SINGAPORE – Adverse market conditions have deterred the special purpose acquisition company (Spac) Pegasus Asia from concluding a combination with another business.
The Singapore Exchange-listed firm will tell shareholders at a later date how they can redeem their stock.
The Spac will then cease operations and wind up its business. There will be no redemption rights or liquidating distributions regarding its warrants.
Spacs are designed to acquire another company and raise money through an initial public offering (IPO) within two years of their own IPO, a process known as a de-Spac transaction.
If the Spac cannot find a suitable acquisition target, it must dissolve and return the funds to investors, a fate that has befallen Pegasus.
Despite the disappointing outcome, a Singapore Exchange (SGX) spokesman said that “the Spac framework is here to stay in the long term and complements the traditional IPO route”.
“The framework was launched to offer listing aspirants greater certainty on price and execution. New structures and products such as Spacs offer wider choices to both issuers and investors.”
Pegasus, which raised gross proceeds of $170 million in its January 2022 IPO, is sponsored by European asset manager Tikehau Capital and Financiere Agache, a luxury goods company backed by LVMH chief executive Bernard Arnault’s family office.
The three Spacs listed here have not enjoyed a good start, marked by the “disastrous de-Spac involving 17Live”, as accounting professor Mak Yuen Teen from the National University of Singapore Business School put it.
Vertex Technology Acquisition Corporation (VTAC), a Spac backed by Vertex Venture Holdings and a subsidiary of Singapore’s investment company Temasek, merged with live-streaming platform 17Live on Dec 8.
VTAC shareholders redeemed about 62.53 per cent of the Spac’s share capital after several analysts concluded ahead of the merger that its shares were overvalued.
17Live shares have plunged following the business combination, closing at $1.55 on Dec 20, down 65.78 per cent from VTAC’s IPO price of $5.
The third and remaining SGX-listed Spac, Novo Tellus Alpha Acquisition (NTAA), has until January 2024 to announce a potential business combination.
NTAA shares closed up 2 per cent at $5 on Dec 20, while Pegasus stock closed up 2.7 per cent at $4.97.
Securities Investors Association (Singapore) president David Gerald said that Pegasus’ decision to liquidate is “a much better outcome than it rushing into a badly structured business combination at a lofty valuation”.
He added that the SGX could fine-tune the Spac structure based on the experience of the first three Spacs, noting: “There is nothing fundamentally wrong with the Spac and this outcome had more to do with market conditions.”
Mr Gerald added: “Notably, interest rates have risen sharply. Such considerations may have impacted the sponsor’s decision in liquidating the Spac, as it may be harder to find attractive targets and investors’ appetite for growth assets are now lower.”
Prof Mak said that most companies usually opt to list via IPOs, while those looking to list through a Spac are likely to prefer the US market for liquidity and valuation.
Mr Nirgunan Tiruchelvam, head of consumer and Internet at investment firm Aletheia Capital, said the hype over Singapore Spacs has simmered now that the market environment is once again better suited for IPOs with the United States Federal Reserve considering rate cuts in the year ahead.
He added that Pegasus would have been afraid of not being able to find a well-valued target, and worried that a de-Spac would go the way of 17Live.
“Retail investors would also be asking what’s the whole point of raising funds through a Spac, which involves high fees, just for it to get into a shotgun marriage that might not last for the long term.”
