SC to revise SPAC framework

The revision is part of its ongoing efforts to promote the development of the Malaysian capital market


THE Securities Commission Malaysia (SC) is revising the equity guidelines in the enhanced special-purpose acquisition company (SPAC) framework on Jan 1, 2022, to facilitate greater access to fundraising in Malaysia.

Chairman Datuk Syed Zaid Albar noted that the revision is part of its ongoing efforts to promote the development of the Malaysian capital market.

“The SC re-evaluated the SPAC framework to ensure it remains relevant and capable of spurring interest in listings and deals involving SPACs, thereby providing issuers with greater access to the capital market,” he said in a statement yesterday.

According to SC, the revisions will enable business combinations via issuance of securities as consideration for the qualifying acquisition (QA), as currently,

SPACs may only meet the QA requirement by way of cash acquisitions.

The revision is expected to broaden the avenue for SPACs to obtain additional financing by allowing private placements for QA.

SC said the revision will also allow professionals with extensive experience in private equity and venture capital with asset sourcing and deal making experience to steer SPACs.

It added that this could potentially broaden the target asset universe and spur mergers and acquisitions (M&A) by Malaysian corporations.

“To minimise the greenmail 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 all 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 to ensure it attracts investors who are able and willing to take on the unique risks associated with investing in SPACs,” it noted.

Additionally, the SC also said to limit dilution to existing shareholders, new shares issued from the exercise of warrants will be restricted to not more than 50% of the total number of issued shares of 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 M&A, all of which were intended to enhance the depth, breadth and competitiveness of the domestic capital market.

The SC has noted that 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, 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,” it said.