At the height of the pandemic, the US market for special purpose acquisition companies, or spacs, reached its peak. In 2021 alone, the US witnessed 610 spac IPOs, raising US$160.75 billion ($210.42 billion). This surge was driven by various factors, including favourable market conditions, enthusiasm for high-growth companies, high-profile sponsors, celebrity endorsements and relaxed regulatory requirements.
For investors, there is substantial profit potential. One notable spac listing was Diamond Eagle Acquisition Corp, which merged with fantasy sports and sports betting operator DraftKings in April 2020. This merger resulted in a significant increase in its valuation, soaring from US$3 billion to over US$13 billion.
The following year, it became evident that the craze had diminished. In 2022, there were only 86 spac IPOs, raising a modest US$13.42 billion. This decline occurred alongside rising interest rates and increased regulatory scrutiny, driven by concerns over poor post-merger performance, lack of transparency and conflicts of interest between sponsors and public investors. Many spac mergers underperformed, resulting in substantial losses for shareholders.
The numbers dwindled further, with only 31 spac IPOs in the US last year. Based on data compiled by Bloomberg, at least 21 spacs went bankrupt in 2023, resulting in the loss of more than US$46 billion of total equity value.
Back home, the Singapore Exchange S68 ’s (SGX) spac framework was launched on Sept 3, 2021 — a year after the peak of the frenzy in the US. SGX wants the spac process to result in good target companies being listed, providing investors with more choices and opportunities, opportunities, said Singapore Exchange Regulation (SGX RegCo) CEO Tan Boon Gin at the launch.
After much anticipation, three SGX spacs were introduced — Vertex Technology Acquisition Corp (VTAC), Pegasus Asia and Novo Tellus Alpha Acquisition (NTAA). All three debuted on SGX in January of 2022 with much fanfare.
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Following the initial excitement, however, there was little news regarding the three SGX-listed spacs. Although they remained silent, investors were mindful of the firms’ two-year deadline to complete a merger with a target company, in accordance with SGX RegCo’s rules.
Finally, after nearly two years of waiting, VTAC was the first to announce its de-spac, proposing to acquire Vertex Ventures long-term portfolio company, live-streaming platform operator 17Live.
Vertex Asia Fund participated in the company’s US$40 million Series A round in 2017, while Vertex Growth Fund led its US$26.5 million Series D funding. Vertex Ventures also invested in Taiwan-based dating app Paktor, founded by 17Live’s co-founder Joseph Phua.
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On Dec 1, 2023, VTAC said 26,016,200 shares, or 62.53% of the company’s issued share capital, had been redeemed. The merger proceeded anyway, as its investors approved the de-spac merger. VTAC was then renamed 17Live Group, trading under the new name from Dec 8. The counter’s shares dropped to $3.15, almost 20% from when it last traded as VTAC. The counter traded as low as 43 cents apiece on July 15 before recovering to $1.13 as of Oct 15.
It is perhaps unsurprising to see both Pegasus Asia and NTAA dissolve the spacs just a few weeks later. The Edge Singapore understands this is due to lower-than-expected numbers due to unfavourable market conditions.
Meanwhile, the Hong Kong Stock Exchange (HKEX) also introduced the new listing regime for spacs around the same time as SGX, drawing a total of five blank-cheque companies. However, no de-spac transaction has been completed thus far. Ongoing de-spac transactions involve Aquila Acquisition Corp and steel trading company ZG Group, Vision Deal HK Acquisition Corp and gamer-centric networking platform Quwan Holding. The remaining three spacs have yet to share their merger plans.
In August, HKEX announced a revision to its de-spac rules, requiring a mandatory independent third-party investment for de-spac transactions. According to the bourse, this is to mitigate the risk of artificial valuations.
The question remains — is the slow adoption of spacs in Singapore and Hong Kong a reflection of unfavourable market conditions, or do deeper issues lie within the bourses’ spac frameworks? As spacs continue to lose momentum globally, SGX’s ability to attract quality deals and investor confidence remains uncertain.
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