SPACs Setting Sights On Southeast Asian Startups

Special-purpose acquisition companies (SPACs) have set their sights on Southeast Asia’s late-stage startups, CNBC reported this week. A SPAC is a shell company established to raise funds through an initial public offering (IPO). Its only purpose is to merge with or acquire another company to take it public.

More than 40 SPACs — also known as blank-check companies — have targeted the region, Vinnie Laura, managing partner at early-stage venture capital firm Golden Gate Ventures, told the network’s “Street Signs Asia” program on Thursday (July 16). “SPACs have really put ASEAN on the map,” Lauria said, referring to Southeast Asia’s economic bloc of 10 member states.

He added that other late-stage investors, including private equity firms, have also begun pouring money into these startups. “The next decade is going to be a very competitive decade for CEOs. You are going to have to scale from five to 5,000 much quicker, to be more competitive, (and for) more money,” Lauria said.

PYMNTS reported on one of these companies back in April. Grab Holding, which bills itself as the biggest technology platform in Southeast Asia, announced it was going public through a SPAC merger. At the time, the company had a valuation of $40 billion, the largest at that point in the SPAC space.

Adherents of the SPAC practice argue that it’s a cheaper, more efficient alternative to shepherding an existing private company through regulatory hoops. This practice was all the rage in the U.S. earlier this year, although it has begun to lose a bit of its luster among startup companies, as PYMNTS noted back in May. Some company heads preparing to go public are nervous about the approach after reports of falling share prices and disappointing performance goals — and resulting investor disenchantment — in the wake of SPAC deals.

“The reluctance is palpable,” Adam J. Epstein, who advises startup CEOs and their boards, said in a Wall Street Journal interview. “It’s gone from being a bonafide alternative path to an IPO to ‘we don’t really want to be a punchline.’”