Home World Is the SPAC increase over? Deals in Singapore and Hong Kong seem like petering out

Is the SPAC increase over? Deals in Singapore and Hong Kong seem like petering out

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Is the SPAC increase over? Deals in Singapore and Hong Kong seem like petering out

It’s been a gradual and cautious begin for SPACs that launched in Hong Kong and Singapore in current months.

George Rose | Getty Images, Reuters

It’s been a gradual and cautious begin for SPACs that launched in Hong Kong and Singapore in current months — in stark distinction to final 12 months’s SPAC increase within the U.S. which has additionally fizzled out.

SPACs are particular objective acquisition corporations. They are shell corporations that increase capital in an preliminary public providing and use the money to merge with a non-public firm as a way to take it public, normally inside two years.

Only one SPAC was launched in Hong Kong within the first quarter and it raised $128 million, whereas three have been launched in Singapore, elevating a complete of $334 million, in response to knowledge analytics agency Refinitiv.

“This is likely reflective of investors being happy to play a game of patience, rather than retail investors in the US who in recent years chased SPACs higher in [the] hope they would acquire a ‘hot start up,'” mentioned Neil Campling, head of know-how, media and telecom analysis at Mirabaud Equity Research.

Among the three SPACs listed in Singapore was Vertex Technology Acquisition and Pegasus, each of which final traded beneath their provide worth of 5 Singapore {dollars} ($3.60).

In Hong Kong, Aquila Acquisition made its SPAC debut in March, which was additionally buying and selling beneath its provide worth of 10 Hong Kong {dollars} ($1.27). Hong Kong nonetheless has one other 10 SPAC functions as of mid-March, in response to its inventory change.

SPACs listed in Hong Kong and Singapore

SPAC Exchange Proceeds raised
Vertex Technology Acquisition Corp Singapore $125.87 million
Pegasus Asia Singapore $109.83 million
Novo Tellus Alpha Acquisition Corp Singapore $44.63 million
Aquila Acquisition Corp Hong Kong $127.82 million

The gradual exercise initially could be an preliminary disappointment for Singapore, which had set its sights on drawing SPACs in hopes of reviving its flagging IPO market.

Hong Kong, however, has taken steps to dampen speculative buying and selling by banning retail participation in SPAC buying and selling earlier than the stage the place the merger takes place.

“I would describe the SPAC environment in Asia as cautious given the volatility in the US over the last two years and a general practice of ‘slow and steady wins the race’ mentality,” mentioned Campling.

In my expertise, if you’ll be able to provide a Chinese CEO an easy, quick path to elevating capital, there will probably be no scarcity of takers.

Drew Bernstein

chairman, MBP

The U.S., as compared, loved a document 12 months with greater than $160 billion raised on U.S. exchanges in 2021 — that is practically double the quantity increase the earlier 12 months, in response to knowledge from SPAC Research. 

But even the red-hot SPAC market within the U.S. appeared to battle for route this 12 months.

The U.S. Securities and Exchange Commission has began to crack down on SPACs, with a number of latest guidelines addressing complaints about incomplete info and inadequate safety in opposition to conflicts of curiosity and fraud. 

The CNBC SPAC Post Deal Index — which contains SPACs which have accomplished their mergers and brought their goal corporations public — tumbled round 20% in January this 12 months, from a February 2021 excessive. However, it has since bounced again partially.

Tailwinds for Hong Kong and Singapore

Still, the scenario could but lookup for corporations searching for a SPAC itemizing in Asia, in response to analysts.

Investors can also be seeking to money in on their earlier purchases, they mentioned.

Chinese unicorns — or start-ups with at the very least $1 billion in valuation — are operating out of personal capital to faucet on, and that would drive them to hunt SPAC listings in Hong Kong, in response to Drew Bernstein, co-founder and chairman at audit advisory agency MBP.

A Hong Kong SPAC merger could also be a sexy possibility for mainland China corporations which might be searching for entry to capital …

Drew Bernstein

Chairman and founder, MBP

“There are over 300 China-based unicorns, some of which are exceeding the capacity of private capital sources,” Bernstein instructed CNBC. “In my experience, if you are able to offer a Chinese CEO a straightforward, fast path to raising capital, there will be no shortage of takers.”

“A Hong Kong SPAC merger may be an attractive option for mainland China companies that are seeking access to capital and liquidity convertible into dollars but are concerned about the accounting and regulatory uncertainties involved in a U.S. listing right now,” he added.

Chinese tech shares have plummeted over the previous 12 months. Hong Kong’s Hang Seng Tech index has dropped greater than 50% in comparison with a 12 months in the past.

The market has been hit by China’s regulatory crackdown in addition to ongoing tensions with the U.S. The U.S. Securities and Exchange Commission earlier this 12 months began figuring out Chinese corporations that could possibly be delisted in the event that they did not adjust to audit necessities.

Read extra about China from CNBC Pro

As for Singapore, it could “catch a tailwind” from the “enormous increase” in personal fairness funding into Southeast Asia lately, Bernstein mentioned.

“We expect a boom of emerging growth companies riding favorable demographics and digital adoption in the region. For some of them, a merger with a Singapore SPAC could be a great way to access growth capital close to hope in a market with strong legal protections,” he mentioned.

Hong Kong or Singapore?

Hong Kong and Singapore historically compete for the standing of Asia’s monetary heart, however every has a unique providing relating to SPACs, the analysts instructed CNBC.

Hong Kong could be a extra pure match for China-based offers resulting from its proximity to the mainland, mentioned Campling.

It’s additionally a bigger market in comparison with Singapore.

“Hong Kong is a more liquid market and that would be a natural hunting ground for larger deals,” mentioned Campling.

“Hong Kong though has seen the fallout from a tougher environment in the US and so some international funds that may have been interested in deals listed in HK may now prefer to seek investments in other areas of Asia, such as Singapore,” he mentioned in an e-mail.

The Chinese metropolis can be pitching itself as the marketplace for high quality offers, versus drawing a lot of offers, in response to Campling.

To accomplish that, it has established extra stringent itemizing necessities. According to these guidelines, moreover permitting solely institutional and excessive web price people to purchase shares in SPACs earlier than the acquisition stage, the SPACs should additionally herald new buyers on the time of merger.

“Generally speaking, it looks as if [Hong Kong] is attracting new economy ventures, and Singapore more traditional industries,” mentioned Campling.

Still, each international locations may have “well funded and highly regarded” state-backed monetary establishments, institutional funding corporations, personal fairness backers and entrepreneurs, he added.

— CNBC’s Yun Li contributed to this report.

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