Listing In The United States Is Becoming More And More Difficult; Venture Capital Institutions "Aim" At Spac Listing In Singapore Stock Exchange

With the increasing difficulty of Chinese enterprises going to the United States to IPO directly, more and more venture capital institutions are aiming at the increasingly hot asian spac market.

In the theme activity of "risk and opportunity under spac upsurge (Singapore chapter)" sponsored by chenshao group recently, many people from venture capital institutions appeared. They are actively understanding the various rules of listing on the main board of SPAC of Singapore Stock Exchange, as well as the operability of operating investment projects to be listed in Singapore through spac.

On September 2, Singapore Stock Exchange officially issued the Listing Rules of SPAC main board, which stipulates that the market value of SPAC companies shall not be less than SGD 150 million; Spac company must complete merger and acquisition transaction and asset injection within 24 months after listing (12 months can be extended if the conditions are met); Spac promoters must purchase 2.5% - 3.5% shares when they are listed in SPAC company.

The so-called spac, known as a "special purpose acquisition company" or "blank check company", is a company that has no commercial operations or income generating business or assets. They are set up to raise funds by listing on the stock exchange through an initial public offering (IPO). Their sole purpose is to acquire another company for business merger, also known as "de spac" transaction, so that the merged companies will continue to be listed on the stock exchange as the main listing body.

With the increasing difficulty of Chinese enterprises going to the United States for listing, more and more venture capital institutions have begun to study the operability and investment profit prospect of "curve listing" of investment enterprises with the help of SPAC.

"In fact, although the relevant departments of the United States have not yet made clear restrictions on Chinese enterprises' listing in the United States, in view of the great policy uncertainty of relevant operations, we prefer to take spac in Singapore and other countries and regions as an option for enterprises to list overseas." an investment director of a large domestic PE fund told reporters.

In an exclusive interview with our reporter, Wei Haoyu, director of the Beijing Representative Office of Singapore Stock Exchange, said that the Listing Rules of SPAC main board introduced by Singapore Stock Exchange have fully drawn on various opinions of the market.

"After we released the draft of SPAC framework, we received more than 80 feedback from financial institutions, investment banks, private equity funds, venture capital funds, corporate financial services companies, lawyers, auditors and related associations. After carefully considering and analyzing all the feedback, the Singapore Stock Exchange finally reached the SPAC framework design," he told reporters.

It is worth noting that after Singapore Stock Exchange issued the Listing Rules of SPAC on the main board in early September, it has been widely concerned by the Chinese market. Many domestic institutions have studied the operability of launching spac companies on the Singapore Stock Exchange. In particular, professional investment institutions that have successfully issued spac companies in other stock exchanges are particularly active. They hope to replicate the previous "successful cases" in the new stock exchange.

The reporter noted that many venture capital institutions are also interested in launching spac in the new stock exchange.

"Previously, some domestic enterprises such as artificial intelligence, biomedicine and cross-border e-commerce at 2B end have become more difficult to be listed in the United States, and they are facing the risk of failure of overseas IPO gambling agreement (they have to buy back the equity held by venture capital institutions at a premium). Therefore, we are actively communicating with them to study the operability of these enterprises to switch to SPAC for listing in Singapore." A partner of venture capital institutions attending the meeting disclosed to reporters. At present, they have communicated with the law firms familiar with the SPAC rules of the Singapore Stock Exchange, and learned that spac companies of the Singapore stock exchange need to comply with the foreign investment law and the negative list of foreign investment 2020 edition in order to acquire domestic enterprises and complete the asset injection.

In his opinion, compared with the compliance operation, venture capital institutions are more concerned about the capital liquidity and trading activity of the Singapore Exchange, and whether it can help spac companies to obtain higher valuation of exit returns, so as to meet the investment return expectations of all parties.

"Before that, many venture capital institutions once favored the operation of domestic enterprises to go to SPAC for listing in the United States, which was that the US capital market gave high valuation to high-tech enterprises, and the transaction activity was high enough to enable venture capital institutions to realize project exit quickly." the venture partner said frankly.

In response, Mr Wei said Singapore would continue to introduce a number of measures to enhance the attractiveness of the Singapore Stock Exchange as a corporate financing center. On September 17, the Singapore government and Temasek set up a S $1.5 billion fund to help high growth companies raise capital on the Singapore Stock Exchange, increase Singapore's capital market subsidies and further promote the development of the stock research ecosystem.

He said that at present, Singapore's assets under management exceed SGD 4 trillion, and many well-known financial institutions around the world have set up platforms in Singapore. Spac sponsors can reach a wider range of international investors in Singapore to attract more attention from global capital.

The reporter learned that at present, some venture capital institutions are quite "concerned" about the stock lock-in period of SPAC company, because it is related to whether they can fully realize the project exit before the expiration of the fund.

At the theme activity of "risks and opportunities under spac boom (Singapore chapter)", heads of many venture capital institutions were learning about spac's stock lock-in period, the setting of follow-up ratio of venture capital as a sponsor, and the "boost incentive" (stock cap of 20%) held by sponsors when spac was listed.

The partners of the above-mentioned venture capital institutions say frankly that the lock-in period of shares of SPAC promoters stipulated by the new stock exchange is relatively "friendly" to venture capital institutions. They have calculated internally that if the venture capital institutions set a three-year exit period, they can complete the project exit before the expiration of the fund.

"We're going to talk to a number of investment companies in the next two weeks to see if we can persuade them to switch to spac in Singapore," said a partner at the venture capital firm. Previously, these companies still hope to go to the United States for spac listing. However, as the relevant investment banks and law firms think that there is policy uncertainty in the relevant operations, they have begun to turn their eyes to other markets such as the Singapore Stock Exchange, the Hong Kong Stock Exchange and the London Stock Exchange. However, these enterprises generally hope that the IPO destination can create enough high valuation and fund-raising amount, And trading activity.