The FCA has published final rules and changes to
its Listing Rules for certain special purpose acquisition
companies (SPACs).
On 30 April 2021, the FCA consulted on proposals to remove the
presumption of suspension for SPACs that meet certain criteria
which are intended to strengthen the protections for investors,
while maintaining the smooth operation of the market. The
proposed changes were designed to provide an alternative approach
for SPACs that must otherwise provide detailed information about
a proposed target to the market to avoid being suspended.
The additional investor safeguards that the FCA will require
SPACs to provide in order to benefit from the alternative
approach include:
- a ‘redemption’ option allowing investors to exit a SPAC prior
to any acquisition being completed
- ensuring money raised from public shareholders is ring-fenced
- requiring shareholder approval for any proposed acquisition
- a time limit on a SPAC’s operating period if no acquisition
is completed
SPAC issuers unable to meet the conditions, or those choosing not
to, will continue to be subject to a presumption of suspension.
In response to feedback received, the main changes the FCA has
made to its original proposals are to:
- Lower the minimum amount a SPAC would need to raise at
initial listing from £200 million to £100 million.
- Introduce an option to extend the proposed 2-year
time-limited operating period (or 3-year period if shareholders
have approved a 12-month extension) by 6 months, without the need
to get shareholder approval. The additional 6 months will only be
available in limited circumstances. This is intended to provide
more time for a SPAC to conclude a deal where a transaction is
well advanced.
- Modify its supervisory approach to provide more comfort prior
to admission to listing that an issuer is within the guidance
which disapplies the presumption of suspension.
The final rules aim to provide more flexibility to larger SPACs,
provided they embed certain features that promote investor
protection and the smooth operation of our markets. Private
companies listing in the UK via a SPAC will also still be subject
to the full rigour of the FCA’s listing rules and transparency
and disclosure obligations.
SPACs continue to have risks and remain a more complex
investment, which investors should ensure they can adequately
assess and understand before investing. This includes
understanding their capital structure, such as the risk of
conflicts of interest, dilution from shares allocated to
sponsors, and assessing the potential value and return prospects
of any proposed acquisition target. Investors, particularly
individual investors, should carefully consider all available
information and risks before deciding whether to invest in a
SPAC, regardless of whether a SPAC has structured itself to
comply with our new rules and guidance.
The new rules and guidance come into force on 10 August 2021.
