June 16, 2021

SPACs: The U.K. Opens Its Doors to Listings

For better or worse, it looks like the U.K. has decided to open its financial markets to the latest craze from the U.S. – SPACs.  This Weil memo discusses the Financial Conduct Authority’s consultation paper outlining proposed amendments to listing criteria intended to encourage SPACs to list on the LSE’s main market. Here’s an excerpt from the intro:

The amendments modify some aspects of the FCA’s Listing Rules that have made it practically impossible for SPACs to list in London with the characteristics that have made them such a popular alternative for companies seeking to go public in the U.S. (as well as lucrative for their sponsors and attractive for certain public market investors).

The key problem is that under the existing rules, the FCA will suspend trading in the SPAC’s shares if there is a leak or an announcement about a potential ‘reverse takeover’ (which, in the case of a SPAC, means any acquisition), until the SPAC can publish sufficient information about the target, typically in a revised prospectus. Under the proposed amendments, suspension will no longer apply if the requirements set out below have been and remain satisfied.

The memo goes on to detail each of the requirements that a SPAC that wants to list on the LSE would have to satisfy. These include raising at least £200m in gross proceeds from the public, “ring-fencing” the capital raised with a third party pending completion of the de-SPAC or liquidation, completion of the de-SPAC within two years of listing, specified disclosures about the target to be included in the announcement, board and shareholder approval requirements, the use of a fairness opinion to address certain conflicts, and a redemption right for shareholders regardless of how they vote on the de-SPAC.

The consultation period ended May 28th, and according to media reports, several SPACs are ready to launch once the rules are in place early this summer.

John Jenkins