Proposals also seek to broaden mainboard admission criteria, raise minimum IPO issue price to 50 cents
By MICHELLE QUAH 07 January 2009
(SINGAPORE) The Singapore Exchange (SGX) is proposing allowing the listing of cash companies, alongside a broadening of its mainboard admission criteria - in what market observers believe is an attempt to secure more listings at a difficult time.
SGX yesterday put up a consultation paper, asking the public for its comments on the listing of Special Purpose Acquisition Companies (SPACs). It described them as ‘cash pools seeking to acquire viable businesses through public funding’, and must have a market capitalisation of at least $150 million.
The Exchange said it has seen ‘increasing interest to introduce SPACs in our capital market’, and has formulated a separate listing framework with safeguards.
SGX also proposed changing the admission criteria for its mainboard, for the first time in 10 years. Currently, companies must meet one of three requirements:
• Cumulative consolidated pre-tax profit of at least $7.5 million for the last three years and a minimum pre-tax profit of $1 million for each of those three years;
• Cumulative consolidated pre-tax profit of at least $10 million for the last one or two years; or
Market capitalisation of at least $80 million calculated based on the issue price and post-invitation issued share capital.
Now, it is suggesting that mainboard aspirants meet one of two criteria:
• Be profitable in the latest financial year and have an operating track record of three years and a market capitalisation of at least $150 million, based on the issue price and post-invitation issued share capital; or
• Have generated operating revenue in the latest financial year and a market capitalisation of at least $300 million based on issue price and post-invitation issued share capital.
The Exchange is also proposing raising the minimum issue price of the equity securities offered in an initial public offering (IPO) or reverse takeover to 50 cents, from the current 20 cents.
Market observers believe this latest consultation paper is its attempt to secure more business, at a time when SGX has come under fire for how it has handled various instances of market intrigue - particularly those involving China listings. Competition from neighbouring exchanges, particularly Hong Kong’s, has also increased.
‘I think they’re desperate to list as much as possible,’ observed Hugh Young, managing director of Aberdeen Asset Management, which is a shareholder of SGX. ‘As a shareholder, that’s undoubtedly good news for us - the more business and the more volume it generates, the better for us.
‘But, at the same time, we aren’t exactly salivating over the proposals - they don’t go nearly far enough,’ he added.
Kevin Scully, executive chairman of NRA Capital, agrees the proposals are ‘not quite enough’, but still a move in the right direction. Particularly, he believes the suggestion to list SPACs is a ‘healthy’ one - provided they move in a certain direction.
‘It would certainly be a good move if what results is a consolidation of numerous small companies out there, companies which are too small to interest most funds and institutional investors,’ he said.
‘The benefits would be two-fold: it would result in the mopping up of several of these smaller entities, and it would offer investors a company with a decent market capitalisation, something on a more global scale,’ Mr. Scully added.
According to SGX’s proposal, a SPAC is a company with no prior operating history that raises capital through an IPO to enter future undetermined business combinations. These may be in the form of a merger, share exchange, asset acquisition, share purchase or reorganisation involving one or more operating businesses or assets.
The listing of SPACs will be regulated within the existing framework for equity securities and must meet certain proposed criteria, including the following:
• At least 25 per cent of its issued shares must be held by at least 300 public shareholders, to ensure sufficient free float;
• At least 95 per cent of the IPO proceeds must be placed in an escrow account to safeguard the SPAC’s assets, given that its only asset is cash until the completion of the business combination;
• The business combination must be completed within three years; and
• The value of a business combination should amount to at least 80 per cent of the net asset value of a SPAC, to set an adequate size threshold for assets to be acquired.
Meanwhile, SGX’s suggestion to broaden the mainboard admission criteria should help to attract more listings, Mr. Scully believes.
‘The proposal to admit companies that have not yet achieved profitability but have already generated operating revenue (and have a market capitalisation of at least $300 million) will favour infrastructure start-ups which might not be profitable in the first year of business but have a large capital base,’ he said.
SGX found that companies seeking listings in other developed markets often far exceeded the baseline admission criteria. ‘Hence, instead of retaining out-of-date minimum admission criteria, it is more relevant to change the admission criteria in a transparent manner,’ it said.
The move is also to distinguish more clearly the larger and more established companies from the mainboard and the fast-growing companies from Catalist, SGX said.
The proposed criteria will apply not just to IPOs, but also reverse takeover applications as well as Catalist issuers seeking a transfer to the mainboard.
The consultation is available on SGX’s website (www.sgx.com) and closes on Feb 3.
