On March 31, 2021, the Singapore Exchange Securities Trading Limited (SGX-ST) issued a Consultation Paper on Proposed Listing Framework for Special Purpose Acquisition Companies (Consultation Paper). The Consultation Paper seeks comments on policy and rule proposals to be implemented to allow special purpose acquisition companies (SPACs) to be listed on the Mainboard.
This briefing focuses on the proposed requirements for the listing of SPACs on the Mainboard.
Generally, a SPAC is a shell entity established and initially financed by experienced founding shareholders (typically referred to as sponsors). SPACs are formed to raise capital through initial public offerings (IPOs) for the sole purpose of acquiring operating business(es) or asset(s). Such acquisition may be in the form of a merger, share exchange, or such other similar business combination method. A SPAC IPO differs from a traditional IPO in that it involves the listing of a newly formed company with no operational history or commercial operations at the time of listing.
The SGX-ST had, over a decade ago, consulted on the listing of SPACs (2010 consultation paper). Due to a lack of market interest at the time, the SGX-ST had determined that it was not an opportune time to introduce the listing of SPACs.
Given recent market developments in the United States, successful SPACs listings and deSPAC transactions of late, and various potential merger and acquisition opportunities arising in the Asia Pacific region, there is renewed and marked interest to introduce SPACs in the local capital markets, including Singapore.
Broad admission criteria
The proposed admission criteria for the listing of SPACs on the Mainboard are set out below:
(i) a minimum S$300 million market capitalization and at least 25% of the total issued shares to be held by at least 500 public shareholders at IPO
(ii) a minimum IPO price of S$10 per share
(iii) at least 90% of IPO proceeds placed in escrow pending the acquisition of a target company (known as the business combination); cash will be returned on a pro rata basis from the amount in escrow to any shareholder voting against the business combination or upon the liquidation of the SPAC
(iv) any warrant (or other convertible securities) issued with the ordinary shares of the SPAC at IPO must be nondetachable from the underlying ordinary shares of the SPAC for trading on SGX
Conditions for founding shareholders, management team, and controlling shareholders
The proposed conditions applicable to founding shareholders, management team, and controlling shareholders of a SPAC are set out below:
(i) the founding shareholders and/or the management team hold minimum equity at IPO of 1.5% to 3.3%, depending on the SPAC market capitalization then
(ii) a moratorium on the shareholding interests held by the key parties such as the founding shareholders and controlling shareholder(s) at various junctures
Business combination requirements
The proposed requirements that would be applicable in the event the business combination takes place are set out below:
(i) a three-year permitted timeframe from IPO date to complete the business combination
(ii) the business combination comprises at least one principal core business with a fair market value forming at least 80% of the gross IPO proceeds in escrow
(iii) the resulting business combination meets the initial Mainboard listing criteria
(iv) the business combination can proceed only with approval from a simple majority of the SPAC’s independent directors and a simple majority of the independent shareholders
(v) liquidation of the SPAC may occur under certain conditions including when a material change in the profile of the founding shareholders and/or management team critical to the successful founding of the SPAC and/or completion of the business combination occurs prior to the consummation of the business combination, unless independent shareholders vote for the continued listing of the SPAC
(vi) the appointment of (a) an accredited issue manager as financial adviser to advise on the business combination and (b) an independent valuer to value the target company
(vii) the shareholders’ circular on the business combination contains prospectus-level disclosures on key areas such as (a) financial position and operating control; (b) character and integrity of the incoming directors and management; (c) compliance history; (d) material licenses, permits, and approvals required to operate the business; and (e) resolution of conflicts of interests
Invitation for Comments
Please refer to the Consultation Paper for full details on the proposed SPACs framework to be introduced. The deadline for comments and feedback to be submitted to the SGX-ST is Wednesday April 28, 2021.
We are collating comments from clients and industry participants for submission to the SGX-ST. If you have comments on the proposals in the Consultation Paper that you would like us to submit on your behalf, please contact any of the lawyers listed below to share your comments, which should be received by no later than Wednesday April 21, 2021.
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