“That’s top of mind. Whether we’re talking to external bankers, or to our internal stakeholders, SPACs are one of the topics that keep coming up,” said Ernest Fung, senior vice-president of strategy and finance at Indonesian e-commerce unicorn Tokopedia. “It is a space that is highly active.”

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The competition among sponsors, particularly as more SPACs focus their attention on Asia, is so fierce that it is leading to more “founder friendly” terms, as the investment vehicles seek to lock in targets, Fung said at MergerMarket’s and ACVJ’s Hong Kong M&A Forum this month.

Bridgetown’s share price jumped by as much as 26 per cent on media reports last week that it was considering a Tokopedia bid, closing Monday at US$14.64.

Tokopedia said on Wednesday that it was considering accelerating its plans to go public and had hired advisers. “We have not decided yet which market and method, and [are] still considering options,” a spokesman said. “[A] SPAC is a potential option that we could consider, but we have not committed to anything at the moment.”

Despite the surge in demand, only a handful of these blank-cheque companies – about a dozen – have been backed by financial sponsors based in Asia this year, according to Refinitiv.

However, that could soon change as financial sponsors in the region become more comfortable with the structure, and target companies increasingly seek the certainty that comes with a listing through a SPAC, rather than a traditional IPO, according to deal advisers.

“Increased competition for assets and returns in Asia has resulted in private-equity houses looking for value beyond the typical structures they have used in the past,” said Marcia Ellis, global chair of law firm Morrison & Foerster’s private-equity group. “SPACs are just one of the ways sponsors are diversifying the types of opportunities and investments through which they seek to deploy capital.”

SPACs are formed for the purpose of merging with or acquiring a company, and then using that deal for a back-door listing of the acquired company on a stock exchange. The investment vehicles must complete a deal within two years or be forced to return the money raised.

“SPACs offer an alternative route to the public markets for firms, including those that are early-stage or in businesses that lack many publicly traded comparables, such as green technology, sports betting or cannabis,” a group of Goldman analysts led by David Kostin said in a research note on December 14.

Sport betting website DraftKings and electric vehicle makers Fisker and Nikola Corporation are among high-profile companies that went public via SPACs this year.

SPACs have traditionally focused on US markets because of more friendly listing rules, but are increasingly targeting growth companies in Asia.

Daniel Wong, Bridgetown’s chief executive, said he sees a “strong SPAC pipeline” in 2021 and there are “sufficient high-potential targets” in the region for blank-cheque companies of various sizes. Bridgetown, for example, is considering Southeast Asian targets and will focus on the new economy sector.

“SPAC sponsors’ integrity and credibility are key for investors,” he said. “We expect the number of qualified Asian sponsors will increase.”

In addition to Bridgetown, other big Asian-supported SPACs this year include Citic Capital Acquisition, a US$276 million blank-cheque company backed by Citic Group’s private-equity arm; D8 Holdings, a US$300 million SPAC backed by private-equity firm Celadon Partners; and Tiga Acquisition Corporation, a US$240 million SPAC formed by Raymond Zage’s Tiga Investments.

“In Asia, a lot of the sponsors who have traditionally not looked at the market, or the SPAC avenue, for raising capital – everybody is asking how do we do it,” said Jeff Chen, group chief innovation officer at Fullerton Health. “In Hong Kong, I get calls left and right about how to do it, what are the assets, is there anything in China we can think about putting [capital] into?”

Before this year, one of the biggest SPACs formed in Asia was New Frontier Corporation, a US$250 million blank-cheque company backed by New Frontier Group, which was co-founded by Antony Leung, the former Hong Kong financial secretary and ex-Blackstone executive.

The SPAC trend remains in its “infancy” in Asia, but it is likely to be an “increasingly viable alternative” in the region in the next 12 months, according to Christopher Laskowski, head of Hong Kong corporate and investment banking at Citigroup.

“The management team can control the investment narrative much better than an IPO,” Laskowski said. “Since it’s a merger document, you’re allowed to put forward-looking projections into the document. It’s a much cleaner structure for people to get their story out,” he said.

SPACs, however, are not without their critics. Carson Block, the founder of Muddy Waters Research, called SPACs the “great 2020 money grab” last month, as he announced the company was shorting MultiPlan, a health care company that went public following an US$11 billion deal in July via a SPAC backed by former Citigroup banker Michael Klein.

The share prices of SPACs tend to lose a third of their value within a year following a merger, meaning investors are footing the bill for most SPAC costs, according to Michael Klausner of Stanford Law School and Michael Ohlrogge of the New York University School of Law.

“From the perspective of companies going public, therefore, SPACs have indeed been cheap,” Klausner and Ohlrogge said in a November 16 working paper. “But we wonder whether this is a sustainable situation. It is hard to believe that SPAC shareholders will continue to take these losses.”