FCA proposes more flexibility for SPACs

The FCA has launched a consultation on proposed changes to its Listing Rules for certain special purpose acquisition companies (SPACs).

In CP21/10, the FCA proposes amending rules to allow an alternative approach for listed SPACs that are able to demonstrate the higher levels of investor protection that have developed in certain overseas jurisdictions.

Currently a SPAC listing is typically suspended at the point it identifies an acquisition target. Suspension seeks to preserve market integrity during a period when limited information on a prospective deal could result in disorderly trading in a SPAC’s shares. However, suspension results in investors being locked into a SPAC at the point a target is announced, potentially for many months prior to completion, which is undesirable for investors and issuers. The FCA is proposing that SPACs that comply with higher levels of investor protection should not be subject to this requirement.

Clare Cole, Director of Market Oversight at the FCA commented on the proposals:

“We are consulting on a set of clear conditions based on which we will not look to suspend the listing of a SPAC. These changes should encourage issuers that are willing to provide transparency and strong protections to investors. This should support market confidence and aligns our approach more closely with standards in other international markets.

“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.

“Our position outside the EU allows the FCA to have a new, more nimble approach to domestic policymaking. But in doing so, we are guided by the principles of robust regulation, high standards and strong safeguards.”

SPACs are acquisition vehicles set up to take private companies public without the cost and hassle of an IPO. They have boomed in the US and the FCA said its proposals were likely to lead to more large SPACs listing in the UK.

Blank-cheque companies raised more funds in the first quarter of 2021 than in all of 2020. On 17 March 264 SPACs had been launched in 2021 compared with 256 in 2020.

SPACs companies that do not meet the conditions will be suspended once they have identified an acquisition, the FCA said. The regulator said SPACs have highly varied returns and can often result in losses.

“Even if the FCA proceeds with proposed measures, investors should carefully consider whether investing in a SPAC is appropriate for them based on all the available information,” the regulator said.

The consultation period closes on 28 May 2021.

The FCA’s consultation paper can be accessed here.

Published 28 May, 2021

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