Singapore’s SPAC debut is so last season

The SPAC fever broke out during the pandemic, as part of a broader gamification of finance. — Bloomberg

BACK in 2018, a Taiwanese streaming and online-dating service made history on the New York Stock Exchange (NYSE). For the first time, the shares of a company that rang the listing bell never traded.

Five years later, in its new avatar as 17Live Inc, the firm is entering the annals of another market – this time as Singapore’s first-ever combination with a locally traded blank-cheque stock.

Vertex Technology Acquisition Corp is taking over 17Live for S$925.1mil (US$692mil).

The deal is expected to conclude early next month.

Don’t expect a successful debut to open the floodgates.

For one thing, special-purpose acquisition companies (SPACs) have gone out of fashion.

Back in September 2021, when Singapore Exchange Ltd was forming rules for SPACs to raise funds for merging with a private target, blank-cheque companies were being touted everywhere as the poor man’s private equity.

The sales pitch was that this new asset class would give the average investor a shot at owning a piece of a future blockbuster, something they would otherwise never get to invest in.

That must also have been the expectation of Singapore investors. The Vertex SPAC was championed by Vertex Venture Holdings, an early-stage investment vehicle of Temasek Holdings Pte, the Asian financial centre’s state investment firm.

That association gave the blank-cheque firm credibility.

So strong was demand from institutions for its initial public offering (IPO) in January 2022 that most shares were placed out even before the IPO prospectus was lodged with the regulator.

The SPAC said it would look for a target from a broad range of technology businesses – from artificial intelligence (AI) to self-driving cars and financial technology (fintech).

Some of those investors would be scratching their heads now.

Instead of a hotshot generative AI startup, they’re getting video posted by users in real time.

The botched NYSE outing of M17 Entertainment Ltd – as the firm was then known – can be ignored as bad luck: One subscriber to the IPO order book failed to clear its bank’s know-your-customer checks.

As other buyers turned jittery, the 2018 listing turned to dust. But while 17Live may be ready to be a publicly owned stock today, what sense should Singapore investors make of a business whose main footprint is in Taiwan and Japan?

To be sure, 17Live does have expansion plans for South-East Asia and the United States.

The big question, though, is whether these markets will mimic the explosive growth of live-streaming in China. Beijing-based Kuaishou Technology alone had 673 million monthly active users in June, compared with 550,000 for 17Live.

Maybe all Gen Z consumers are similar. Perhaps they will all be showering gifts on popular streamers, buying in-game virtual tchotchkes and engaging in other kinds of eCommerce with real money. In that case, 17Live could well be a winner.

However, is it worth US$692mil? Some sceptical brokerage analysts have recommended that investors redeem their SPAC holdings and exit.

Still, Nirgunan Tiruchelvam, the Singapore-based head of consumer and Internet at Aletheia Capital, reckons that even after redemption, the combined entity may be left with US$160mil.

“This cash will enable it to build out its franchise in South-East Asia where live-streaming demand is going to zoom,” he said.

However, the fate of more mature consumer-tech businesses from the region that combined with blank-cheque companies doesn’t inspire confidence.

Take Grab Holdings Ltd.

A US$10 share of the US blank-cheque company that took the South-East Asian ride-hailing and fintech giant public surged briefly to US$17.

But that was before the merger. Nowadays, Grab shares are available at about US$3.

A similar fate befell PropertyGuru Group Ltd, another household name in Singapore, where it is a popular app for property purchases and apartment leases.

After it listed on the NYSE in March 2022, investors in the SPAC never got a chance to recoup their US$10 investment.

Currently, PropertyGuru shares are trading at about US$3.43.

In three months, VinFast Auto Ltd, a Vietnamese electric-vehicle maker, has crashed from a post-merger valuation of US$190bil to US$15bil.

Both Singapore and Hong Kong were late to the SPAC party, though Hong Kong beat its rival to the finish line by announcing its first deSPAC deal – industry jargon for when a blank-cheque firm merges with a target business – in August.

Chinese steel-trading website ZG Group said it would merge with Aquila Acquisition Corp, which is backed by China Merchants Bank Co, to go public in the city.

Against lofty expectations that dozens of SPACs would list in Hong Kong, there are just four (other than Aquila) scouting for targets.

After Vertex, Singapore would have two left, out of which Pegasus Asia – backed, among others, by the French fashion mogul Bernard Arnault – is in talks to acquire a satellite internet provider, according to Bloomberg News.

Overall, though, there is hardly enough going on for investors to build a diversified portfolio of long shots.

The SPAC fever broke out during the pandemic, as part of a broader gamification of finance.

The involvement of celebrities like Serena Williams and A-Rod offered a way out of the boredom of lockdowns and work-from-home.

As Covid-19 dissipated, so did interest. Returns have disappointed, too. In Asia, like everywhere else, poor man’s private equity has turned out to be private equity’s poor cousin. — Bloomberg

Andy Mukherjee is a Bloomberg Opinion columnist. The views expressed here are the writer’s own.

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