Will there be a revival of SPACs in Malaysia?

KUALA LUMPUR: It was a much welcomed move when the government announced plans last month to make Malaysia a destination for startups, with the aim of turning Kuala Lumpur into a bustling regional startup and digital hub.

But it will take many more years before this ambition turns into reality.

In the meantime, young entrepreneurs are in need of funds to scale up their ventures and this is why listing their ideas or businesses via the special-purpose acquisition companies (SPACs) route in the US stock market has become very popular.

According to Arc Group global venture partner Datuk Seri Paul Chong, there were 15 Malaysian-sponsored SPAC initial public offerings (IPOs) on Nasdaq between 2021 and 2023.

Collectively, the total fund size of these SPAC IPOs was about US$2bil.

Chong said the biggest Malaysian SPAC IPO on Nasdaq was Canna-Global Acquisition Corp, which raised US$230mil in 2021.

“Malaysia had SPACs before Hong Kong and Singapore. We should be way ahead out there.

“Right now, apart from the United States, Malaysia is the country with the biggest number of SPACs on Nasdaq,” he told StarBiz after a briefing on Arc Group’s latest developments recently.

SPACs are listed but have no business operations. These are known as “blank cheque companies” that hunt for an existing business to take it public, typically with a shorter listing timeframe than IPOs.

Even local airline group Capital A Bhd had previously proposed listing its intellectual property segment, the AirAsia branding, on Nasdaq via a SPAC to raise at least US$300mil.

However, its chief executive officer Tan Sri Tony Fernandes said it no longer needed to do the SPAC listing but is still considering spinning off its branding business, given the tremendous interest shown by US investors.

Meanwhile, the biggest SPAC listing in the world was ride-hailing and food delivery platform Grab Holdings with a deal worth US$40bil in 2021.

Indeed, 2021 was the year that saw the most number of SPACs listed since it started in 1993 in the United States.

Recognising the surge in demand for such fundraising vehicles globally, the Securities Commision (SC) said in 2021 that it is reviewing its SPAC framework.

The move was part of the country’s Capital Market Masterplan 3 to make the domestic markets more relevant and efficient, as well as in tandem with developments in other markets.

Moving forward, Chong said he expected the Malaysian SPAC listing in the United States to take a breather this year mainly due to high interest rates in the country.

“This year, we are looking at listing about four SPACs from Malaysia on the Nasdaq and globally, we are looking at 60 to 70 SPACs, down from 631 in 2021.

“These new SPACs from Malaysia will be in education, real estate and two in information technology (IT). One of the IT SPACs is a very prominent IT company in the digital identity business. All of these soon-to-be listed SPACs are valued at about US$100mil each.

“We are here to create more. Many deserving Malaysian companies actually have no choice. They cannot get funded or listed in Malaysia. Even Grab couldn’t get listed in Malaysia.

“If there is a capital market that gives you the opportunity, why not? Especially if it is the largest and second largest exchange in the world,” he added.

Chong explained that the Nasdaq and New York Stock Exchange take SPACs as one way to democratise IPO.

“They want the decision as to whether the target to be listed via a SPAC or not, in the hands of the investors of the SPAC. After all, it is their money. They have the right to redeem and to vote ‘yes’ or ‘no’.

“They are there to make sure that there is adequate disclosure, follow the rules and make sure the audit is done for the protection of small investors.

“If the regulators insist on the companies being profitable for three years like in Hong Kong, none of them (startups) would ever be listed.

“There will not be any more Microsoft or Amazon or Tesla in the world because everyone started from zero. But some exchanges and investors are prepared to back them. We need that infrastructure and ecosystem for the sake of our young innovative companies,” he added.