives SGX SPACs a leveraged range of between three to eight times (equivalent to between S$500m and S$1.5bn).
• Including detachable warrants lets investors trade shares and warrants (also known as convertible securities) separately. SGX has imposed a maximum percentage dilution to shareholders arising from the conversion of warrants issued at IPO to be capped at 50%. In the US, detachable warrants are determined by the SPAC's management and are driven by market forces, as set out by law firm Clifford Chance.
• Singapore SPAC listing rules increase sponsors' 'skin in the game', aligning more with shareholder interests (for example, shares must be held for six months after the de-SPAC process).
• Hong Kong is following suit with a new listing regime, but regional and international sponsors could still be drawn to Singapore to jumpstart the region's first tranche of listings. There are reports of some asset managers already joining the queue, including European and Singaporean private equity firms and sovereign wealth funds.
• The launch by the Singapore government of a S$1.5bn (US$1.1bn) co-investment fund to support primary and dual listings could boost trading volume, according to the FT.
• A S$500m growth IPO fund launched by the investment arm of the government's Economic Development Board will help pre-IPO financing.
• The financial regulator will provide grants for innovative listing companies to cover IPO-related expenses.

Asset managers set to lead first tranche of Singapore SPACs

We at Intertrust Group believe asset managers are comfortable with the more relaxed, yet commercially-minded investor protections taken by the Singaporean financial regulators in their SPAC consultation.

Singapore SPAC rules call for a degree of listing experience, so we expect sponsors of Singapore SPACs to come primarily from private equity houses, where staff have established investment banking backgrounds.

These requirements, alongside the dry powder (committed, but unallocated capital) they must deploy, means such players are likely to be among the first to announce deals. However, they will also anticipate exit opportunities for their portfolio companies, which could become SPAC targets themselves.

Others to watch include more than 200 single-family offices set up in Singapore in recent years. Increasingly at Intertrust Group, we find family offices are keen to consider SPACs as an investment tool. This can be as a growth or exit strategy to benefit legacies or part of succession planning.

Why Singapore is a good fit for regional SPAC targets

The main draw to the US SPAC market has been trading volume and liquidity, but there is a strong argument that Singapore would be a better multi-cultural fit for companies from various parts of Asia.

For Chinese-based sponsors and targets, Chinese issuers are already present on the Singapore exchange and homegrown SPAC stories, whether told by growth or more established businesses, could be more compelling for regional investors.

South-east Asian sponsors and target companies have a better chance of being heard "at home", rather than getting lost in the traffic of the oversubscribed US SPAC market.

For example, Grab, South-east Asia's ride-hailing and fintech giant, is about to list via a SPAC merger on NASDAQ with sponsor Altimeter Growth Corp. in a US$40bn (S$53.9bn) deal. But unless US retail investors really appreciate this unicorn's potential upside, there's no telling if it will gain the attention it deserves.

Why Intertrust Group?

• We are the ideal partner for SPAC sponsors and merger targets in Asia.
• Growing track record of SPAC transactions, including the first ESG-focused SPAC listed in Amsterdam (ESG Core Investments)
• Leading Escrow agent in the EU for SPACs, and recently awarded SPV Administrator of the Year at Global Capital's European Securitization Awards 2021
• On-the-ground expertise in Hong Kong and Singapore, a growing regional hub, including the new and highly popular Variable Capital Company (VCC) in Singapore
• One of the largest administrators in the market, established for more than 30 years
• End-to-end suite of administrative, escrow and settlement services; range of additional corporate solutions
• We can navigate and manage complex regulatory and reporting requirements, which are growing by about 30% a year
• State-of-the-art in-house proprietary technology makes it easy even for new SPVs and managers to establish in Hong Kong and Singapore