SC to ensure that new submissions are of high quality
The Securities Commission (SC) will soon issue new guidance notes relating to the listing of special-purpose acquisition companies (SPACs), a move that is aimed at ensuring new submissions are of a certain high quality, sources said.
“There have been some concerns about the quality of submissions. The SC feels that it needs to elaborate on the original spirit of the SPAC guidelines,” said the source.
The new guidance notes should also enable applicants and their advisors to better understand the requirements of the regulator, thus helping avoid the unsavoury result of seeing applications rejected by the authorities, he added.
“The feeling is that the market has drifted away from the original spirit of SPACs,” noted the source.
It is also learnt that new applications of SPACs would have to wait until these new guidance notes are issued before they submit their proposals.
To recap, the SC created the structure and guidelines for SPACs back in May 2009. SPACs are essentially companies without any businesses that are listed with the aim of using the initial public offering or IPO proceeds to undertake mergers or acquisitions. It is effectively a group of experienced industry specialists coming together to raise money from investors for a venture.
Since then, three SPACS have been listed.
However, two other well-publicised applications, namely, Australaysia Resources and Minerals Bhd and TerraGali Resources Bhd, have yet to be approved, and market talk has been that these have been rejected by the regulator.
TerraGali had submitted its application to list in February, while Australaysia put in its submission a month later.
It is learnt that the SC, in its approval process, places a lot of emphasisonthe protection of minority shareholder interests. In other words, it looks into the suitability of the management and whether their credentials and technical knowledge stood up to scrutiny.
It also assesses the risk-return profile of early investors in the SPAC.
It is likely that the new guidance notes would have more details surrounding these issues.
The SC also has an obligation by virtue of section 214A (1)(d) of the Capital Markets and Services Act to protect the interests of investors generally if it believes that the approval of the application would be detrimental to the latter.