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SGX paves the way for listing of cash companies
Proposals also seek to broaden mainboard admission criteria, raise minimum IPO issue price to 50 cents
By MICHELLE QUAH
07 January 2009
(SINGAPORE) The Singapore Exchange (SGX) is proposing allowing the listing of cash companies, alongside a broadening of its mainboard admission criteria - in what market observers believe is an attempt to secure more listings at a difficult time.
SGX yesterday put up a consultation paper, asking the public for its comments on the listing of Special Purpose Acquisition Companies (SPACs). It described them as ‘cash pools seeking to acquire viable businesses through public funding’, and must have a market capitalisation of at least $150 million.
The Exchange said it has seen ‘increasing interest to introduce SPACs in our capital market’, and has formulated a separate listing framework with safeguards.
SGX also proposed changing the admission criteria for its mainboard, for the first time in 10 years. Currently, companies must meet one of three requirements:
• Cumulative consolidated pre-tax profit of at least $7.5 million for the last three years and a minimum pre-tax profit of $1 million for each of those three years;
• Cumulative consolidated pre-tax profit of at least $10 million for the last one or two years; or
Market capitalisation of at least $80 million calculated based on the issue price and post-invitation issued share capital.
Now, it is suggesting that mainboard aspirants meet one of two criteria:
• Be profitable in the latest financial year and have an operating track record of three years and a market capitalisation of at least $150 million, based on the issue price and post-invitation issued share capital; or
• Have generated operating revenue in the latest financial year and a market capitalisation of at least $300 million based on issue price and post-invitation issued share capital.
The Exchange is also proposing raising the minimum issue price of the equity securities offered in an initial public offering (IPO) or reverse takeover to 50 cents, from the current 20 cents.
Market observers believe this latest consultation paper is its attempt to secure more business, at a time when SGX has come under fire for how it has handled various instances of market intrigue - particularly those involving China listings. Competition from neighbouring exchanges, particularly Hong Kong’s, has also increased.
‘I think they’re desperate to list as much as possible,’ observed Hugh Young, managing director of Aberdeen Asset Management, which is a shareholder of SGX. ‘As a shareholder, that’s undoubtedly good news for us - the more business and the more volume it generates, the better for us.
‘But, at the same time, we aren’t exactly salivating over the proposals - they don’t go nearly far enough,’ he added.
Kevin Scully, executive chairman of NRA Capital, agrees the proposals are ‘not quite enough’, but still a move in the right direction. Particularly, he believes the suggestion to list SPACs is a ‘healthy’ one - provided they move in a certain direction.
‘It would certainly be a good move if what results is a consolidation of numerous small companies out there, companies which are too small to interest most funds and institutional investors,’ he said.
‘The benefits would be two-fold: it would result in the mopping up of several of these smaller entities, and it would offer investors a company with a decent market capitalisation, something on a more global scale,’ Mr. Scully added.
According to SGX’s proposal, a SPAC is a company with no prior operating history that raises capital through an IPO to enter future undetermined business combinations. These may be in the form of a merger, share exchange, asset acquisition, share purchase or reorganisation involving one or more operating businesses or assets.
The listing of SPACs will be regulated within the existing framework for equity securities and must meet certain proposed criteria, including the following:
• At least 25 per cent of its issued shares must be held by at least 300 public shareholders, to ensure sufficient free float;
• At least 95 per cent of the IPO proceeds must be placed in an escrow account to safeguard the SPAC’s assets, given that its only asset is cash until the completion of the business combination;
• The business combination must be completed within three years; and
• The value of a business combination should amount to at least 80 per cent of the net asset value of a SPAC, to set an adequate size threshold for assets to be acquired.
Meanwhile, SGX’s suggestion to broaden the mainboard admission criteria should help to attract more listings, Mr. Scully believes.
‘The proposal to admit companies that have not yet achieved profitability but have already generated operating revenue (and have a market capitalisation of at least $300 million) will favour infrastructure start-ups which might not be profitable in the first year of business but have a large capital base,’ he said.
SGX found that companies seeking listings in other developed markets often far exceeded the baseline admission criteria. ‘Hence, instead of retaining out-of-date minimum admission criteria, it is more relevant to change the admission criteria in a transparent manner,’ it said.
The move is also to distinguish more clearly the larger and more established companies from the mainboard and the fast-growing companies from Catalist, SGX said.
The proposed criteria will apply not just to IPOs, but also reverse takeover applications as well as Catalist issuers seeking a transfer to the mainboard.
The consultation is available on SGX’s website (www.sgx.com) and closes on Feb 3.
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