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The Securities Commission Malaysia (SC) announced today revisions to the Equity Guidelines in the enhanced Special Purpose Acquisition Company (SPAC) framework to facilitate greater access to fundraising in Malaysia, as part of its ongoing efforts to promote the development of the Malaysian capital market.
“The SC re-evaluated the SPAC framework to ensure that it remains relevant and capable of spurring interest in listings and deals involving SPACs, thereby providing issuers with greater access to the capital market,” said SC Chairman Datuk Syed Zaid Albar.
The revisions wil, among others:
- Enable business combinations via issuance of securities as consideration for the Qualifying Acquisition (QA). Currently, SPACs may only meet the QA requirement by way of cash acquisitions.
- Broaden the avenue for SPACs to obtain additional financing by alowing private placements for QA. In addition, the minimum amount of funds required to be raised by a SPAC through its initial public offering (IPO) has been reduced from RM150 milion to RM100 milion.
- Allow professionals with extensive experience in private equity and venture capital with asset sourcing and deal making experience to steer SPACs. This could potentialy broaden the target asset universe and spur mergers and acquisitions by Malaysian corporations.
- To minimise the greenmail1 issue faced by SPACs, the threshold for shareholders’ approval of the QA has been reduced from a special resolution of at least 75% majority to a simple majority approval by al shareholders present and voting.
- To reflect the inherent risks of investing in SPACs, the minimum IPO price has been raised from RM0.50 to RM2.00 to ensure that it attracts investors who are able and wil ing to take on the unique risks associated with investing in SPACs.
- To limit dilution to existing shareholders, new shares issued from the exercise of warrants wil be restricted to not more than 50% of the total number of issued shares of the SPAC.
The framework for the listing of SPACs in Malaysia was first introduced in 2009 to promote private equity activities, spur corporate transformation and encourage mergers and acquisitions, al of which were intended to enhance the depth, breadth and competitiveness of the domestic capital market. The review of the SPAC framework is in line with the Capital Market Masterplan 3’s aspiration to create a capital market that is relevant, efficient and diversified.
While the Malaysian capital market has seen new development and innovation, the SC would like to remind investors that SPACs is an alternative capital market investment option that may carry higher investment risk when compared with shares of listed corporations with operating businesses. Investors should familiarise themselves with the nature of SPACs and consider whether the investment meets their objectives and risk profile.
The revised SPAC framework will take effect on 1 January 2022, and a copy of the revised Equity Guidelines can be found here:
https://www.sc.com.my/regulation/guide lines/equity
1 ‘Greenmail’ tactics is a strategy used by certain investors who acquireinterests in a SPAC andusetheability to voteagainst a proposed QAto obtain additional consideration from themanagement team
