On 30 April 2021, the FCA consulted on proposals to change the UK Listing Rules to remove the presumption that the listing of a Special Purpose Acquisition Company (“SPAC”) be suspended when it identifies a potential acquisition target, where the SPAC meets certain criteria. This was seen a significant barrier to listings of SPACs in the UK, following the “SPAC boom” in the U.S. and continental Europe during 2020.
Following its consultation, on 27 July 2021, the FCA published a policy statement setting out the final changes to the UK Listing Rules applicable to SPACs which took effect on 10 August, 2021 (click here to read the statement).
The changes aim to create an environment where:
As such, the changes are designed to remove barriers to SPAC listings in the UK and provide more flexibility to market participants.
SPAC vehicles are increasingly popular in the life sciences and health care sector, as businesses look to benefit from a less onerous and burdensome route to accessing public capital. Recently announced transactions include:
The specific changes as set out in the FCA’s policy statement are summarised below.
The presumption of suspension will not apply where the below criteria are met.
Note: The FCA initially proposed a £200 million threshold, but accepted that a lower threshold of £100m will be sufficiently high to achieve the intended benefit of this approach, while being more appropriate to the relative size of likely targets in a UK context.
Ring-fenced cash for acquisition, redemption or repayment purposes
Time limit for making an acquisition
Board approval of a transaction
Shareholder approval of a transaction
Fair and reasonable statement on the terms of an acquisition
Redemption of option for shareholders
A SPAC must undertake to provide, at the time it announces a target to the market, the following information.
The announcement should identify any information described above that has not been included because it is not known at the time and make further announcements to provide such information when available, with sufficient time before the shareholder vote for the approval of the acquisition takes place.
The FCA states that it will work with SPACs and their advisors to provide comfort prior to admission that the SPAC meets the criteria for disapplication of the suspension presumption, rather than at the point that an announcement of an acquisition is to be made.
A SPAC which meets the criteria for the disapplication of the suspension presumption will generally be treated similarly to commercial companies, whereby the FCA expects compliance with the Listing Rule, UK MAR and its general suspension powers apply.
Where the FCA has given comfort prior to admission that a SPAC does meet the criteria, a SPAC should still contact the FCA:
SPACs must notify the FCA if the criteria for disapplication of suspension no longer apply.
In its consultation, the FCA sought views on whether there are further measures or different approaches that could be taken to ensure adequate protection for investors. This included whether the FCA’s approach to SPACs could be differentiated for vehicles focused on sustainability and investing based on environmental, social and governance (ESG) factors.
The FCA set out in the policy statement that it would not be taking any additional measures but that this would be kept under review; the FCA will monitor how SPACs are distributed and marketed. The FCA may consider further consumer communications or warnings in future if it sees any evidence that SPACs are attracting or being marketed to investors who may not understand the features and risks involved.