ARC Group launches US$20M SPAC opportunity fund, hits first close

ARC Group, a Shanghai-based boutique mid-market investment bank with offices in Singapore and Jakarta, has launched a US$20-million SPAC opportunity fund, called ARC Opportunity Fund.

An open-ended fund, a SPAC opportunity fund invests money as risk capital with sponsors to create new SPACs. (Special purpose acquisition companies or SPACs are blank-cheque companies that provide an alternative way to list in the public markets.)

A top executive of ARC Opportunity Fund told e27 that the fund has already made the first close at US$12 million (almost 60 per cent of the target size). The Limited Partners include family offices and entrepreneurs based in Malaysia and Indonesia.

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“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.

Typically, a SPAC is created by a sponsor who invests 5-6 per cent of risk capital. With this investment, the sponsor will become a 20 per cent holder of the SPAC after IPO. Once merged with a target company, the sponsor gets 5-6x returns on an average in a period ranging from one year and a half to two years.

“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.

Headed by CEO Abraham Cinta and Verma, ARC Opportunity Fund will invest alongside high-quality SPAC teams globally.

According to Verma, the fund will invest by assessing sponsors’ ability to merge with the target company, and it has created a framework to select sponsors. “We can invest in 10-12 SPACs across varied sectors, geography, and sizes with each fund. We will target Asian sponsors who want to create SPACs. 90 per cent of them would be in the US market. However, we are also exploring options to work with sponsors looking to create SPACs in Singapore.

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ARC Opportunity Fund is yet to start investment from this fund.

Founded in 2015, ARC Group has been focused on providing public market solutions to mid-market companies with offices across Asia. The group has been a financial advisor in over 30 SPAC transactions.

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