February 26, 2008

The Nasdaq Proposes to List SPACs

Last week, the Nasdaq Stock Market issued this proposal to create new listing standards that will relate to special purpose acquisition companies. Previously, even if a SPAC met Nasdaq’s market and financial initial listing standards, Nasdaq would not list the SPAC. These determinations were based on concerns about the underwriters of some of the earlier deals and because a SPAC is a “shell company” that does not have current business operations.

Under the Nasdaq’s proposal, Nasdaq would seek to list SPACs (whose listings are dominated by AMEX, according to this WSJ article) – albeit under more stringent listing standards compared to operating companies, including the following criteria:

– Gross proceeds from the initial public offering (IPO) must be deposited in an escrow account maintained by an insured depository institution as defined by the Federal Deposit Insurance Act or in a separate bank account established by a registered broker or dealer.

– Within 36 months of the effectiveness of its IPO registration statement, the company must complete one or more business combinations using aggregate cash consideration equal to at least 80% of the value of the escrow account at the time of the initial combination.

– So long as the company is in the acquisition stage, each business combination must be approved both by the company’s shareholders and by a majority of the company’s independent directors. Following each business combination, the combined company must meet all of the requirements for initial listing.

Speaking of SPACs

Recently, there have been a flurry of articles in the mainstream media about SPACs, including this article from the Washington Post – and this article from the WSJ.