Equity Analysis /
Global

Second SPAC boom will encourage EM listings

  • The SPAC market is reviving after a six-month lull

  • Singapore and Hong Kong have created the regulatory framework for SPACs

  • There will be more emerging market SPACs in the second round of the SPAC boom

Second SPAC boom will encourage EM listings
Nirgunan Tiruchelvam
Nirgunan Tiruchelvam

Head of Consumers Equity Research

Tellimer Research
28 November 2021
Published by

The SPAC market is bouncing back.

SPACs surged in popularity in the first quarter of 2021, when there were more issues than in the whole of 2020. There was then a six-month lull, and the SPAC Index also corrected.

Now there are signs that the market is turning again. The catalyst for the revival has been the tightening of regulatory frameworks. In the US, the accounting rules have been changed to improve protections for investors.

In emerging markets, financial centres including Singapore, Hong Kong and Dubai have created a framework for SPAC issues. These markets did not have a regulatory regime for SPACs prior to this.

Bouncing back

The number of issues in October was the highest monthly level since April, and November is set to be as strong, with Bloomberg's SPAC Index rising 3% this month.

SPAC IPO

SPAC Index (USD)

Emerging markets at the forefront

We expect emerging markets to be at the centre of the next round of SPAC issues, for two reasons:

  1. Singapore and Hong Kong have created a framework for SPAC issues. Both markets previously allowed for backdoor listings, but a framework for SPAC issues was not in effect until this year.

Comparison of regulatory rules
  1. Tech Unicorns in ASEAN are ripe for SPAC listings, as the traditional IPO route does not favour them. There is a requirement for a long operating track record, while tech unicorns are typically unprofitable as they are at a nascent stage of development. The traditional IPO market in ASEAN has tended to ignore unprofitable companies.

EM SPAC assessment

SPACs

Our top pick among EM SPACs remains Altimeter Growth Corp (AGC US) – the SPAC that ASEAN super-app Grab is due to merge with and on which we have a Buy recommendation at a target price of US$20, implying 49% upside.

The SPAC deal with Altimeter is set to close on 1 December and the company will trade as Grab from 2 December.