On Sept 18, Tan Boon Gin, CEO, Singapore Exchange
“It is no secret that our biggest new economy companies have chosen to list in the US using a dual-class share structure, nor is it a secret that such structures have become increasingly normalised for investors. In the same way as the EU has recognised, we can rail against the tide, or we can have a dual class share regime for such companies to come home or stay home,” he says.
In order to keep tech companies and unicorns at home, the SGX introduced Special Purpose Acquisition Companies (SPACs). SPACS are designed to address the valuation gap that new economy companies face because investors are less familiar them by allowing more time for understanding the company, compared to a traditional IPO road show.
SPACS on SGX contain additional safeguards not found in the US such as sunset clauses for dual class shares and skin in the game for SPAC sponsors. “So, we have sought to achieve the elimination of a competitive disadvantage judiciously and in the overall interests of market participants,” Tan says.
Still, of the three SPACs that listed, only one managed to de-SPAC into 17live. The other two SPACs returned monies to their investors.
There is a strong link between good corporate governance and improved access to capital. As a case in point, the ACGA has recognised the efforts of Japan. The Japanese regulators are requiring their companies to publicly disclose plans to improve capital efficiency, return on equity, and price-to-book ratios, and effectively naming and shaming the companies that fail to do so.
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This complements the decision of the Japanese Government Pension Investment Fund to raise its domestic stock allocation from 12 to 25% in 2014, resulting in a domestic equity portfolio of 61 trillion yen by the start of 2024. The ACGA has highlighted how the external managers responsible for managing the GPIF funds have also been stepping up their engagements of companies, with the number of engagements doubling between 2017 and 2022.
Singapore is implementing a “value-focused” approach to enhance shareholder value, including: raising board standards and promoting diversity; encouraging market discipline by facilitating shareholder engagement; and reducing market friction to support value-enhancing activities like share buybacks, Tan says. “This predates, but will hopefully dovetail with, the efforts of the Monetary Authority of Singapore’s Equity Market Review Group.”