On 30 April 2021, the FCA launched a consultation on proposed changes to its Listing Rules for certain special purpose acquisition companies (SPACs).
In CP21/10, the FCA proposes amending rules to allow an alternative approach for listed SPACs that are able to demonstrate the higher levels of investor protection that have developed in certain overseas jurisdictions. Currently, a SPAC listing is typically suspended at the point it identifies an acquisition target. Suspension seeks to preserve market integrity during a period when limited information on a prospective deal could result in disorderly trading in a SPAC’s shares. However, suspension results in investors being locked into a SPAC at the point a target is announced, potentially for many months prior to completion, which is undesirable for investors and issuers. The FCA are proposing that SPACs that comply with higher levels of investor protection should not be subject to this requirement.
The disclosure and investor protection features the FCA propose SPACs should use, in order to avoid suspension, and on which the consultation seeks feedback, include:
- setting a minimum amount of £200m to be raised when a SPAC’s shares are initially listed, to encourage a high level of institutional investor participation
- ensuring monies raised from public shareholders are ring-fenced to either fund an acquisition, or be returned to shareholders, less any amounts agreed to be used for the running costs of the SPAC
- ensuring shareholder approval for any proposed acquisition, based on sufficient disclosure of key terms and a confirmation that terms are fair and reasonable if any of the SPAC’s directors have a conflict of interest relating to a target company
- a ‘redemption’ option allowing investors to exit a SPAC prior to any acquisition being completed, and a time limit on a SPAC’s operating period if no acquisition is completed
- sufficient disclosures being provided to investors on key terms and risks from the SPAC IPO through to the announcement and conclusion of any reverse takeover deal
SPAC issuers unable to meet the conditions, or those choosing not to, will continue to be subject to a presumption of suspension. The consultation is open until 28 May 2021.
