SPACs raise money from investors and then look to acquire another business, usually a private one, within two years. If they fail to identify targets, then investors may elect to get their investment back at the initial public offering price by exercising their redemption right.
In this sense it can be viewed as a safer investment than bonds because of a very remote default risk, said Tam. In addition, if you invest in the more reputable SPACs founded by reputable tycoons and big PE funds, investors may make a fairly high return.
Asian financial centers arent the only ones looking to catch more of the SPAC market, which is dominated by the U.S. The U.K. may ease rules to make it more attractive for SPACs to list in London, a report showed this week.
Some are skeptical that the boom will be sustained.
As the number of SPAC IPOs increases, there may be too many sponsors confident of their skills at unearthing under-appreciated targets, chasing after too few worthy businesses, said Edward Au, Hong Kong-based southern region managing partner at Deloitte. The risk of SPACs failing to make suitable acquisitions could dampen sentiment for the industry, he said.
So far this year at least eight blank-check companies backed by Asian sponsors including Primavera Capital and Hopu Investment Management have gone public in the U.S., raising at least $2.42 billion, data compiled by Bloomberg show. Thats a big acceleration from 2020, when 11 Asian SPACs raised $2.26 billion throughout the whole year.
Hong Kong-based Raffles Family Office, which managed $1.8 billion of assets as of August, has offered its clients exposure to SPACs including Richard Lis Bridgetown 2 Holdings Ltd.
Weve seen growing interest in the areas of cleantech, biotech and healthcare, said Raffles CEO Chiman Kwan. Some of the crucial factors in choosing a SPAC sponsor to work with are their credibility, commercial acumen and track record of choosing suitable acquisition targets and closing deals.