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Short for Special Purpose Acquisition Companies, SPACs offer investors access to potentially unique and exciting investment opportunities. A SPAC’s journey begins with its own Initial Public Offering (IPO).
Raising capital with the sole intent of acquiring a target company, SGX-listed SPACs will then have 24 months from its IPO to complete their Business Combination. This is also typically referred to as the de-SPAC process.
Singapore investors may be familiar with the 3 SPACs that are listed on the SGX: Vertex Technology Acquisition Corporation (SGX: VTA); Pegasus Asia (SGX: PGU); and Novo Tellus Alpha Acquisition (SGX: NTU).
With Vertex Technology announcing its proposed Business Combination with leading livestreaming platform, 17Live Inc., in early October 2023, the first de-SPAC process on SGX is underway.
For private companies, like 17Live Inc., SPACs offer an alternative capital fund raising route compared to a traditional IPO.
What Happens After A Proposed Business Combination Is Announced
The announcement of a proposed Business Combination essentially kickstarts the de-SPAC process. Investors should keep track of the key dates and understand the process to make more informed decisions.
Once a Business Combination is announced, investors can expect to see news coverage, analyst reports and financial articles (such as this one) published by various sources. For every de-SPAC process, SIAS has also committed to independently appoint research firms, on its panel, to provide independent research report.
SGX themselves has created market updates for Singapore investors to learn more about the current Vertex Technology de-SPAC process and the business behind the Vertex Technology de-SPAC, 17Live Inc., as well as hosted a livestream with Vertex Technology and the 17Live management team for investors to hear from them and ask questions they may have.
While investors can benefit from such content, you should ultimately rely on your own assessment to determine what actions to take.
Here are 6 milestone dates you should pay attention to.
Read Also: 8 Things You Need To Know Before Investing In A SPAC Listing On The Singapore Exchange (SGX)
#1 EGM Notice and Shareholder’s Circular
Once a target company has been identified for a Business Combination and the relevant regulatory approval(s) obtained, SPACs will call for an Extraordinary General Meeting (EGM) to obtain shareholders’ approval. This allows shareholders to raise questions and vote on the proposed Business Combination.
Shareholders will receive an EGM Notice at least 21 days before the actual EGM date. This provides investors sufficient time to assess the target company.
For reference, Vertex Technology provided its Notice of EGM on 9 November 2023, and will hold its EGM on 1 December 2023.
Along with this notice, shareholders will receive a Circular providing comprehensive information on the target company and details of the Business Combination process. This will typically include the purchase consideration, new funds raised via PIPE (or Private Investment in Public Equity) financing (if any), and any special schemes for its de-SPAC.
Shareholders should also pay attention to the relevant milestones dates in the de-SPAC process which will be found in the Circular.
Shareholders should read the Circular in order to make an informed decision. By reading the circular, shareholders would be able to learn about the industry of the target company, its business model, operational strengths and risks, finances and cash flow, board of directors and management team, valuation, as well as its potential for growth. This will help shareholders evaluate the target company.
Shareholders may also find independent market reports and valuation reports in the Circular to help them decide on their course of action.
#2 Trading Halt / Suspension
It is important that shareholders be aware of the contents of the Circular especially as the SPAC will call a trading halt before the EGM typically a few days before the EGM and until the conclusion of the EGM.
This trading suspension is to prevent disorderly trading in the Company’s counter as the redemption levels are unknown until the date of the EGM. In Vertex Technology’s case, this trading suspension will also provide a record date to differentiate between Redeeming Shareholders and Non-Redeeming Shareholders who will be entitled to the Special Bonus NRS Shares and the Additional Warrants based on the Shares held as at the Redemption Record Date.
Looking at the Vertex Technology de-SPAC process, its Circular states that the trading suspension will start from 28 November 2023 and trading will resume on 4 December 2023. The EGM will be held on 1 December 2023 – the Friday before trading restarts on Monday (4 December).
Shareholders looking to buy or sell the SPAC shares and/or warrants should note that they won’t be able to do so once the trading suspension is underway.
This is especially important because some SPACs may offer special bonus shares and/or additional warrants to non-redeeming shareholders who hold the SPAC shares before the trading halt / suspension is called. Investors who want to receive these bonus shares and warrants should therefore take note of the cum-date for the special bonus shares and additional warrants.
As part of the Business Combination exercise for Vertex Technology, a Special Bonus Scheme of 0.1 new shares will be issued to shareholders who do not redeem their shares. There are also Additional Warrants of 0.2 of 1 Warrant per share that will be distributed to non-redeeming shareholders. The last date and time to purchase shares to be entitled to the Special Bonus Scheme shares and additional warrants is 27 November 2023, 5 p.m.
#3 Last Date For Share Redemption
In addition to buying and selling the SPAC shares, investors can also choose to redeem their shares. The redemption window opens once shareholders receive the Circular, along with the redemption forms within it.
Shareholders can choose to redeem all or part of their shares. The redemption price will be announced by the company after the EGM and prior to completion of the Business Combination.
