Special Purpose Acquisition Companies (SPACs)

In light of market developments, increased interest, and potential M&A opportunities in the Asia Pacific, SGX has launched the Special Purpose Acquisition Companies (SPACs) Framework to introduce a new listing vehicle to the Singapore market. SGX believes that the introduction of SPACs will generate benefits to capital market participants and become a viable alternative to traditional IPOs for fundraising in Singapore and the region.

Special Purpose Acquisition Companies (SPACs) are formed to raise capital through IPOs for the sole purpose of acquiring operating business(es) or asset(s) (i.e. business combination). Such acquisitions may be in the form of a merger, share exchange or other similar business combination methods. Prior to a business combination, SPACs are listed investment vehicles with no prior operating history and revenue-generating business/asset at IPO.

A SPAC is generally established and initially financed by experienced and reputable founding shareholders (typically referred to as sponsors). These sponsors are usually considered the management team which forms the SPAC entity to acquire or merge with a private operating company. Sponsors may include but are not limited to private equity or venture capital firms and asset managers with expertise and track record in identifying acquisition targets for shareholders. The sponsors will sometimes announce their intention (at IPO) to focus their search within a specific geographical region and/or industry to find a suitable acquisition target. Sponsors are typically entitled to sponsor’s promote shares to increase their equity holdings in a SPAC. These shares are typically purchased at favourable terms (i.e. at minimal nominal sum) to incentivise sponsors for their risks taken in setting up a SPAC and acquiring a target company.

At least 90% of the gross proceeds raised at a SPAC listing must be placed in an escrow account. Under such escrow arrangement, funds are held by a third party (i.e. an independent escrow agent or financial institution licensed and approved by MAS). It is required to place, immediately upon the listing, at least 90% of a SPAC’s gross proceeds raised in an escrow account which can only be drawn down in the event of a business combination, SPAC liquidation or other specific circumstances. Sponsors can only invest escrow account funds in approved investments (e.g. cash or cash equivalent short-dated securities). The utilisation of the funds in the escrow account will be primarily used for business combination.

Investing in a SPAC listing can largely be seen as investing in the founding shareholders’ profile and abilities to identify companies and execute business combination transaction. In Singapore, SPAC sponsors must complete a business combination (i.e. de-SPAC) within 24 months from IPO, with an extension of up to 12 months subject to fulfilment of prescribed conditions.
Unlike traditional IPOs, SPAC listings have a shorter time to market due to the absence of business fundamental operations and financials at IPO. SPACs have no historical financial results to disclose, assets description, and minimal business-related risks at IPO. Investors will find more information on a SPAC’s target assets/business upon announcing a proposed business combination agreement (i.e. a proposal to acquire or combine with an operating company).
From IPO, the SPAC unit represents one SPAC share, and a fraction of a warrant stapled together. At detachment of the SPAC unit, the SPAC share and the SPAC warrant will detach and trade independently (detachment date).
Trading name conventions are as follows:

  • SPAC unit: “CompanyName SPAC U
  • SPAC share: “CompanyName SPAC
  • SPAC warrant: “CompanyName SPAC WExerciseDate

Note: exercise date indicative at time of listing. Refer to the Trading of SPAC warrants section for more information.

Automatic and Optional Detachment
Depending on the terms stated in the prospectus of the individual SPAC listings, the SPAC unit may be detached automatically or provide investors with the option to detach.
SPAC units with an automatic detachable feature will stop trading one day before the detachment date (typically 45 days after IPO day), where it will separate into shares and warrants. From the detachment day onwards, only SPAC shares and whole warrants can be traded (fractional warrants will be disregarded). SPAC units will be delisted two trading days post the detachment date.

Board Lot and Trading Period
Board lot for SPAC unit and share is 100. Board lot for SPAC warrant is 1.

Security Instrument Name Board Lot Trading
SPAC Unit Company Name SPAC U 100 For SPAC units with automatic detachment, units will trade from IPO Date until trading day prior to the detachment date.

For SPAC units with optional detachment, units will continue to be available for trading along with the SPAC share and SPAC warrant

SPAC Share Company Name SPAC 100 From detachment
SPAC Warrant Company Name SPAC WExercuseDate 1 From detachment

Units, shares and warrants trade as independent instruments
SPAC units, shares and warrants are priced in separate orderbooks and trade as independent instruments.

