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What is a SPAC?

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.

What is a SPAC sponsor?

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.

Where will shareholders’ funds be kept?

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.

About Investing in SPAC IPOs

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.

What is the difference between SPACs and traditional IPOs?

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).

For more information on individual SPACs, please review the content of the SPAC’s IPO prospectus and related documents or contact your broker and/or financial advisors.

What is a typical structure of a SPAC?

At the point of an IPO, a listed SPAC unit is usually made up of shares and fractional warrants held by SPAC founder/sponsor and public investors. IPOs proceeds are held in an escrow account. The fractional warrants grant holders the right to buy corresponding fraction of the shares from the company at a specific price in the future.

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 on day before the detachment date (typically 45 or 52 days after IPO day), where it will separate into shares and warrants. After detachment, fractional warrants which cannot be combined into whole warrants will be disregarded and only the shares and whole warrants can be traded. Investors will need to hold enough SPAC units to be able to form whole warrants at the point of detachment.

What happens after the sponsors have identified a target?

Once a SPAC has announced a proposal to acquire or merge with a fully operating private company as part of its business combination, shareholders have the choice to continue their investment in the combined entity, or opt to redeem their investment (i.e. pro-rated share of the funds held in the escrow account). Shareholders also have the right to vote for the proposed business combination. Upon at least 50% of independent directors and at least 50% of SPAC shareholders voting in favour of the proposal, the IPO proceeds from the escrow account will be used to finance the acquisition. The SPAC sponsor must ensure the acquisition target’s fair market value is at least 80% of the funds in the escrow account. If the acquisition target is larger than the assets of the SPAC, additional equity fundraising from private investors may be required (aka private investments in public equities – PIPE). The SPAC and the acquisition target will be merged into a publicly traded operating company/listed company. The shareholders of the resulting entity will consist of SPAC sponsors, SPAC investors, target company’s shareholders and PIPE investors.

Who are PIPE investors?

Private Investment in Public Equity (or PIPE) implies a private placement of securities of a publicly listed company made to institutional investors (e.g. asset managers) and/or accredited investors. These investors are known as PIPE investors. PIPE investors typically participate in a business combination if additional equity fundraising is required. During this transaction, the PIPE investors will enter into an agreement to purchase a pre-negotiated amount and value of the company’s securities. PIPE investors will typically negotiate the investment terms and valuation of the acquisition target together with the SPAC sponsors and target company’s shareholders. In Singapore, an independent valuation (by a valuer) of an acquisition target is not required if PIPE happens at De-SPAC given that PIPE investors would have already done their due diligence.

For more information on individual SPACs, please review the content of the SPAC’s IPO prospectus and related documents or contact your broker and/or financial advisors.

The key features of SGX’s SPAC framework include:

Pre-listing

• A minimum market capitalisation of S$150 million.
• Minimum IPO issue price of S$5 per unit.
• At least 25% of total issued SPAC shares (excl. treasury shares) must be held by at least 300 public shareholders.
• SPAC sponsors must subscribe to at least 2.5-3.5% of the IPO units depending on the market capitalisation of the SPAC.

Post-listing

• At least 90% of gross IPO proceeds raised must be placed in an escrow account (operated by an approved independent agent).
• Business combination must take place within 24 months of IPO, with an extension of up to 12 months, subject to fulfilment of prescribed conditions.
• Maximum percentage dilution to shareholders from conversion of warrants issued at IPO capped at 50%
• Shareholders have voting, redemption and liquidation rights in relation to a proposed business combination.
• Independent valuer for business combination to be appointed in the event of an absence of (i) PIPE financing; or (ii) where SPAC acquires a mineral oil and gas (MOG) or a property investment/development target.
• Initial business combination to have a fair market value of ≥80% of the SPAC’s escrowed funds
• SPAC sponsor’s promote (sponsor’s entitlement to additional equity at nominal or no consideration) is kept at up to 20% of issued shares at IPO.
• Sponsors are not allowed to divest their shares from IPO to de-SPAC. There will also be a 6-month moratorium after completion of the de-SPAC process, with a further 6-month moratorium thereafter on 50% of original shareholdings if certain criteria are met.

More information can be found in SGX’s consultation paper and response to consult.

SPAC Unit Listing and Detachment

Investors who successfully subscribe to a SPAC IPO will own SPAC units consisting of a share and a fractional warrant (e.g. 1/3 of a warrant).

