All three SGX-listed Spacs, listed with fanfare in early 2022, are still looking for targets to acquire, although there’s no deal imminent even as the first deadline to de-spac draws nearer.
The three spacs, or special purpose acquisition corp, were listed near the tail-end of global market enthusiasm over such vehicles, which promise an alternative venue for some companies to list.
As global market sentiment for spacs cooled considerably, several high-profile US-listed spacs chose to return the cash to their investors, instead of going ahead with acquisitions and risk getting their share prices hammered as what happened to certain big de-spacs.
Despite the initial wave of enthusiasm shown by investors, market participants and market professionals alike here, there had been no signs of other spacs listing here other than these three.
According to Vertex Technology Acquisition Corp, it has been in “active discussions” with potential targets.
However, it has yet to enter into any written binding acquisition agreement, says VTAC on April 21, in its response to questions from shareholders ahead of its AGM to be held on April 28.
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“Due to confidentiality reasons, we are unable to disclose further details on the potential targets at the moment,” says VTAC, which made SGX history by being the first spac to be listed here on Jan 20 2022. The other two spacs followed within days. VTAC’s sponsor is Vertex Ventures, a VC firm that is a subsidiary of Temasek.
Under SGX rules, de-spac has to take place within 24 months after the IPO, although an extension of 12 months can be given.
Novo Tellus Alpha Acquisition, on April 20, says it has been active with building and advancing a pipeline of potential business combination targets “consistent with the investment profile” described when it listed.
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These targets include technology and industrial sectors in the Indo-Pacific region, where a business combination with the company can build lasting business value in close partnership with management teams, says NTAA, whose AGM will be held on April 24.
NTAA is backed by buyout firm Novo Tellus Capital Partners, better known as a strategic investor, at various times, of SGX-listed tech firms such as AEM Holdings, ISDN Holdings and Grand Venture Technology.
“The activities to identify an optimal business combination target are ongoing and the company does not have any material updates at present,” says NTAA.
As for Pegasus Asia, it says on April 21 that it is “continuously reviewing, evaluating and identifying potential targets to consummate a business combination.”
Pegasus Asia, which hold its AGM on April 25, is backed by French alternative investment firm Tikehaus Capital and Financière Agache, linked to the Arnault family of France.
Deals and IPO slump
According to S&P Market Intelligence, there were 86 spac IPOs in 2022, that raised US$13.42 billion, versus 610 in 2021 that raised US$160.75 billion, as rates rise and regulatory scrutiny increased.
The number of spac deals fell too, with 187 combinations in 2022, versus 265 in 2021. According to SPAC Research, some 70 spacs liquidated last December alone.
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To be sure, the drop in spac deals is part of the wider global trend of a big drop in IPOs to a six-year-low, as market volatility weighed down on sentiment, coupled with funding that’s no longer easily available with rates higher as central banks prioritise fighting inflation over caring how market players feel.
The spacs, in response to their shareholders, are striking a tone that is both careful and upbeat.
“The company continues to view its target market as fundamentally attractive for investment,” says NTAA, whose de-spac deadline is Jan 26 2024.
“The volatile equity markets in Southeast Asia in 2022 have made it more difficult to time a de-spac transaction, but management does not presently see this as a challenge to completing a de-spac transaction.”
Pegasus Asia, in response to a question if high-interest rates have made it less favourable to acquire, maintains that a de-spac transaction will depend on several factors.
They include the business, financial and operating conditions and environment of the target, its funding needs, the nature of funding available, as well as current and future plans.
“In evaluating a potential business combination, the company will take into account and consider relevant factors, including the impact that interest rates may have on the valuation of the transaction, and on the target’s business,” says Pegasus Asia.
“The company remains in discussions on a potential business combination. The company wishes to emphasise that no decision has been made as to whether to proceed and there is no certainty or assurance that a transaction will proceed or take place,” adds Pegasus Asia.
A VTAA shareholder asked, given the “relatively weak performance” of some combined entities following the de-spac, how does the board and management plan to “navigate these challenges and ensure a successful outcome for shareholders”.
“We address the challenges through identifying potential acquisition target that has good technology, management, financial viability and market potential as illustrated in our earlier responses,” says VTAA in response.
“Furthermore, we are mindful about valuations and search for attractively priced company relative to its peers which would provide upside potential for our shareholders,” adds VTAA.
Novo Tellus Alpha Acquisition last traded at $4.57; Pegasus Asia last traded at $4.60; Vertex Technology Acquisition Corp last traded at $4.58. All three spacs were offered at $5 at the time of their IPO.
