SPAC mania drives up valuations in Asia

Special purpose acquisition companies – or SPACs – are all the rage.

Last year, a total of 248 SPACs IPOed, over four times the 2019 count. In aggregate, they raised US$82bn, which is 47% of the funds raised through IPOs in the US. If anything, the trend has accelerated in 2021, with 60 new SPACs raising US$17bn in the first three weeks of this year, according to Bloomberg – roughly US$1bn per day.

One of the most notable SPACs in 2020 was Pershing Square, which raised US$4bn. Softbank also filed to launch a US$525mn SPAC. The SPAC Index on Bloomberg has risen 67% since its inception in August 2020.

What are SPACs?

SPACs are companies formed by investors with the aim of investing in deals in a sector. They raise funding through an IPO. The SPAC then acquires a target company.

The term blank cheque company is used because the initial investors have no idea about the eventual target investments. The investors are taking a bet on the promoters of the SPAC.

They have a long history in the world of finance but have grown hugely in popularity in recent times.

The rise of SPACs focusing on EM Asia

At least 20% of the SPACs that have raised funding in the past two years are targeting EM Asia (see the table below for a selection), with c10-12 SPACs focusing on the Asian tech scene specifically.

Last month, two billionaires, Peter Thiel (of Palantir and Paypal fame, pictured above) and Masayoshi Son (SoftBank) announced they are backing Bridgetown Holdings, a Nasdaq-listed SPAC. Bridgetown has set its sights on Indonesian e-commerce star Tokopedia, with a merger on the cards with Gojek, according to Bloomberg. Other promoters of Asian SPACs include Citic Capital and Raymond Zage.

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