Emerging Markets Cautiously Enter SPAC Arena Amid Regulatory Concerns

Emerging market entrepreneurs have arrived late to a funding mechanism that has already reshaped capital markets in the developed world. Special purpose acquisition companies—SPACs, or blank-check firms—offer a shortcut to public markets: investors pool money first, then hunt for a company to buy, collapsing what would normally be a lengthy IPO process into something faster. On Wall Street, this tool has exploded. More than 400 SPACs raised over $115 billion in the first half of 2021 alone, accounting for two-thirds of all initial public offerings in the United States. But in emerging markets, the picture is starkly different. Just six SPAC offerings from developing-world companies—two from Israel, two from China, and others scattered across the region—pulled in $1.18 billion. That is a fraction of the $96.3 billion that flowed into traditional IPOs in emerging markets during the same period.

The gap reflects both opportunity and caution. Emerging markets, which represent only 8 percent of global private capital and 11 percent of global stock market value, are hungry for new funding channels. SPACs could unlock capital for entrepreneurs in regions where traditional IPOs are difficult—where a company's losses or limited operating history makes it hard to convince public market investors to buy shares. Yet the mechanism carries real risks. Transparency is thinner. Disclosure standards are looser. And the global SPAC boom, which peaked in early 2021, has already begun to cool as investors grow skeptical of valuations and question whether these vehicles are worth the hype.

Two high-profile deals illustrate both the promise and the peril. Grab, a Singapore-based ride-hailing and delivery platform, announced a $40 billion SPAC merger that would make it one of the largest emerging market companies ever to go public. The company initially said it would close the deal in July, then pushed the timeline to the fourth quarter—a delay that signaled investor hesitation. Anghami, a music streaming app based in Abu Dhabi, aimed to become the first Arab technology company listed on the Nasdaq through a SPAC merger valued at roughly $220 million. But bankers covering the region noted that the small size of Anghami's deal had raised eyebrows among SPAC watchers. The company acknowledged the slowdown, saying the merger process involved technical milestones that "invariably take time." Stock prices for both vehicles have fallen since the deals were announced, a visible marker of investor doubt.

Other emerging market companies are testing the waters. Embraer, the Brazilian aircraft manufacturer, announced in June that its subsidiary Eve—which is developing electric vertical takeoff and landing aircraft—had signed a SPAC agreement. Analysts estimate Eve could reach a market value of $2 billion. Meanwhile, Mubadala Capital of Abu Dhabi and Fat Projects SPAC of Singapore filed with the U.S. Securities and Exchange Commission seeking up to $300 million in offerings. Mubadala is targeting media and entertainment opportunities in India and China. Fat Projects is betting on consumer-focused companies in Southeast Asia.

Whether these deals succeed matters enormously. Allen Taylor, managing director of Endeavor Catalyst, a venture capital firm based in California that invests in more than 180 emerging market companies, put it plainly: if Grab performs well, investors will pay attention. Entrepreneurs and investors across Southeast Asia would see a credible path to going public. The same logic applies to Latin America, Taylor said. But the opposite is also true. Failure or significant underperformance could sour the market for years.

The regulatory landscape remains uncertain. Singapore's stock exchange proposed rules in March to allow SPAC listings. Dubai's exchange is consulting with market participants about the possibility. But emerging market bourses lack the liquidity and infrastructure of U.S. markets. A technology company from an emerging market that lists on the Nasdaq can tap a vastly larger pool of investors than one that lists locally. That advantage comes with a catch: companies must navigate U.S. regulatory scrutiny and compete for attention in a crowded market.

Alex Korda, an analyst at The Edge Group, suggested that the boom-and-bust cycle of SPACs in developed markets offers a cautionary tale. The global enthusiasm that peaked in early 2021 has already begun to fade as concerns about valuations mount. Some American companies have shelved their SPAC plans entirely. Nirgunan Tiruchelvam, head of consumer equity research at Tellimer, noted that investors can simply avoid unproven regulatory structures in emerging markets by sticking with established SPAC listings in the United States.

For now, SPACs represent one arrow in the quiver for emerging market capital raising, alongside traditional private equity, conventional stock offerings, and acquisitions. Whether they become a vital tool or a cautionary footnote depends on the next few months. The deals already in motion will either validate the mechanism or expose its limits. Either way, the emerging market entrepreneurs watching from the sidelines are learning a lesson about timing: arriving late to a crowded party means you inherit both the opportunity and the debris.