SPAC framework to be reviewed for efficiency

“Against growing demand for such vehicles for high-growth companies, the current SPAC framework is being reviewed for greater efficiency,” the SC said.

PETALING JAYA: The current framework for special-purpose acquisition companies (SPACs) will be reviewed for greater efficiency, says the Securities Commission (SC).

The move is in response to growing demand for such fundraising vehicles as a cheaper and faster route to the market compared to initial public offerings (IPOs).

“Against growing demand for such vehicles for high-growth companies, the current SPAC framework is being reviewed for greater efficiency,” the SC said.

The regulator noted the review is conducted amid developments in other markets.

SPACs are special-purpose entities led by experienced promoters to raise funds from the equity market in order to acquire businesses in their relevant areas of expertise.

The review of the SPAC framework is part of the SC’s plans under the five-year Capital Market Masterplan 3 (CMP3). Under CMP3, there are also other initiatives to enhance fundraising efficiency for Malaysian companies at various stages of growth to allow more competitiveness in the market.

These include streamlining the listing process and the regulatory framework for the ACE Market; working with early stage fundraising community for greater regulatory clarity; exploring alternatives for small and medium enterprises and mid-tier companies (MTCs) to tap public markets; and introducing mechanisms to allow credit enhancements for MTCs or credit hedging for investors to boost the bond market.

In the CMP3 report, the SC said catalysing competitive growth in the market would be a key driver for the country’s transformation to become a high-income economy, as there is a need for dynamic entrepreneurs and companies with a strong presence in regional and global value chain.

It added that efficient fundraising avenues also need to be supported by deep secondary markets, to allow orderly exits and attract participation from investors.

“The SC envisions a multi-layered capital market with a competitive ecosystem of market institutions, intermediaries and other participants to meet the diverse needs of issuers and investors,” it envisaged.

For companies seeking funding at the earliest stage, the SC said it would continue to work with them to provide greater regulatory clarity for instruments such as simple agreement for future equity notes, which postpone the question on valuation to a future fundraising round.

The SC also said companies listing on the ACE Market would see a more streamlined regulatory framework which would help support greater listing efficiency.

As it is, efforts are ongoing to migrate the ACE Market regulatory framework, including registration of prospectuses, to Bursa Malaysia.

“This will pave the way for Bursa Malaysia, as the single approving authority, to enable a more efficient approval process for companies listing on the ACE Market,” it added.

It would also continue to evaluate alternative options beyond the traditional IPO process to enhance the efficiency of the equity market for late-stage financing.

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