Singapore SPACs Are Reaching Their 2-Year Mark: What’s in Store for This Asset Class?

Special purpose acquisition companies, or SPACs, were listed back in January 2022 to much fanfare.

Back then, three SPACs were listed on the mainboard of the Singapore Exchange (SGX) – Vertex Technology Acquisition Company (VTAC), Pegasus Asia (SGX: PGU), and Novo Tellus Alpha Acquisition (SGX: NTU), or NTAA.

SPACs are blank-cheque companies set up with the express purpose of sourcing for a suitable operating company to merge with.

An acquisition, also known as a “de-SPAC”, must take place within 24 months of each SPAC’s IPO, with an extension of 12 months allowed only after the fulfilment of prescribed conditions.

With the crop of SPACs fast reaching their two-year mark, what can investors expect from this new asset class?

Three different outcomes

With time nearly running out, one of the SPACs, VTAC, announced a business combination and de-SPAC in early October.

The SPAC has agreed to combine with 17LIVE Inc., a top pure-play live-streaming platform in Japan and Taiwan by revenue.

The pro-forma equity value of this combination is up to S$1.16 billion and this listing will be SGX’s first live-streaming company.

After receiving approval from VTAC shareholders at an extraordinary general meeting, 17LIVE Group (SGX: VT1) was then listed in early December.

At the time of writing, VTAC remains the only SPAC that has completed a business combination and executed a de-SPAC.

On 20 December 2023, Pegasus Asia announced that it would not proceed with a business combination after considering “macroeconomic and market conditions”.

NTAA, on the other hand, clarified rumours that it was seeking to dissolve and that it was not merging with any target company.

The SPAC’s press release stated that it was still actively looking for a potential business combination but has yet to identify one.

Hence, there is no decision to dissolve the SPAC yet.

A lacklustre performance

There could still be a potential business combination for NTAA should it identify an acquisition target before the deadline is reached.

However, 17LIVE Group’s share price performance since its listing has been lacklustre.

On its first trading day, the stock fell by 13.6% to S$3.88.

Since then, shares of the live-streaming group have continued sliding, closing at S$1.61, down a significant 64% from its pre-listing price of S$4.49.

This dismal performance was already hinted at when 62.5% of shareholders exercised their redemption right in the share capital of VTAC before 17LIVE Group’s listing.

Excluding the holdings from Vertex Co-Investment Fund and Venezio Investment, which committed not to redeem their shares, as well as Temasek-linked entities, the redemption rate goes up to 96.3%.

It didn’t help that 17LIVE reported a lacklustre set of financials for its first half of 2023 (1H 2023), with operating revenue falling by nearly 25% year on year to US$151 million.

The group’s average revenue per paying user (ARPPU) for 1H 2023 also fell from the pandemic high of more than US$350 to less than US$300, although the spend rate increased for both Taiwan and Japan to 18% and 25% from 15% and 20%, respectively.

Investors may be looking out for signs of a recovery in revenue and 17LIVE’s user base before its share price can recover.

A ray of hope for SPACs

Despite the hurdles faced by SPACs in identifying a suitable acquisition target, an SGX spokesperson has said that the SPAC framework is here to stay.

SPACs offer a choice for companies to list compared with the traditional IPO route.

The spokesperson sees it as a complement to IPOs.

However, David Gerald, president of the Securities Investors Association of Singapore (SIAS) believes that SPACs need to be fine-tuned based on the experience with this first batch.

He feels that there is nothing fundamentally wrong with SPACs and that market conditions had a part to play in two out of three SPACs being not able to identify suitable acquisition targets.

Notably, interest rates have risen sharply since all three SPACs were first listed, denting investor appetite for growth assets globally.

Such endorsements from both SGX and SIAS mean that SPACs may still be launched in the coming years, albeit with possibly amended rules.

Get Smart: SPACs will live on

It has been a turbulent journey for all three SPACs.

One has decided to call it quits while another (NTAA) has a small window to search for a suitable combination before it has to liquidate, too.

17LIVE has yet to prove itself as a viable growth stock that can justify higher valuations.

The three SPACs may not have impressed investors thus far, but the SPAC framework should live on despite these challenges.

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Disclosure: Royston Yang does not own shares in any of the companies mentioned.