Other trading parameters
The minimum bid size schedule for SPAC instruments will be similar to Stocks and Company Warrants. For more information, please refer to Minimum Bid Size, Forced Order Range & Error Trade Policy.
SGX’s dynamic circuit breaker in the securities market will also apply to the SPAC unit and shares as separate instruments.
SPAC warrants will enter a trading halt if the SPAC share triggers the dynamic circuit breaker and enters into a Cooling-Off Period pursuant to 8.14.2. The trading halt will be aligned with the Cooling-Off Period. For more information, please refer to SGX-ST Regulatory Notice 8.14.1 – Circuit Breaker.
The normal trading fees of 0.0075% of traded value and clearing fees of 0.0325% of trade value will apply.

Trading of SPAC units with automatic detachable feature
For SPAC units with an automatic detachable feature, trades done in the SPAC units on its last trading day will be settled 2 market days later. In this event, CDP will convert holdings in SPAC units to SPAC shares and warrants. Any failed settlements of SPAC units (e.g. short sell without holding of units) will be subject to the current CDP procedures on buying-in, procurement and possibly cash settlement. SPAC shares and warrants may be procured to meet failed settlement of SPAC units in accordance with CDP settlement procedures and timelines.

Trading of SPAC warrants
Fractional entitlements to warrants will be disregarded on detachment. Only whole warrants will be issued to the investor. For example, if a SPAC unit consists of one share of common stock and one third of a warrant, an investor would need to purchase three units to be issued a whole warrant at detachment. Following the completion of a business combination, the SPAC warrants will continue to retain its board lot size of 1.
The expiry date for SPAC warrants is indicative at the time of listing. The maturity of the SPAC warrant is determined by the SPAC sponsor (in the prospectus) and typically set as a time period—for example five years after the completion of the business combination. Please refer to the relevant SPAC’s IPO prospectus for more information.
If there is a business combination completed, the actual maturity date of the SPAC warrant will depend on the actual completion date. If there is no business combination completed within the permitted timeframe, the SPAC will be liquidated and the warrants will be deemed expired. The SPAC sponsor may also elect to redeem outstanding warrants after de-SPAC. Please refer to the SPAC Lifecycle section for more information on exercising of SPAC warrants.
New warrants issued by the post-de-SPAC company may be in board lot size of 100.

SPAC warrants versus Company warrants
SPAC warrants have a board lot of 1. In contrast, company warrants and new company warrants issued by the post-de-SPAC company have a board lot of 100. In addition, investors may sometimes have the option of a cashless exercise for their SPAC warrants, which is a feature not found in company warrants.
Investors are advised to consult their respective brokers on the applicable broker commission fees prior to trading SPAC warrants.

SPACs have professional sponsors such as private equity firms whose mandate and expertise is investing into companies with a view towards a potential public listing. SPAC sponsors contribute sponsor equity and support operational expenses in the SPAC, this is in contrast with cash shell listed companies who may not have the necessary investment expertise nor the level of alignment of interest and support. Finally, SPACs are required to place at least 90% of the gross IPO proceeds in a trust/escrow account, providing safeguards for investors until the completion of the Business Combination.

Prior to the Business Combination, the SPAC entity is primarily a fund-raising vehicle and is governed under the SPAC framework. This provides a). alignment of interest between SPAC sponsors and independent shareholders and b). opportunities for investors to participate in private equity arrangements in a publicly listed company with the relevant investor protection considerations.
Upon completion of the Business Combination, the resulting entity is subjected to existing Listing Requirements – similar to a traditional IPO. Existing standards are equally applied to the resulting entity which will have an operational business post Business Combination (de-SPAC).
No. The Resulting Issuer (i.e. operating company acquired by a SPAC) is required to meet the same Initial Listing Requirement as a traditional IPO company seeking to list on the Mainboard, including the quantitative admission criterion, public spread and distribution requirements, and qualitative requirements such as the character and integrity of directors, executive officers and controlling shareholders.
The SGX SPAC framework references the US SPAC regime and as such certain features are common. However, SGX SPACs further codifies some of the market conventions with a focus on investor protection and aligning the interests of all stakeholders. SGX also places emphasis on a sponsor’s track record, repute of founding shareholders and experience and expertise of the SPAC’s management team.