US SPAC Frenzy urges restart in Asia.

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

Two Asian financial hubs are pursuing competing plans to allow the listing of special purpose acquisition companies to raise and publish funds before finding a business to merge. Singapore launched SPAC rules in September, but Hong Kong is seeking public comments on the proposed rules until the end of this month.

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

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

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

“I call this SPAC 2.0,” said Atlas Growth Acquisition Ltd, a SPAC that plans to raise $ 110 million at Nasdaq. Said Sung June Hwang, Founder and Chief Executive Officer of. “Both Hong Kong and Singapore had the hindsight of observing the development of SPACs in the United States, which is very, very valuable,” he said.

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

Neither Hong Kong nor Singapore previously allowed it, so Asian investor-sponsored SPACs also gathered in the United States to raise money. Since its inception last year, 35 such SPACs have raised a total of $ 6.8 billion by listing on the US Stock Exchange, according to Dealogic.

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, for a total value of $ 52.8 billion. The biggest to date is a $ 40 billion pending deal involving ride-haling giant Grab Holdings Inc.

Johnny Lim, director of Resource Law LLC, a law firm in Singapore, said: Partnered with US law firm Reed Smith LLP with reference to exchange SPAC rules.

Last month, the Stock Exchange of Singapore announced rules for listing SPACs on the mainboard.


Photo:

roslan rahman / Agence France-Presse / Getty Images

Industry watchers say a series of transactions is 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 discussions, some requirements will be improved to allow for easier implementation. “

Hong Kong, which has spent years cleaning up the Chicany created by the backdoor list, has proposed some of the strictest rules regarding SPACs and has set “investor suitability” criteria.

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

“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 largest ever merger between a US-listed SPAC and an Asian company is a $ 40 billion pending transaction involving ridehaling giant Grab Holdings.


Photo:

Dimas Ardian / Bloomberg News

Hong Kong’s proposed rules will limit access to SPAC shares by institutional and wealthy individual investors until the vehicle merges with the Covered Company. In the United States, small investors can build up on SPACs before a deal is announced or closed, spurring a large but unsustainable rise in stock prices.

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

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

September 29, 2020: Private companies are flooded with special purpose acquisition companies (SPACs) to bypass traditional IPO processes and go public. The WSJ explains why some critics say investing in these so-called blank-checking companies is not worth the risk. Illustration: Zoë Soriano / WSJ

Auditors and these investment banks also need to approve the financial forecasts provided by the target. Given Hong Kong’s strict liability rules, it can 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 plans to require that at least 15% to 25% of the market value of the merged company come from PIPE investments by investors independent of 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. Marcia Ellis, a partner at Morrison & Foerster, said. “It’s a very safe investment compared to investing in a private company that doesn’t know when the exit will come,” she said.

Write to Jing Yang at [email protected]

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US SPAC Frenzy urges restart in Asia

Source link US SPAC Frenzy urges restart in Asia

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