Singapore’s first Spacs off to a rough start and raises more questions than answers

Muted performance of blank-cheque companies comes amid a global equity selloff, with their performance correlated to technology shares

Singapore announced a listing framework for Spacs in September ahead of financial-hub rival Hong Kong, with rules that are seen as less stringent. Reuters

A lacklustre market debut for the first two blank-cheque companies to list in Singapore is raising some questions whether the excitement seen for such vehicles in the US early last year will prevail in Asia.

Vertex Technology Acquisition, sponsored by a unit of state investor Temasek, jumped in early trade on Thursday, but was just 1 per cent higher than its offer price by the end of Friday. Tikehau Capital SCA-backed Pegasus Asia rose 0.4 per cent in its first day of trading on Friday.

The muted performance of the two Spacs, or special purpose acquisition companies, comes amid a global equity selloff. Worries over rising inflation and potential rate hikes by the Federal Reserve saw the technology-focused Nasdaq 100 plunge into a correction on Thursday. Spacs’ performance tends to be correlated to tech shares.

Singapore announced a listing framework for Spacs in September ahead of financial-hub rival Hong Kong, with rules that are seen as less stringent. Hong Kong’s first blank-cheque company filed a prospectus to its exchange on January 17, with a debut date yet to be set, and another Spac is said to be in the works in the city.

“There is no real reason for a Spac to trade very far from its listing price” until it’s ready to find merger partners, said Sumeet Singh, the head of equity research, IPOs and placements at Aequitas Research. If the managers are able to undertake a merger that trades well post-market, investors would be willing to “pay a premium and bid the shares higher”, he said.

Both VTAC and Pegasus counted on well-known sponsors and had strong participation of cornerstone and institutional funds, with just small portions reserved for individuals. That could leave some room for those that couldn’t join the IPOs to buy them in the market.

VTAC raised total gross proceeds of S$200 million ($149m) with its offering. Pegasus Asia, which is also backed by the family office of LVMH chairman Bernard Arnault, took in S$170 million. Both had units sold at S$5 apiece. Despite their relatively small sizes, the debuting of blank-check firms was long awaited in the city-state, which also has some other Spacs in the works.

The sponsor really matters at this point. Whenever you have something new, the track record matters

Terence Chua,
analyst at Phillip Securities Research

“The sponsor really matters at this point,” said Terence Chua, an analyst at Phillip Securities Research. “Whenever you have something new, the track record matters.”

Strong performances by Spacs in Singapore could help attract attention to the market, which is seeking to lure more initial public offerings. Spacs domiciled in the city-state raised about $900m in the US last year, an amount close to all proceeds raised by IPOs on the Singapore Exchange in 2021.

Meanwhile, Spacs are off to a busy start to the year in Europe, with several new offerings and mergers planned. That contrasts with a more sluggish scenario in the US, where listings have slowed considerably versus the frenzy that dominated the start of 2021, mostly due to increased scrutiny by regulators.

“Companies should go public in the region where they are best known, where they have a good stand in the long term,” said Neil Parekh, chief executive officer of Pegasus Asia, in an interview with Bloomberg TV. The firm is seeking an acquisition in consumer tech, MedTech, FinTech, property tech and digital services, he said.