New SPAC Rules in the United Kingdom
New UK SPAC Rules in Force
The new SPAC rules by FCA provide for a SPAC listing environment similar to Wall Street, encouraging SPAC listings on the London Stock Exchange with better investor protections and annulling previous trade suspension of a SPAC after acquisition announcement. Mr Boris Johnson announced in March 2021 an overhaul of UK SPAC rules and formed a taskforce. They have done a very good job.
The new UK SPAC rules came into effect three days ago, on August 10th, 2021, much earlier than previously expected, in October 2021.
The recently published new UK SPAC rules also came with a nice surprise. The FCA proposed a minimum IPO size threshold of £200m but then reduced the threshold to £100m. Smaller SPACs can still be listed, but they will not be able to benefit from the new beneficial rules.
We are highly welcoming the new UK SPAC rules and believe that they will put the London Stock Exchange on the preferred global map for SPAC listings.
What is new for SPACs listing on the LSE?
The new rules for SPACs listed in the United Kingdom create an environment similar to the U.S., providing both flexibility and enhanced protection for investors:
- IPO Shareholders now need to approve a proposed business combination.
- IPO Shareholders now have a redemption right which they may execute in case they do not like a proposed acquisition. The redemption option must be declared in the SPAC prospectus.
- Conflict of interest of SPAC board members has been resolved by abstaining from voting in case of a conflict of interest. Conflict of interest must be published by the SPAC board.
- Disclosure obligations regarding SPAC IPO and a proposed acquisition have been enhanced.
- Period to complete an acquisition has been fixed at two years, with an option of 12-month extension if IPO shareholder approve, and additional six months in case a transaction is already well advanced.
- The minimum IPO size to benefit from the new SPAC rules is £100 million.
- IPO proceeds must be “ring-fenced”, i.e. must be held on a third-party trust account.
UK SPACs versus SPACs in continental Europe
The main advantage of UK SPAC listings versus listings in Frankfurt, Amsterdam, Paris or other stock exchanges is the positive interest rate in the United Kingdom.
IPO proceeds held on trust account in the European Union suffer from negative interest rates. When a shareholder opts to redeem its outstanding shares, a SPAC is obliged to pay back that shareholders funds provided on IPO. The difference stemming from negative interest rate is to be covered by the SPAC, which means that the SPAC sponsors need to provide additional funds.
SPACs listed in the United Kingdom will not face this problem, at least for now and expectedly for foreseeable future as well.
SPACs aiming to list in the UK will also benefit from a deeper pool of capital across a global investor base in London, compared with other stock exchanges in continental Europe.
SPAC Consultants is not offering and/or providing investment advisory services in the sense of regulated investment advisory services as per respective EU Directives and their implementation into national law of EU Member States. Instead, SPAC Consultants offers SPAC Project Management services and consults regarding the general principles of US SPACs and their business structuring. Any investment, legal and financial advice that may become necessary for possible sponsors and investors at advanced stages will be provided by the network partners of SPAC Consultants.