Britain’s financial watchdog on Friday proposed changing how special purpose acquisition companies (SPACs) can list as the City of London seeks to bolster its global attraction after Brexit.
After a surge in what are dubbed “blank check” companies on Wall Street and more recently in Europe, Britain is keen that London is not left behind.
SPACs list on an exchange and must use the proceeds to buy an existing company within a set timeframe.
The UK’s Financial Conduct Authority said it was proposing a waiver on the current rule that trading in a listed SPAC should be suspended at the point where it identifies a company to acquire.
Suspension, aimed at preserving market integrity until more information on the target company is made available, can trap investors in the SPAC for potentially many months.
Suspension would be waived if a minimum 200 million pounds is raised when a SPAC initially lists, a proposal aimed at attracting more institutional investors, the FCA said.
Cash raised from public shareholders should also be ring-fenced for an acquisition, and shareholder approval would be needed for any proposed takeover, the FCA said.
There must also be 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, the watchdog said.
“We would expect our changes to provide a more flexible regime for larger SPACs, while still ensuring investor protections, potentially resulting in a wider range of large SPACs listed in the UK, increased choice for investors and an alternative route to public markets for private companies,” said Clare Cole, the FCA’s director of market oversight.
The FCA said there are 33 SPACs listed in Britain, with 13 suspended. Among the 20 with live listings, only two have a market capitalisation of more than 100 million pounds.
Charles Howarth, a partner at law firm CMS, said the proposals address the fundamental problem deterring investors from London-listed SPACs – getting stuck with shares in a proposed acquisition they may not like.
Removing the suspension requirement should make SPACs a more attractive prospect on the London market, Howarth said.