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 on day before the detachment date (typically 45 days after IPO day), where it will separate into shares and warrants. Investors can trade the units up through the trading day before the detachment day. From the detachment day onwards, the SPAC shares and whole warrants can be traded (fractional warrants will be disregarded) separately. SPAC units will be delisted two trading days post the detachment date.

Investors should expect the shares and warrants to be credited into their accounts two trading days post the detachment date.

For SPACs that provide investors with an option to detach, the SPAC unit will continue to be available for trading along with the SPAC share and SPAC warrant.

Business Combination

Post-IPO, the SPAC sponsor will commence its search for a target company to acquire or merge as part of a business combination process. The sponsors must ensure that it will enter into a binding agreement for a proposed business combination before the end of a 24-month period from IPO; and complete the business combination within the overall maximum timeframe of 36 months from IPO.

De-SPAC Process and Redemption

Upon announcing their target, the SPAC sponsor will issue a shareholder circular detailing the proposed business combination. An EGM for shareholders to vote on the business combination can only be held at least 21 calendar days after the circular is published. It is important for shareholders to understand the content in the shareholder circular to form their investment decision.

Suppose more capital than the SPAC’s assets is needed to complete a business combination, PIPE financing will likely be required. In that case, the proposal will also include details on the additional funds needed to be raised through a PIPE investment. This will potentially result in dilution of the existing SPAC shareholders’ holdings if the business combination proceeds.

As part of the de-SPAC process, independent shareholders (other than founding shareholders, SPAC management team, and respective associates) have the right to redeem their SPAC shares, regardless of whether they vote for or against the proposed business combination. They will also be able to hold on to their warrants should they wish to.

The deadline to complete and submit a redemption form is typically at least two trading days prior to the EGM vote. The redemption amount will be based on a pro-rata portion of the amount held in the escrow account and may differ from the prevailing market prices.

Shareholders’ redemption will only be successful upon the approval and completion of the business combination. Where these Shareholders who redeemed their shares hold SPAC warrants, they will continue to hold their SPAC warrants as they cannot be redeemed.

If at least 50% of independent directors and at least 50% of SPAC shareholders voted in favour of the business combination, the SPAC sponsor will work towards the completion of the de-SPAC process and the trading of the new entity (i.e. de-SPAC). The ratio of SPAC shares and warrants to convert into the new entity is at 1:1. If the vote does not go through, the SPAC sponsor will continue seeking an acquisition target within its stipulated timeframe. Shareholders who choose not to redeem their shares may sometimes be issued incentive warrants. Shareholders need to note that after the business combination, their shareholding may be diluted due to the entrance of other shareholders (e.g. PIPE, target company’s existing shareholders).

Liquidation

If a SPAC fails to complete the business combination within the permitted time frame, it will be liquidated, and all assets of the SPAC, including all funds held in the escrow account, will be returned to shareholders on a pro-rata basis. SPAC warrants will be deemed expired and warrant holders are not entitled to liquidation distribution. The SPAC’s shares and warrants will be delisted on or around the date where the liquidation distribution is completed. SPAC sponsors are expected to announce via SGXNET as soon as they are aware that they cannot complete its business combination within the permitted time frame.

Exercising of Warrants after De-SPAC

Fractional entitlements to warrants will be disregarded on detachment. Only whole warrants will be issued to the investor.

The whole warrants can usually be exercised within 30 days after de-SPAC is completed up to the warrant expiry date (usually five years after completion of the business combination). For some SPACs, the exercise period may be the later of (1) 30 days after de-SPAC or (2) 12 months from the SPAC’s IPO. The warrant holder will pay cash to exercise and convert their warrants into shares (typically at a 1:1 ratio).  Upon exercising, investors should refrain from selling their warrants on the market as it may result in short selling.

The SPAC sponsor may also elect to redeem outstanding warrants post-de-SPAC, typically with a 1-month notice announcement on the redemption period upon meeting certain specified conditions. Please refer to the relevant SPAC’s IPO prospectus for more details on exercising and redemption of warrants.  As the conditions for redemption of warrants (and the options for payout) vary across SPACs, it is vital for investors to familiarise themselves with the details set out in the prospectus.

Redemption of Warrants after De-SPAC

SPAC sponsors may in their prospectus include variations of warrant exercise and redemption structures prior to the expiry of the warrants. An example can be sponsors electing to conduct a redemption of the warrants if the share price hits a certain threshold for a period of time. Different SPACs may have in place various cash or cashless redemption structures for warrants holders. Warrant redemption notice is typically given at least one month prior to the redemption date.

