Montieth SPRG Insights • 16 February 2022

Is Asia the Hottest SPAC Hunting Ground?

Is Asia the Hottest SPAC Hunting Ground?

Special Purpose Acquisition Companies (SPACs), also known as “blank check companies,” have been around since the 1980s. Despite their decades-long existence, 2021 saw exponential year-on-year growth in the number of these entities. The number of SPAC IPO transactions in 2021 was 40 times higher, compared to a decade ago. So, what is a SPAC?

A SPAC is a shell corporation listed on a stock exchange with the purpose of acquiring a private company. This makes it public without having to go through the lengthy and often expensive traditional Initial Public Offering (IPO) process. Once an acquisition is completed, the SPAC’s investors can either swap their shares of the merged company or redeem their SPAC shares to get back their original investment.

As Asian investors and companies have jumped on the SPAC bandwagon, the Singapore Exchange (SGX) and Hong Kong Stock Exchange (HKEx) have recently joined global bourses such as Nasdaq and New York Stock Exchange, to open new fundraising avenues for companies across North Asia and Southeast Asia. Three SPACs in Singapore have already received eligibility-to-list letters from SGX, two of which have filed their prospectuses, and are set to be listed later this month.

HKEx instated the long-awaited listing regime for SPACs on 1 January 2022. The arrival of SPAC regulations provides a larger pool of potential investors and businesses with more options and opportunities to raise capital and drive growth.

Hong Kong’s SPAC framework is much stricter than its global peers, which bars retail investors from participating in SPAC share sales. Some investors are more prudent about the transparency of SPACs and poor stock market valuations of the merger. Another red flag comes in the form of negative media sentiment. The way forward for SPAC sponsors is to work hard to instill investor confidence with a solid communications strategy and execution plan across every stage of SPAC lifecycle – deal announcement, deal marketing, shareholder vote, de-SPAC and listing day ceremony.

Articulate your vision and build your narrative

A clearly defined vision and mission statements inspire action moving towards achieving a shared goal, as well as short- and long-term objectives. Companies will have to articulate, communicate, or even sell, their vision to their allies. This includes employees, investors, internal stakeholders, analysts, influencers, reporters and more. Every step in the lifecycle offers a unique opportunity to position the SPAC with target audiences and raise awareness. You can turn them into your biggest fan.

Know your audience

Investors rely on facts and information to build trust and confidence. You will have to highlight your company’s competitive differences in the crowded marketplace. You will also have to show that your leadership team has proven experience in their specialities, outline your financial story and provide transaction terms. This could be your only chance to do so, so you need to make it relatable, easy to understand, avoid the use of jargon, add visuals and videos where appropriate, and prepare for tough Q&A. By knowing the story backwards and forwards, you will be setting yourself up for success.

Be proactive

Unlike traditional IPOs, SPACs do not have to follow the IPO-related quiet period once they file. Their success is based on the media hype built around the SPAC. Implementing an effective, proactive, and comprehensive communications program throughout the entire process is the key to getting more eyeballs on the SPAC and sustaining positive market sentiment.

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