DigiAsia Bios Immediate IPO on the US Stock Exchange Through SPAC

Startups fintechDigiAsia Bios immediately take the floor on the United States stock exchange through the SPAC mechanism (special purpose acquisition company). The company has entered into a merger agreement with shell company Stonebridge Acquisition Corporation. The ticker traded on the Nasdaq stock market will be 'FAAS'.

Menurut official statement As conveyed by the company, this agreement has received approval from the board of directors of DigiAsia and Stonebridge, and is targeted to be completed in the second quarter of this year.

“DigiAsia has a presence in Indonesia and is seeking immediate expansion into Southeast Asia, followed by the Middle East and North Africa. The capital increase through the IPO and subsequent executions will help establish Digi as the clear leader in white-label digital wallets and the Banking-as-a-Service vertical in the region,” said DigiAsia Co-CEO Alexander Rusli.

Stonedridge CEO Bhargav Marpally added, Stonebridge was established as a bridge for IPO-ready companies in the Asia Pacific region to access the US public market. DigiAsia's focus on Indonesia and its ability to scale the business quickly, a team with a proven track record, made it a perfect match for Stonebridge.

Furthermore, the merger transaction of the two companies carries a pre-equity valuation of $500 million (over 7,7 trillion Rupiah) and DigiAsia's shareholders Mastercard and Reliance Capital Management (RCM) will roll over 100% of their equity into the combined company as part of the transaction. DigiAsia has also entered into a partnership with DBS Bank on 31 October 2022 to channel loans through businesses lending Digiasia, CreditPro.

Assuming no redemption by Stonebridge's public shareholders, once the deal closes, the combined operating entity could have access to as much as $200 million in net cash (after paying transaction fees) from the Stonebridge trust account. The final outcome will depend on Stonebridge's current shareholder redemption rate on completion of the proposed transaction.

Prior to signing the merger agreement, DigiAsia had closed an investment of $14,5 million (over 225 billion Rupiah) with post-money valuations of $450 million led by Reliance Capital Management. The investment will strengthen the business relations between the two companies in the areas of insurance, asset management, which are controlled by RCM. With this collaboration, it is hoped that DigiAsia can become a B2B embedded financial solution full stack first in Indonesia.

For the record, DigiAsia was founded in 2017 by Alexander Rusli and Prashant Gokarn. This startup positions itself as fintech-as-a-service (FaaS) whose ambition is to accelerate financial inclusion through licensing and technology pools by providing solutions embedded finance for B2B2C and B2B2M. Among them mobile wallets, issuing cards, paying bills, cash management, payment supply chain leaders, loans, and others. The company has a number of business licenses, namely digital wallets and payments, Banking-as-a-Service, remittances, and other digital financial services.

DigiAsia Co-CEO Prashant Gokarn conveyed DigiAsia's vision is to be an active part of Indonesia's digital revolution that enables financial services, from loans, payments, remittances, and low-cost banking, to all individuals and businesses, regardless of their size or socioeconomic status.

"We are also very proud to be working with Mastercard to expand our existing offerings to increase financial inclusion in Indonesia," said Gokarn.

SPAC step

Until this news was revealed, DailySocial.id yet to receive additional comments from Alexander Rusli regarding his reasons for choosing the SPAC mechanism to enter the US stock market. As is known, this mechanism was previously being considered by a number of local startups, such as Traveloka and Kredivo, but was canceled due to various strategic reasons.

Kredivo for example, originally planned for a merger with a shell company called VPC Impact Acquisition Holdings announced in August 2021. VPC itself is a longtime partner Kredivo which has poured funds up to $ 200 million.

However, the plan ran aground, quoted from the disclosure of information from the US Securities and Exchange Commission (SEC) website, which was uploaded on March 14, 2022, the failure of this corporate action was the result of volatile market conditions and the existence of several problems beyond control which threatened to delay transactions.

One of the bustling IPO actions via SPAC in Indonesia is Grab by utilizing the shell company Altimeter Growth Corp. It claims the deal is the largest among special purpose acquisition companies.

Previously, SPACs were popular in the United States because they were the fastest way to obtain public funds. According to data quoted from South China Morning Post, in 2021 reached 613 IPOs through SPAC. This figure has increased from the previous year's 248 IPOs.

However, the US regulator SEC made regulatory changes which were considered to hinder this corporate action since late 2021. One of them, SPACs have a limited time to find operating companies to merge (usually 24-36 months); if SPAC fails to complete the merger within the stipulated time frame, SPAC must cease to exist and return all capital to its shareholders.

This regulation was made because regulators were concerned that this mechanism would be used as a disseminator of misleading information, fraud, and conflicts of interest in certain de-SPAC transactions. Therefore, the SEC proposed new rules to eliminate information asymmetry among investors, protect against misleading information and fraud by regulating market practices, and reduce conflicts of interest by better aligning incentives between gatekeepers.

The results reported that the SPAC process was longer and more difficult than before, with more extensive regulatory reviews of proxy statements and registrations. However, a number of people are still optimistic about the long-term potential of SPAC. They said this new policy had an impact on companies being able to more clearly follow the guidelines that had been set.