The ARC Opportunity Fund is a US $20 million SPAC opportunity fund formed by ARC Group, a Shanghai-based boutique mid-market investment bank with offices in Singapore and Jakarta.
A SPAC opportunity fund is an open-ended fund that invests money as risk capital with sponsors to form new SPACs. (Special purpose acquisition companies, or SPACs, are non-public businesses that offer a different route to list on the stock exchange.)
“Going public via SPAC mergers has seen tremendous interest in the past few years and has boomed on Wall Street since 2020, raising more than US$83 billion in 2020 and over US$125 billion in 2021 so far. However, its popularity has begun to wane as many SPACs trade below their initial IPO price,” said Chittransh Verma, managing director of ARC Opportunity Fund.
A sponsor often creates a SPAC by investing 5-6 percent of risk capital. After the IPO, the sponsor will own 20% of the SPAC as a result of this investment. The sponsor receives 5-6x returns on average in a timeframe spanning from one year and a half to two years after merging with a target firm.
“The capital required to invest as a sponsor in the SPAC risk capital makes this structure generally accessible to only ultra HNIs. ARC Group has identified this gap and decided to bridge it by making this market more accessible to a broader set of investors,” he said.
ARC Opportunity Fund, led by CEO Abraham Cinta and Verma, will invest alongside high-quality SPAC teams throughout the world.
The fund will invest by evaluating sponsors’ abilities to combine with the target firm, according to Verma, and it has developed a framework to pick sponsors. “With each fund, we may invest in 10-12 SPACs from various industries, geographies, and sizes.” We’ll focus on Asian investors interested in forming SPACs. 90% of them would be sold in the United States. We are, however, looking into working with sponsors interested in forming SPACs in Singapore.
This fund, ARC Opportunity Fund, has yet to begin investing.
ARC Group, which has offices all throughout Asia, was founded in 2015 with the goal of offering public market solutions to mid-market firms. Over 30 SPAC transactions have involved the organisation as a financial advisor.
