Basically, a SPAC is a promise. You give the promoters a tonne of money so that they will put it to use within a specified period of time — usually 18 months to two years — to buy an existing unlisted company. Promoters put together a board with well-known people, then look around for a target company that they can buy. Once the deal is done, you have a formidable board, a growth company, cash that can be used to fuel growth and a promoter — a billionaire investor, hedge fund or private-equity firm, willing to light up the rocket fuel and send it skywards.
In late June, Hong Kong-based private-equity executive Kenneth Ng listed Malacca Straits Acquisition Co on Nasdaq, raising US$144 million ($197 million). The company has no assets and Ng has never run a listed firm before. With its new-found cash, Malacca Straits is targeting Southeast Asian businesses in media, renewable energy and healthcare. Yet, the Nasdaq listing went unnoticed in Hong Kong and across Southeast Asia. Malacca Straits is a blank-cheque company commonly known as a SPAC, or Special Purpose Acquisition Corporation.
SPACs are all the rage on Wall Street these days. There have been a record-breaking 60 blank-cheque listings so far this year, which raised US$24.3 billion, compared with 59 last year, which raised US$13.6 billion. “The pipeline is long and we could get at least 40 more, or a total of 100, SPACs this year,” Kristi Marvin, a former Wall Street investment banker and founder of consultancy SPACInsider told The Edge Singapore in a recent interview.