Investors should note that warrants will cease to trade five trading days before the last date of redemption. Warrants will remain exercisable during those five trading days. It is important for investors to be aware of the timeline for exercising their warrants and when their accounts will be credited. Investors must also ensure their account details are updated before submitting their exercise instructions. Once warrants are exercised, investors must refrain from trading their warrants on the open market to prevent short sell situations.

Below are some possible redemption scenarios:

Scenario A: SPAC sponsor elects to redeem its outstanding warrants, allowing warrant holders the option to cash exercise (i.e. using cash to exercise warrants in exchange for shares) within the redemption period (usually 30 calendar days) or be subject to a cashless redemption exercise. If warrant holders do not exercise their warrants during this period, their warrant holdings will be subject to the cashless redemption exercise and be automatically converted into shares  using a predetermined ratio as stated in the prospectus and redemption notice, rounded down to a whole number. 

Scenario B: SPAC sponsor elects to redeem its outstanding warrants, allowing warrant holders to have the option of either i). cash exercise or ii). cashless exercise, or be subject to a nominal cash redemption on the redemption date. The cashless exercise may be based on the price range of the share price. Warrant holders who exercise the cashless exercise option will receive shares based on the ratios (i.e. make-whole table) specified in the prospectus and redemption notice. For warrant holders who do not elect to exercise their warrants (both cash and cashless), their holdings will be subjected to mandatory redemption by the sponsor at a nominal price on the redemption date.

The conditions on exercising and redemption of warrants will differ across individual SPACs.  It is important for investors to read the propectus and ensure they understand the specific information on exercising and redemption of warrants when assessing a SPAC.

Identification

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.

 

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.  

SPAC Risk – A listed SPAC (pre-de-SPAC) is a recently incorporated company with no operating history and revenue, and no basis for investors to evaluate the SPAC’s ability to achieve its business objective.

Sponsor Risk – Investors will need to rely on the sponsor’s quality and execution track record to identify and acquire companies to enhance shareholder value. A sponsor may not be able to acquire a target within the approved timeframe to complete a business combination. Up to 10% of the IPO proceeds may also be expensed as the sponsor performs the search and attempts to execute a business combination.

Dilution Risk – Additional funding from the sponsors may potentially dilute an investor’s existing stake in the combined company. The three sources of potential dilution are: sponsor’s promote (up to 20% dilution), warrants (capped at 50%), and PIPE investors (unlimited and dependent on investment terms).

Liquidation Risk – Should a SPAC be unable to complete a business combination (i.e. de-SPAC) within the allowed timeframe, the SPAC may be liquidated. While its assets will be returned to investors, the proceeds received by investors may be less than what they invested in at the time of IPO.

SPACs may also, like other securities, be subject to:

Price Risk – Prices may also be impacted and fall below your purchase price due to macroeconomic or sector/SPAC-specific factors.

Volatility Risk – Refers to the fluctuation in the value of a stock due to the changes in its stock price.

Liquidity Risk – Stock liquidity is the degree to which stocks can be bought or sold in the market without materially impacting their market price. Liquidity risk refers to the risk where a stock cannot be transacted in a timely manner.

More risks specific to a SPAC can be found in the IPO prospectus and/or shareholder circular of the respective SPAC listing.

SPACs are suited for investors willing to invest in listed entities with no initial operating asset and/or revenue. Investors should have some level of understanding of the terms of their investments, as well as the ability to review the prospectus,  business combination circular, and relevant notices to form their investment decisions (e.g. redeem or vote). Investors must be also willing to accept the risk of capital loss and potential dilution in their shareholding post the completion of a business combination.

Investors should also be familiar with the typical SPAC lifecycle, which includes IPO, separation of units, business combination, redemption, voting and exercising/redemption of warrants. This is to ensure they fully understand the implications of their decision to vote for or against the business combination and to decide to continue holding, sell or redeem their shares. For more information, investors can also consult their respective brokers or financial advisors.

More information about SGX’s SPACs Framework :

• Consultation Paper: Proposed Listing Framework for Special Purpose Acquisition Companies (31 March 2021) 
• Responses to Comments on Consultation Paper: Proposed Listing Framework for Special Purpose Acquisition Companies (2 September 2021)

General

1. How is a SPAC listing different from current listed companies (if any) which have sold off their business operations and are also sitting on cash? 

