(ATF) Grab Holdings, the Southeast Asian ride-hailing and delivery firm is reportedly near a deal with a special purpose acquisition company (SPAC) that could set a new record for the sector at a value of around $34 billion. Any deal would come soon after the Securities and Exchange Commission (SEC) warned that it is looking at SPAC market structure and disclosures.
John Coates, acting director of corporation finance at the SEC, issued a lengthy statement on April 8 warning that the regulator is examining filings for SPACs and has concerns about fees, potential conflicts of interest and the role of deal sponsors.
He took particular aim at the perception that SPAC deals can be structured with less liability than traditional IPOs, in effect allowing dealmakers to get away with unrealistic projections about the growth prospects of companies that are acquired via mergers with special purpose vehicles.
The SEC had already warned that it is looking at how underwriters manage their risk from SPAC deals and the statement from Coates may lead dealers to more closely examine potential deals, a prospect that has slowed the blistering pace of new launches recently.
“Are current liability protections for investors voting on or buying shares at the time of a de-SPAC sufficient if some SPAC sponsors or advisors are touting SPACs with vague assurances of lessened liability for disclosures? Do current liability provisions give those involved – such as sponsors, private investors, and target managers – sufficient incentives to do appropriate due diligence on the target and its disclosures to public investors, especially since SPACs are designed not to include a conventional underwriter at the de-SPAC stage? Moreover, is it appropriate that the choice of how to go public may determine or be determined by liability rules?” Coates asked.
“SPAC sponsors and targets should already be hearing from their legal, accounting, and financial advisers that a de-SPAC transaction gives no one a free pass for material misstatements or omissions,” he warned.
“Liability risk is an important feature of the conventional IPO process. If that risk drives choices about what information to present and how, it should not in my view be different in the de-SPAC process without clear and compelling reasons for and limits and conditions on any such difference,” Coates said.
The warning from the regulator for the market where most SPACs are still listed – the US – could slow the pace of new launches and contribute to a continuation of the recent trend for growing numbers of SPACs to trade at a discount to their nominal price of $10 before a target is identified.
But the sheer weight of money already raised means that big acquisition deals by SPACs are set to continue, and fast-growing Asian firms are prime targets for mergers.
There has been speculation for the last month that Grab Holdings will merge with SPAC Altimeter, and on Sunday April 11 Bloomberg reported that the crucial private investment in public equity offering (PIPE) component of a deal is close, with major investors including Singapore’s Temasek and T Rowe Price on board to supply around $4 billion for a merger with Altimeter’s SPAC, which listed last year at $500 million.
A deal could value Grab at over $34 billion and provide a boost for its earlier investors, such as SoftBank.
Other potential deals for SPACs to target Asian companies could include a deal to acquire Indonesia’s Traveloka, which is reportedly in discussions with the Bridgetown Holdings vehicle set up by Hong Kong investor Richard Li and his Silicon Valley fellow billionaire Peter Thiel.