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SPACs provide hope for revitalizing the ailing Singapore IPO market

SINGAPORE – Singapore's stock exchange introduced new rules this month that will allow SPACs to get listed, a move it hopes will attract more companies to raise funds in the city-state in a long-standing IPO market.

From Friday, special purpose entities can list on the mainboard of the Singapore Exchange (SGX).

SPACs, which have been gaining popularity recently, have no commercial activities and are formed solely to raise capital from investors to acquire one or more operating companies. You raise capital in an IPO and use the money to merge with a private company and take it public.

Singapore's benchmark index has traditionally been dominated by financial and real estate stocks. But the exchange is aiming to attract tech companies, and it believes SPACs are a great way to do that.

Mohamed Nasser Ismail, head of equity capital markets at SGX, told CNBC on Monday that SPACs represent an alternative route for companies to access public markets.

"There is now a growing pool of new tech or new economy companies that are growing across the region and that are taking the SPACs route … Box Asia."

Companies seeking SPAC listing on the SGX must meet a minimum market capitalization of 150 million Singapore dollars ($ 111 million).

Singapore's stagnant IPO market

The popularity of SPACs has exploded, especially in the US. So far this year there have been 358 SPAC IPOs in the US, an increase of over 800% over the previous year. That makes up the vast majority of the 379 SPAC IPOs worldwide this year, according to data from consulting firm EY. The rest of the SPAC IPOs took place in Europe.

In Asia, according to Reuters, Singapore would be the first exchange to offer the SPAC route.

This could provide the much-needed renewed enthusiasm for Singapore's IPO market, which despite efforts by the exchange to make the city-state listing attractive, has not attracted much interest from companies, including their own.

Singapore-based ride-hailing giant Grab, for example, plans to join forces with Altimeter Growth Corp. upon completion of its SPAC merger. to be listed on the Nasdaq.

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In the first half of this year, Singapore only drew three listings – a 50% year-over-year decrease, according to EY data. By comparison, Hong Kong, rivaling Singapore's financial center status, recorded 46 entries over the same period.

The amount donated was also much lower. Singapore's three IPOs raised $ 200 million in total, while Hong Kong's 46 IPOs raised $ 27.4 billion.

For companies, says Nasser of SGX, a SPAC "brings certain advantages that a traditional IPO route may not have".

"SPACs can be more secure in terms of timing, evaluation and execution," he said.

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