Special Purpose Acquisition Company

Special purpose vehicles - acquisitions.

(SPAC or spac).

Special purpose acquisition companies are companies formed to:

(1) Raise money from investors, and then

(2) Use the money raised to acquire, or merge with, another operating business.

The acquisition or merger is a reverse takeover for the purposes of the UK Listing Rules of the UK Financial Conduct Authority (FCA).

SPACs may not be appropriate for all investors - ESMA

"SPACs are shell companies that are admitted to trading on a trading venue with the intention to acquire a business and are often referred to as blank check companies.

The persons responsible for setting up SPACs are the sponsors, who typically have significant expertise in one or more economic sectors and use the SPAC to acquire companies in those sectors.

SPACs sell their shares, often together with warrants, to investors to finance the acquisition.

After the acquisition, the SPAC becomes a normal listed company...

ESMA’s view [is] that SPAC transactions may not be appropriate investments for all investors due to risks relating to dilution, conflicts of interests in relation to sponsors’ incentives and the uncertainty as to the identification and evaluation of the target company.

In addition, ESMA emphasises the importance of the proper application of the MiFID II product governance rules and their role in ensuring investor protection."

Disclosure & investor protection guidance on SPACs - ESMA - July 2021

SPACs remain a more complex investment - FCA

"... we may suspend the listing of any securities if the smooth operation of the market is, or may be, temporarily jeopardised or it is necessary to protect investors.

For a shell company, including a SPAC, there is a general presumption that we will suspend listing when it announces a potential acquisition target, or if details of the proposed acquisition have leaked.

This is to protect investors from disorderly markets as a result of insufficient information being publicly available at that stage, which could impair the process of proper price formation.

Our changes remove the presumption of suspension for SPACs that meet certain criteria intended to strengthen the protections for investors.

The changes provide an alternative approach for SPACs that must otherwise provide detailed information about a proposed target to the market to avoid being suspended...

SPACs remain a more complex investment, however, so investors should carefully consider all available information and risks before deciding whether to invest in a SPAC."

Changes to Listing Rules applying to SPACs - FCA - July 2021

See also

• Acquisition
• Cash shell
• Company
• Conduit
• Conflict of interest
• De-SPAC
• Dilution
• Disclosure
• Entity
• European Securities and Markets Authority (ESMA)
• Financial Conduct Authority (FCA)
• Investor
• Listing Rules
• MiFID II
• Operating company
• PIPE
• Prospectus Regulation
• Reverse takeover
• Shell company
• Special Purpose Entity
• Special purpose vehicle
• Sponsor
• SSPE
• UK Listing Rules (UKLR)
• Warrant

Other resources

• Changes to Listing Rules applying to SPACs - FCA - July 2021
• Disclosure & investor protection guidance on SPACs - ESMA - July 2021