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.

2. Why doesn’t a SPAC go through the traditional IPO route?

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).

3. Are the financial criteria for a company listing via a SPAC less stringent compared to a traditional IPO on the Mainboard?

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.

4. How different is the SGX SPAC process compared to the one in US markets? 

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.

*SGX retains discretion to require issuer to appoint a competent and independent valuer to value the businesses or assets to be acquired under the business combination.

5. Why would an investor trade SPACs?

SPACs enable an investor to participate in private equity arrangements (e.g. high growth companies) in the form of a publicly listed company. Based on an investor’s risk appetite and just like any other stocks, the investor can trade in the different stages of the life-cycle of a SPAC. 

6. Why is there a SPAC warrant component?

The warrant is intended to enhance the potential return to investors for agreeing to have their capital held in the trust/escrow account until the SPAC completes a business combination. It provides the opportunity for investors to maintain equity exposure to the Resulting Issuer via the warrants even when they choose to redeem the shares for cash.

SPAC Life-cycle

1. What are the key milestones of a SPAC life-cycle a shareholder should take note of?

Post the IPO of the SPAC, shareholders will need to take note of the following milestones

• Detachment of units
• Issuance of shareholder circular on proposed business combination (i.e. acquire or merge with target company)
• Redemption process
• EGM vote on the proposed business combination
• Completion of business combination and trading of Resulting Issuer
• Exercise or redemption of warrants

Shareholders are advised to look out for related announcements on SGXNet by the SPAC for more information on the dates of the key milestones.

2. Does a SPAC have to disclose the target sector/industry that they wish to acquire businesses or assets in. If yes, are they bound by the disclosure and cannot invest in non-disclosed target sector/industry?

SGX’s Mainboard listing Rules require upfront disclosure in the prospectus on their acquisition mandate including the target sector, types of assets or geographic areas for purposes of undertaking a business combination. However we note that generally SPACs do include a caveat that they may decide to enter into initial business combination with a target business or businesses that does not meet all of these criteria and guidelines as stated in the prospectus.

Any proposed change of acquisition must be approved by 75% of shareholders. 

3. How do SPAC sponsors search for target companies?

SPACs typically have professional sponsors such as private equity firms whose mandate and expertise is investing into companies with a view towards a potential public listing.

The search for a target company is similar to traditional merger & acquisitions (M&A) approaches. In the search for a target, SPAC sponsors will typically vet through potential companies through their network and conduct the necessary due diligence (i.e. financial analysis, legal, background checks). Please refer to a SPAC’s prospectus for more information.

4. How long does a SPAC have to identify and acquire or merge with a target company?

Post-IPO, the SPAC sponsor will commence its search for a target company to acquire or merge with as part of its business combination process.

The sponsor must ensure it enters into a binding agreement for a proposed business combination (with a target company) within a 24-month period from the SPAC’s IPO date, and complete the business combination within the overall maximum timeframe of 36 months from IPO.

5. Do SPACs typically acquire or merge with listed or unlisted 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.

SPACs typically acquire or merge with private companies. From the perspective of private companies, SPACs offer an alternative route for capital raising and public listing.

6. Can a SPAC target more than one company for an acquisition or a merger?

A SPAC can acquire or merge with more than one company as part of their business combination. However, the SPAC sponsor will need to ensure the fair market value of the largest target company is at least 80% of the funds in the escrow account (at time of entry into the binding agreements for business combination).

7. Will I know which is the target company before I vote?

SPAC shareholders will know the target company for acquisition via the issuance of a shareholder circular by a SPAC sponsor. The circular will detail the proposed business combination and relevant information on the target company (e.g. company background and financials).

An EGM for shareholders to vote on the business combination will be held at least 21 calendar days after the circular is published.

Investor Rights

1. What is the purpose of redemption of shares before Business Combination?

The redemption right of shares by independent shareholders is an important investor protection mechanism to safeguard the interests of shareholders who invested in the SPAC prior to the completion of a business combination. Regardless of whether the independent shareholders vote for or against the proposed business combination, they can choose to redeem their shares for cash in the trust/escrow account. They will also be able to hold on to the warrants if they so wish. 

