For years, Singapore-based Grab Holdings, the provider of everyday services ranging from digital payments and food delivery to ride-hailing and even insurance, has been mulling an initial public offering (IPO). But due to strict listing regulations, Grab could not tick all the right regulatory boxes to list on several stock exchanges.
Now, Grab will be merging with Altimeter Growth Corp, which is a special purpose acquisition company (SPAC) or blank-cheque company, to list the company on Nasdaq. This deal, slated for completion by end of the year, is expected to be the largest SPAC listing, valuing the company at some US$40 billion ($53.5 billion). It has drawn institutional backing from the likes of BlackRock, T Rowe Price Group and also Singapore’s sovereign fund Temasek Holdings. SPACs are investment vehicles that are listed despite having no real business. The plan is to raise money from investors and use it to buy into another company, typically a private one.
SPACs are not new but emerging as a popular IPO alternative for firms with less regulatory scrutiny over the past year or so.
Earlier this past week, it was reported that Carousell, the online classifieds and marketplace platform, was also mulling a US SPAC listing that will value the company at some US$1.5 billion.
For all the popularity of SPACS in the US, regional bourses are more conservative although the Singapore Exchange, sensing the opportunity to broaden its pool of issuers, is in the process of putting together the framework for such listings.
“The feedback we have been receiving is that an Asian SPAC would be interesting because Asia is such a fertile ground not just for target companies but also for sponsors,” says Tan Boon Gin, CEO of Singapore Exchange Regulation (SGX RegCo).
SGX is proposing safeguards to rein in risks seen in US SPACs including excessive dilution by shareholders and sponsors and a rush by shell firms to merge with targets. SGX also wants SPACs to have a minimum $300 million market value. It has also proposed minimum equity participation by founding shareholders and allowing SPAC mergers to be completed within three years instead of the typical two years seen in US SPACs.
So far, SPAC activities are largely confined to the US but the effects are far-reaching.
“US SPACs are indeed looking for a lot of acquisitions and I think out of the 200–300 SPACs being listed, most of them are still looking for targets. So, that will definitely help to spur M&A growth globally,” says Chai Koay Ling, RHB Singapore’s head of M&A.
Jerry Chua, CEO and managing partner of Evolve Capital Asia, agrees, noting that many SPACs are looking to acquire targets following the boom in SPAC listings last year. “So, I think these trends are fuelling M&A activity,” he adds.
Other market watchers aren’t carried away though. Stephen Bates, partner and head of transaction services, deal advisery, KPMG Singapore, notes that there is “significant interest” from both SPAC sponsors and private target companies here and in Asean for SPAC deals. “However, we expect SPAC transactions to be less popular across Europe and Australia.”
As SGX smooths out its plans to launch SPAC listings sometime later this year, Bates says, “This will generate a huge opportunity for sponsors and investors alike focused on the region — riding on the wave of interest already out there for the SPAC route of going public.”
While SPAC listings in the US have indeed slowed down of late due to regulatory pressures, market watchers believe that this will not dampen the interest of companies wanting to list via a SPAC vehicle.
Johannes Juette, partner at Clifford Chance, believes that SPAC acquisitions will continue to be a popular way for companies to list in 2H2021, as there is still plenty of liquidity, “voracious” appetite from investors and ongoing recovery of the US economy.
“There probably won’t be quite as many SPAC deals in 2H2021 as in 1H2021 but SPACs are not going away. There may be some regulatory tweaks, but fundamentally, the concept and structure will continue to exist,” says Juette.
Photo: Bloomberg