They have from this time until at least 2 business days before the EGM to submit their Share Redemption Form. This information will be provided in the Circular.
Note that the physical Share Redemption Form has to reach the Corporate Secretary by the stipulated last date and time. Online submissions are not allowed.
For Vertex Technology’s de-SPAC exercise, shareholders have until 28 November 2023, 2 p.m. to submit their Share Redemption Form.
The window closes a few days before the EGM, as the redemption statistics have to be compiled and will be disclosed to shareholders during the EGM itself.
Redeeming shareholders, if the Business Combination goes ahead, will receive the redemption proceeds around the same time non-redeeming shareholders receive their Special Bonus NRS Shares and the Additional Warrants – on 8 December 2023.
#4 Last Date For Submitting The Proxy Form
For shareholders who are unable to attend the EGM, they can appoint a proxy by submitting the Proxy Form. The Proxy Form, and information for the last date and time are also available in the Circular. Shareholders typically have until a few days before the EGM to submit this form. Shareholders may also appoint the Chairman of the Meeting to vote based on their proxy form.
If we reference the Vertex Technology de-SPAC again, the last date and time to submit the Proxy Form is 29 November 2023, 2 p.m. This can be done physically or online.
#5 Extraordinary General Meeting (EGM)
All shareholders are invited to attend and vote at the EGM, even those who have elected to redeem their shares. The share redemption process will only be completed after the EGM, and redeeming shareholders will still have the right to attend and vote at the EGM. Of course, proxies can also attend to vote at the EGM if the Proxy Form is submitted on time.
There are 2 possible outcomes at the EGM. 1) shareholders vote in favour of the Business Combination or 2) Shareholders do not vote in favour of the Business Combination.
If the Business Combination is approved, then the de-SPAC process will proceed (as explained in #6 below).
If the Business Combination is not approved, then the de-SPAC process will not proceed. In this situation, SPACs can go back to the drawing board to identify a new target company to complete the Business Combination within the stipulated timeframe.
If we look at the specific case of Vertex Technology, however, there may not be a sufficient runway. It was listed in January 2022 and has to find a target company by January 2024. As stated in its Circular, if its Business Combination is not approved, the SPAC will proceed to liquidate.
This will result in the return of the IPO proceeds, initially placed within an escrow account, including the interest earned, to shareholders. While SPACs on SGX have to place at least 90% of IPO proceeds in such an escrow account, Vertex Technology placed 100% of the proceeds into an escrow account.
#6 Crediting Of Shares And Commencement Of Trading
Assuming shareholders vote in favour of the Business Combination, the money set aside from the SPAC IPO will first be disbursed to redeeming shareholders based on the redemption price, with the remaining going to the target company.
Non-redeeming shareholders, as well as PIPE Investors and shareholders of the target company, can look forward to the commencement of trading of their shares under a new name, following the completion of the Business Combination.
In the case of Vertex Technology’s de-SPAC, it will trade under the name “17Live Group Limited”. Unique to this de-SPAC, non-redeeming shareholders can also look forward to the crediting of Special Bonus Shares and Additional Warrants. These will be completed before the commencement of trading.
17Live Group Limited, if it proceeds with and completes the Business Combination, will commence trading on SGX on 8 December 2023, 9 a.m. For investors purchasing shares prior to 8 Dec 2023, 9 a.m., (i.e. from 4 December to 7 December) they will be buying shares in Vertex, not 17Live, since the Business Combination is not completed yet. Such investors should also note that they are not eligible for the crediting of the Special Bonus NRS Shares and the Additional Warrants.
Navigating The De-SPAC Process
Investors who understand the de-SPAC process can gain access to potentially attractive investment opportunities.
Of course, non-redeeming shareholders are now investors in an entirely different entity. Rather than a SPAC, they are investors in an operational company. How well their investments turn out will hinge on how well the company performs. For this, it is an ongoing process to assess whether the company is delivering on its commitments and fulfilling its potential.
The de-SPAC journey may not necessarily end with the Business Combination either, as investors still have their warrants. Whole warrants can usually be exercised after 30 days from when the de-SPAC process is completed and up to the warrant expiry date (which is usually 5 years after the completion of the Business Combination).
In the case of the Vertex Technology SPAC, the warrants expire 5 years after the Business Combination. It has an exercise price of $5.75, which means it may make sense to exercise the warrants if the company’s share price trades above this level.
For non-redeeming shareholders who receive the 0.2 Additional Warrants per share, these are ranked equally as the existing warrants that they may be holding if they subscribed to the IPO.
Shareholders can continue to trade these warrants if they are not redeemed. More details on the exercise of warrants process will be announced closer to the relevant date (i.e. which begins 30 days after the completion of the business combination on 8 December 2023).
For more details on the VTAC’s De-SPAC process and FAQs, investors can refer to SGX’s Research and Education page here.
For more product information on SPACs, visit www.sgx.com/SPACs
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