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RPT-UPDATE 1-Singapore Exchange explores joining SPAC party but with restrictions

Thu 1st April, 2021 1:00am
(Repeats MARCH 31 story)
    By Anshuman Daga
    SINGAPORE, March 31 (Reuters) - Singapore Exchange Ltd
 SGXL.SI  is proposing introducing regulations to allow the
listing of Special Purpose Acquisition Companies (SPACs) or
blank cheque firms that have taken U.S. markets by storm.
    "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," Tan Boon Gin,
CEO of Singapore Exchange Regulation, told a news conference.
    SGX, the first major Asian bourse to consider the listing of
SPACs, is calling for market feedback from Wednesday until April
28 after which it could introduce regulations by mid-year.
    SPACs or shell companies, raise funds via IPOs to merge with
operating firms and then take them public after offering them
shorter listing timeframes and strong valuations.
    SGX is proposing safeguards to rein in risks seen in U.S.
SPACs such as excessive dilution by shareholders and sponsors
and a rush by shell firms to merge with targets. SGX plans a
minimum S$300 million ($223 million) market value for SPACs.
    Hong Kong, Indonesia and other markets are stepping up
efforts for SPAC listings but some industry executives say the
region may not be as attractive as the United States where SPACs
have already raised $97 billion this year after a bumper 2020.*:nL1N2LM0F1*:nL4N2LR1W6
    "It's clear that the SGX is targeting high quality
institutional investors even though this makes it a smaller
market," said one banker who did not want to be identified as he
was not authorised to speak to the media.
    "The safeguards might not be a deal-breaker for many
sponsors but then again Singapore really needs to roll out the
red carpet to win over SPACs," he said.
    SPACs usually offer shares with warrants attached, which
entitle them to buy shares at a certain price, becoming valuable
if the underlying stock price goes up.
    Unlike the United States, SGX proposes that warrants cannot
be detached from underlying shares, and that only those
investors who vote against a business combination be allowed to
redeem shares. This would help prevent what is known as
free-riding, Tan said.
    "Our observations showed that the SPACs that were most
successful were the ones which managed two main risks well:
first, free-riding by investors and excessive dilution of
long-term investors, and second: the rush to do a business
combination also known as a de-SPAC," Tan said.
    In U.S. SPACs, the shares and warrants may be traded
separately, meaning investors can sell their shares but still
benefit via the warrants if the SPAC is successful but without
contributing capital to the company.
    Other measures by SGX include a minimum equity participation
by founding shareholders and allowing SPAC mergers to be
completed within three years instead of the typical two years
seen in U.S. SPACs.
($1 = 1.3446 Singapore dollars)

 (Reporting by Anshuman Daga; Editing by Raju Gopalakrishnan and
Louise Heavens)
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