Over the past year in Singapore, Special Purpose Acquisition Companies, better known as SPACs, have been garnering interest among Singapore investors. One of Singapore’s most well-known companies – Grab Holdings Limited, was recently listed on the NASDAQ in December 2021 via a SPAC sponsor, Altimeter Growth Corp (AGC).
As more companies – typically high-growth companies, lean towards taking their companies public via a SPAC, the Singapore Exchange (SGX) has also launched the SPACs framework to introduce a new listing vehicle to the Singapore market. SGX believes that the introduction of SPACs will generate benefits to capital market participants and become a viable alternative to traditional IPOs for fundraising in Singapore and the region. For example, a company that was previously embroiled in controversy – WeWork – also went public in October 2021 on the NYSE via a SPAC merger.
SPACs are shell companies at the point in time when they go public. SPACs are formed to raise capital with the sole intent of acquiring another business(es) and/or asset(s). In Singapore, SPAC sponsors must complete a business combination (i.e. de-SPAC) within 24 months from IPO, with an extension of up to 12 months subject to fulfilment of prescribed conditions.
Investing In SPAC Listed On SGX
On 20 and 21 January 2022, the SGX welcome their first two SPAC listings – Vertex Technology Acquisition Corp and Pegasus Asia. A third SPAC, Novo Tellus Alpha Acquisition (SGX: NTAA), was listed on SGX on 27 January 2022. We can expect more such SPAC listings on SGX in the coming months.
Vertex Technology Acquisition Corp (VTAC) (SGX: VTA)
Vertex Technology Acquisition Corp (VTAC) (SGX: VTA) took the honour of being Singapore’s first listed SPAC when it was listed on 20 January 2022.
VTAC sponsor is Vertex Venture Holdings, a Singapore-based venture capital investment holdings that currently have an asset under management of more than USD 5 billion. Vertex Venture is backed by Temasek Holdings.
VTAC aims to acquire business(es) at the forefront of technology transformation. Some of the business characteristics of any target companies that it’s looking at would include being technology-driven, fast-growing and scalable, at an inflection point of their growth journey, having a strong management team, cross-border potential with market leadership and having an appropriate valuation.
VTAC also intends to focus on six investment themes based on the selection criteria/characteristics of the prospective target business, which they believe will be at the forefront of technological transformation, and in which Vertex has deep domain expertise.
These themes are:
- Artificial Intelligence
- Cyber Security & Enterprise Solution
- Consumer Internet & Technology
- Sea Digital Payment Gross Transaction Value
- Autonomous Driving And New-Energy Vehicle
- Biomedical Technologies & Digital Healthcare
Through their SPAC listing, VTAC has raised $200 million at $5 per share. The retail portion of its IPO was 36 times oversubscribed. Do note that only about 600,000 shares out of a total of 40,000,000 were made available to the public.
Every unit of VTAC SPAC share entitles the shareholders to 0.3 warrant per share. The warrant, which is an option that gives the warrant-holder the right but not the obligation to purchase a company’s stock at a specific strike price in the future, have an exercise price of $5.75 per share which will expire on the 5th anniversary of the initial business combination completion (i.e. merger/acquisition), or earlier upon redemption of warrants or liquidation.
There will also be an additional right of 0.2 of one warrant per share issued later (at or around the completion of initial business combination) to shareholders who have not tendered for share redemption. In other words, you can get up to 0.5 warrant per share.
Here’s a simplified explanation. If you own 1000 VTAC shares today, this will be converted to 1000 shares of whatever company VTAC acquires/merges with in the future, plus an additional 500 warrants that will allow you to purchase 500 more shares at an exercise price of $5.75. Do note you only get the additional warrants if you do not redeem your shares.
VTAC is currently trading at $4.99 as of 4 February 2022.
Pegasus Asia (SGX: PGU)
Pegasus Asia (SGX: PGU) was listed on 21 January 2022 and is the second SPAC listed on the SGX.
Pegasus Asia is backed by experienced sponsors (Tikehau Capital, Financière Agache, Diego De Giorgi and Jean-Pierre Mustier), and seeks to search for businesses in 6 sub-investment themes (primarily, but not exclusively in Asia Pacific), which it has deep domain expertise in.
- Consumer Technology
- Financial Technology
- Property Technology
- Insurance Technology
- Healthcare and Medical Technology
- Digital Services
A total of 25.6 million shares were issued for Pegasus Asia including 600,000 were set aside for public offering. Each unit consists of 1 SPAC share and 0.5 warrant, with the warrant having an exercise price of $5.75. In total, about $126.27 million was raised in gross proceeds from the IPO.
Pegasus Asia is currently trading at $4.85 as of 4 January 2022.
Novo Tellus Alpha Acquisition (SGX: NTAA)
Novo Tellus Alpha Acquisition (SGX: NTAA) was listed on SGX on 27 January 2022. This SPAC offers investors an opportunity to invest alongside Novo Tellus PE Fund 2, Limited Partner (L.P.), which is its sponsor. The Sponsor Group has a clear, repeated track record of successful investments in Technology and Industrials Companies. Novo Tellus Alpha Acquisition aim is to leverage its Sponsor Group’s unique capabilities and investment strategy to identify and complete a business combination, creating substantial long-term value for its shareholders.
Some general criteria and guidelines that Novo Tellus Alpha Acquisition has to evaluate prospective target businesses include:
- Target Sector: Technology and Industrials sector in the Indo-Pacific region
- Value Creation: Preference for “expert capital” investment opportunities where the Sponsor Group can actively partner with management teams to build fundamental and long-term equity growth in the company
- Investment Themes: Focus on critical technology and macro-growth shifts with multi-year tailwinds, such as Industry 4.0, next generation semiconductors, cloud/edge computing, artificial intelligence (AI), medical life sciences, and supply chain resiliency for advanced engineering
- Target Profile: Companies with leadership or disruptive potential, and able to serve global or continental markets. Focus on companies and business models that have reached sufficient business size to generate superior economies of scale as they grow
- Leadership Profile: Seasoned, expert leadership teams with deep experience, relationships and operating track record. Target leadership teams whose skills and experience will be synergistic with the Sponsor Group’s expertise in building companies
- Deal Structure: Primary capital investment, or a mixed primary and secondary investment. The Sponsor Group also has significant experience in creating successful investment outcomes through founder/owner recapitalisations and transitions
- ESG: Committed to espousing positive ESG practices. This commitment is reflected across the fundamental investment lifecycle and investment policies for the Sponsor Group, from investment sourcing through long-term value creation.
A total of 30 million shares (or up to 32.0 million if over-allotment fully exercised) was issued at $5 per share. This consists of 16 million units for cornerstone investors, 4 million sponsor IPO units and 10 million offering units. Of the 10 million offering units, 500,000 were set aside for public offering. The public tranche was 7.6 times oversubscribed while the international placement tranche of 9.5 million shares was 3.1 times oversubscribed.
Each of the IPO units consists of 1 Class A share of NTAA, and half a public warrant, with the warrant having an exercise price of $5.75.
As of 4 February 2022, share prices for Novo Tellus Alpha Acquisition are at $4.85.
This article was originally published on 23 January 2022 and has been updated with the latest information.
Get The Latest Bite-sized Investment News, Ideas & Insights
Join FSMOne.com's Telegram channel ( FSMOne SG - Research Highlights ) to stay updated on the latest investment and personal finance news, idea and insights. Whether you're at home or on-the-go, this is a quick and convenient way to stay in-the-know.