Date: September 2, 2021
The introduction of SPACs in Singapore will provide retail investors with new investment opportunities. SPACs make venture capital and private equity investments more democratic because shares in a SPAC, that is listed on a stock exchange can be acquired by anyone, including retail investors. However, investors need to be knowledgeable and understand fully the product features and risks before investing. In addition, to ensure that retail investors have the necessary information and guidance, SIAS will be providing independent research and guidance on voting on the de-SPAC transaction.
SIAS to appoint independent research firm to provide research
To ensure complete independence, for every SPAC, following the identification of a target company and the de-SPAC process, SIAS will independently appoint a research firm to provide independent research on the de-SPAC, from its panel of research firms which SIAS will administer.
The research will provide guidance to help investors make an informed decision on how to vote for the proposal merger with the target company. The guidance will be based on business fundamentals of the SPAC/target including:
(i) evaluating the information on the proposed de-SPAC transaction including the attractiveness of the target business/entity;
(ii) discussing the pros and cons of the transaction, including implications to investors;
(iii) peer group price/valuation comparison; and
(iv) scenario analysis for share redemption and warrant/convertible security exercise.
Separately, previously SIAS raised the inherent conflicts of interest from companies appointing financial advisors to advise their independent directors on major corporate actions such as mergers and acquisitions, rights issues and de-listings.
This approach for SPACs, where an independent body appoints an independent research firm to guide retail investors will raise the independence and transparency of the process while providing the necessary guidance. This should also provide more comfort to investors investing in SPACs.
Providing ongoing continuing guidance on disclosures
In addition, SIAS will review all documents and disclosures of SPACs and pose questions to the SPAC companies. SIAS will review the responses from the SPAC companies and provide a report or commentary, based on the responses from the SPAC.
This approach is consistent with what SIAS has been doing with the current exercise of raising questions on annual reports as well as for the many corporate actions conducted by listed companies for their rights issue, acquisitions & mergers and delisting. We expect to pose questions and guidance at the IPO of the SPAC, at major announcements of the SPACs, and ongoing at quarterly intervals focusing on disclosures and updates.
SIAS encourages the SPAC sponsors to actively engage with their shareholders and stakeholders, providing updates and organising dialogues with its shareholders so that shareholders are updated, informed and are able to make informed decisions.
As with any new product introduction, there is a fine line between regulation and over regulation. The framework by SGX provides the opportunity of SPAC sponsors and companies to tap into Singapore’s capital markets. The education and market initiatives by SIAS will help improve transparency and disclosure to enable investors to make an informed decision, within Singapore’s caveat emptor (buyer beware) regime. However, all stakeholders will need to play their part for SPACs to succeed in Singapore.
Founder, President & CEO