Successful Hibiscus takeoff spurs interest in SPACs

PETALING JAYA: At least four different groups of entrepreneurs are in various stages of putting together applications to have their Special Purpose Acquisition Companies (SPACs) listed on Bursa Malaysia, according to banking sources.

The SPACs which are essentially shell companies raising funds for the purpose of acquiring businesses are said to cover industries ranging from coal mining, greenfield property development and palm oil cultivation to the oil and gas space.

The interest is said to be partly spurred on by the successful takeoff of Malaysia's first SPAC, Hibiscus Petroleum Bhd.

However, sources said all the SPACs being proposed had yet to receive the approval of the Securities Commission (SC) for a listing.

“The promoters and advisors are busy putting together their initial consultative papers for the SC to vet and are hoping for a favourable reply,” said one source.

Not unlike Hibiscus, these SPACs are typically being set up by small groups of experienced people from the industries they are planning to venture into.

As one promoter put it, “the SPAC offers an experienced individual an entrepreneurial opportunity to have a stake in a business that is built from scratch, rather than to continue their lives as professionals working for large organisations.”

The SPACs plan to raise a minimum of RM150mil, in according with the SPAC guidelines first issued by the regulators in 2009.

It took a while before the first SPAC came unto the market.

Hibiscus managed to raise RM234mil from its initial public offering (IPO) last July. Its share price has performed well, confounding the sceptics.

From its IPO price of 75 sen, the shares are now up 124% to RM1.68, while its warrants (which were given free to those who subscribed to its shares at the IPO) closed yesterday at RM1.05.

The SC, together with Bursa Malaysia, launched the SPAC equity guidelines in May 2009, as part of a new fund-raising framework.

However, by mid-2010, there had been no applications for SPACs and it was reported then that promoters were facing issues such as identifying the quality and type of assets to be acquired.

Reports then had stated that there were several concerns about SPACs, including how IPO proceeds would be used to acquire assets, management issues, and whether the guidelines were ready for such investment vehicles.

Malaysia is the first country in the region to offer this path to fund-raising.