2. Do I get my investment back if I vote against a SPAC’s proposed acquisition?

A SPAC sponsor will announce and issue a shareholder circular on a proposed acquisition (i.e. business combination), with an EGM to vote to be held at least 21 calendar days after.

As part of the de-SPAC process, independent shareholders have the right to redeem their SPAC shares, regardless of whether they vote for or against the business combination. They will also be able to hold on to their warrants should they wish to.

The deadline to complete and submit a redemption form is typically at least two trading days prior to an EGM vote for the business combination. The redemption amount for the shareholder will be based on a pro-rata portion of the amount held in the escrow account and may differ from the prevailing market prices.

Shareholders’ redemption will only be successful upon the approval and completion of the business combination. Do note that SPAC warrant holders will not be able to redeem their warrants regardless of whether they have redeemed their shares or not.

3. Do I get my investment back If I am not agreeable for the SPAC to withdraw funds from the Escrow account?

The funds (at least 90% of gross IPO proceeds) held in the escrow account 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). SPACs are required to provide quarterly updates (via SGXNet) on its cash utilisation in the escrow account.

To exit their investment, shareholders can choose to either a). sell their shares in the open market at prevailing market prices or b). opt to redeem their shares when the SPAC announces a proposed business combination.

4. What will happen to my investment in the SPAC if it cannot identify a target company?

If a SPAC sponsor fails to identify a target company and complete the business combination within the permitted timeframe, the SPAC will be liquidated. All assets of the SPAC, including all funds held in the escrow account, will be returned to shareholders on a pro-rata basis.

SPAC warrants will be deemed expired and warrant holders are not entitled to liquidation distribution. The SPAC’s shares and warrants will be delisted on or around the date where the liquidation distribution is completed.

SPAC sponsors are expected to announce via SGXNET as soon as they are aware that they cannot complete its business combination within the permitted timeframe.

5. How does SGX ensure retail investors’ interests remain protected?

SGX has implemented various safeguards to strengthen the alignment of interests between the SPAC sponsor and their independent shareholders, such as the permitted timeframe to complete a business combination, moratorium for relevant shareholders, requirement to place at least 90% of gross IPO proceeds in an escrow account, 50% cap on dilution from warrants, redemption and voting rights for independent shareholders.

Completion of a business combination can only proceed if more than 50% of independent directors approve the transaction and more than 50% of shareholders vote in favour of the transaction.

Trading

1. Why does detachment of unit (from shares and warrants) occur after 45 days?

SPACs are shell companies and do not have an underlying operating business, unlike an operating company that becomes public through a traditional IPO. At IPO, SPACs will offer units, with each unit comprising of a public share and typically a fraction of a warrant. It is a feature of SPACs that the unit splits into a public share and warrant which are then separately traded. 

Before the split happens, a time period from the listing date has to first lapse and to potentially accommodate over-allotment options, if any, similar to that of a traditional IPO. Over-allotment grant underwriters an option to purchase additional units which can be exercised up to 30 days from the listing period. While SPAC units will trade immediately at the IPO, the total public unit count may not be known for up to 45 days. 

2. Where can I view the number of SPAC shares and warrants I hold post detachment?

Shareholders can view the number of SPAC shares and warrants they hold on the SGX Investor Portal two trading days after the detachment date. From the detachment date, shareholders can only trade SPAC shares and warrants.

3. Will I be able to lend out my SPAC units (prior to de-SPAC) under the Securities, Borrowing and Lending (SBL) programme?

Yes, SPACs will be made available under CDP’s SBL programme, provided that the relevant SPAC counter has met the eligible criteria to be offered. Please click here for the list of stocks available on the programme.

4. Is there a process on a SPAC’s stock naming convention after de-SPAC?

There are several scenarios that may happen post the completion of the business combination. Some scenarios include i) name change for the SPAC shares, ii) name change and ISIN code change, iii) new counter creation. Shareholders are advised to read through the announcements and/or contact their brokers or financial advisors for more information.

5. Are SPACs transferrable before and after detachment?

There is no difference between the SPAC and a normal security for transfers. The usual procedures apply unless there are explicit conditions imposed on the shares (e.g. moratorium period).

6. Is there a moratorium period for transfer after de-SPAC?

There is no difference between the SPAC and a normal security for transfers. The usual procedures apply unless there are explicit conditions imposed on the shares e.g. moratorium period.

For more information, please refer to SPACs product page (here) and the relevant SPAC’s prospectus/announcements for more details.

 

Source : SGX