Reach Energy Whets Investor Appetite for Malaysian SPACs

Reuters

KUALA LUMPUR, Aug 15 (Reuters) - Reach Energy Bhd, set up by veterans in Malaysia's oil and gas industry, made its market debut in Kuala Lumpur on Friday after completing the country's largest-ever initial public offering by a special purpose acquisition company (SPAC).

The 750 million ringgit ($236.44 million) IPO exceeded the initial share sales by other local SPACs such as Sona Petroleum Bhd and Cliq Energy Bhd, which raised between $100 million and $150 million last year.

Reach Energy, which has no existing assets, is looking to acquire firms in both the exploration and production segments of Asia's oil and gas sector, following in the footsteps of Hibiscus Petroleum, Sona Petroleum and Cliq Energy.

SPACs, common in the West but still rare in Asia, attract investors who hope a team of experienced industry executives can translate seed money into profits down the road. They are also drawn to bonus giveaways such as warrants attached to shares bought during IPOs.

But there are risks unique to SPACs.

In the United States, half of the SPACs launched in the past decade have failed to complete an actual acquisition and posted negative annual returns, according to data from research firm SPAC Analytics.

Malaysia late last year tightened rules on SPACs to assure investors their money will be secure in the months or years that such shell companies might take to find an income-generating asset.


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