Reed Smith Client Alerts

The FCA has published new rules and guidelines on listing special purpose acquisition companies, or SPACs, on the UK’s Official List. The revised Listing Rules follow a consultation launched earlier this year amid concerns identified in Lord Hill’s Listing Review recommendations that the UK has fallen behind in attracting ‘blank cheque’ vehicles of this kind to list on its markets. As outlined in the FCA consultation, the changes seek to address a specific obstacle identified in the current rules – the presumption that a SPAC’s listing should be suspended once it has identified a proposed acquisition target. The FCA’s new guidelines remove this presumption, provided the SPAC complies with certain criteria at the time of its IPO and in the lead up to the acquisition.

Authors: Delphine Currie James F. Wilkinson Edmund Tyler

The SPAC proposition

SPACs are a relatively straightforward concept, involving the establishment of a new company by a team of experienced promoters with the objective of raising equity finance in conjunction with a stock market listing, and then deploying these funds to acquire a suitable business. A SPAC has no business or assets other than the cash raised, which must be used within a limited timeframe to make a substantial acquisition (called a ‘de-SPAC’). If a suitable target is not identified, the SPAC must be wound up and the funds returned to investors.

At the heart of the structure’s appeal is the speed and certainty it offers for a target seeking an IPO, in comparison to a traditional flotation. With the funds already raised, management can avoid the lengthy timescales and uncertainty involved in a traditional IPO and accompanying investor roadshow, and limit the negotiations on price to a smaller group of stakeholders.