Sona Petroleum Bhd fell on its debut in Kuala Lumpur after completing Asia's biggest initial public offering by a so-called blank-check company set up to raise funds for acquisitions.

The company, which has no assets or track record, dropped 18 per cent to 41 sen as of 11.05am in Kuala Lumpur trading, down from its offer price of 50 sen. The benchmark FTSE Bursa Malaysia KLCI Index retreated 0.3 per cent, declining for a fourth day.

Sona, which is betting on its management team to find oil and gas investments, drew RM3.4 billion from investors, six times more than RM550 million raised, according to managing director Datuk seri Hadian Hashim. The former Royal Dutch Shell Plc, like other industry veterans, are setting up these special purpose acquisition companies or SPACs to buy assets from the IPO proceeds.

"The nature of SPACs is that the upside isn't immediate," said James Lau, director of portfolio investment at Pheim Asset Management Sdn, said in an interview in Kuala Lumpur. "The softer market conditions also didn't help."

The other two SPACs in Malaysia, Hibiscus Petroleum Bhd and CLIQ Bhd, also declined on their debuts.

SPAC creators include Gil Amelio, former chief executive officer of Apple Inc, and Tony Hayward, one-time CEO of BP Plc whose blank-check entity, Vallares Plc, raised US$2.15 billion in 2011.

Kuala Lumpur-based Sona aims to compete with private-equity funds as it seeks out deals. The board is evaluating oil and gas acquisition proposals, said Hadian, who has more than 30 years of experience in the industry and is chairman of Malaysia's Integrated Petroleum Bhd.

"We have 36 months to look for an asset and it's to our shareholders' interest to get it as soon as possible," Hadian, 55, said in an interview yesterday in Kuala Lumpur. "SPACs are a threat to private-equity funds because they open up a different floodgate of people that can be doing the same thing."

Malaysia has stolen a march on Singapore with regulations for SPACs ahead of its neighbor, which has a stock market that's a fifth larger, according to data compiled by Bloomberg.

Investors in SPACs rely on the management team's experience in a certain industry and their ability to secure deals. For the companies to succeed, operators must focus on making a profit so the stock market supports a rising valuation for the firm or asset acquired.

Should operators fail to buy an asset within three years, they must return funds to investors with interest, according to Malaysian Securities Commission guidelines.

"In their current form, we won't buy SPACs because there's no basis for valuation and that goes against our investment principles," said Pheim's Lau. "But that doesn't mean we won't invest in such companies when their business models crystalize."

Malaysia, home to Asia's three biggest SPACS, introduced a framework for such offerings in 2009. It's unfair to describe them as blank-check companies because they need approval from regulators and shareholders to buy assets, Hadian said.

"Blank check means that I give you a check and I don't know what you do with it," he said. "If the business model works in Malaysia, countries like Indonesia and Thailand that need funds to develop their resources will want to consider this option."

Singapore is still seeking industry feedback, according to Carolyn Lim, a spokeswoman for Singapore Exchange Ltd.

RHB Investment Management Sdn Bhd and London-based Davidson Kempner European Partners LLP were among six cornerstone investors in Sona's IPO, investing a total RM135 million, Hadian said.

"When you buy SPACs, you are betting on the management's ability to deliver returns," said Ang Kok Heng, chief investment officer at Phillip Capital Management Sdn, where he helps manage US$428 million. "We bought some of Sona's shares because we like the management."

Datuk Yusli Mohamed Yusoff, former CEO of exchange operator Bursa Malaysia Bhd, now heads Australaysia Resources and Minerals Bhd, which filed a prospectus to list as a SPAC.

"The guidelines are fair," Yusli said in a July 26 interview, predicting more of such share sales. "They provide entrepreneurs the opportunity to tap the market, while at the same time safeguard investors' investments."-- Bloomberg