From 10 August 2021, the UK’s listing regime will provide greater flexibility for larger special purpose acquisition companies (SPACs) that have in place sufficient measures to protect investors and the smooth operation of the market.
Earlier this year, the FCA consulted on proposals to relax, for certain larger SPACs, the current presumption of suspension that applies when a SPAC announces a target acquisition. The consultation followed the UK Listing Review, which had noted that this presumption of suspension is a significant deterrent to the growth of the SPAC market in the UK. (Click here for our overview of the proposals in the FCA consultation.)
FCA policy statement
The FCA has now published a policy statement confirming that the changes it consulted on will take effect from 10 August.
Modification of the conditions for dis-applying the presumption of suspension
While the changes will largely be implemented as proposed in the consultation, there are two significant modifications, reflecting feedback on the consultation.
Size threshold: At the date of its initial listing, the aggregate gross cash proceeds received by the SPAC for the shares issued to public shareholders will have to be at least £100 million, not £200 million as originally proposed. This lower threshold will still be sufficiently high to require a SPAC to attract institutional investors and with them their professional level of scrutiny, while at the same time being more appropriate to the size of likely targets.
Time limit for making an acquisition: A SPAC will, without shareholder approval, be able to extend, by six months, the permitted period (two years from admission to listing, or three years with shareholder approval) for finding and acquiring a target. This additional six months will only be available in limited circumstances and is intended to provide more time for a SPAC to conclude a reverse takeover where a transaction is well-advanced.
Modification of supervisory approach
The FCA has confirmed that it will modify the supervisory approach proposed in its consultation. It will work to provide more comfort to a SPAC before listing that it satisfies the conditions necessary to dis-apply the presumption of suspension. It will therefore work with a SPAC and its advisers to ensure that this comfort is achieved as part of vetting the prospectus and assessing eligibility for listing. At the point of announcement of an acquisition, the FCA will not expect to revisit its previous assessment, provided the SPAC can confirm that it still satisfies the conditions.
Summary of the conditions for dis-applying the presumption of suspension
The table below sets out, in summary, the various conditions that a SPAC will need to satisfy to dis-apply the presumption of suspension under the new regime.
Where a SPAC is unable, or does not wish, to satisfy these conditions, the current regime will continue to apply and the SPAC will continue to be subject to a presumption of suspension. The FCA will only agree that suspension is unnecessary if it is satisfied that there is sufficient publicly available information about the proposed transaction.
|Conditions that a SPAC must satisfy to qualify for the new regime
||Minimum size threshold of £100 million raised from public shareholders on initial IPO.
||Monies raised from public shareholders are ring-fenced to fund an acquisition or for return to shareholders (e.g. if they redeem their shares or the SPAC is wound up), less agreed running costs.
|Time limit for making an acquisition
||Two years, or three years with shareholder approval, from admission to listing plus the option, in certain limited circumstances, to extend the time limit by six months without a shareholder vote.
|Board and shareholder approval
||Board and shareholder approval of a proposed acquisition required. Conflicted directors and shareholders who are directors, founders or promote the SPAC are excluded from voting.
|Fair and reasonable statement
||The board must publish a “fair and reasonable” statement, which reflects appropriate independent advice, if any SPAC director has a conflict of interest in relation to an acquisition.
|Redemption option for shareholders
||SPAC must provide a redemption option allowing investors to exit their shareholding for a pre-determined amount before an acquisition is completed.
||Investors must be given sufficient disclosures on key terms and risks from the SPAC IPO through to the announcement and conclusion of an acquisition.