In an effort to make special purpose acquisition company (SPAC) listings more attractive, the U.K.’s Financial Conduct Authority (FCA) is proposing changes to its listing rules.
The FCA launched a consultation on April 30, on proposed rule changes that are designed to make SPACs more appealing to investors by allowing them to keep trading, provided that they carry certain added investor protections.
Currently, under U.K. rules, a SPAC is automatically cease traded when it identifies an acquisition target. While this practice is intended to prevent disorderly trading, it also means that investors are locked in, possibly for months, until a transaction is completed.
The FCA is proposing that SPACs which carry higher levels of investor protection would not be subject to this automatic cease trade requirement.
Among other measures, the proposed protections include: added disclosure requirements; shareholder approval requirements for the acquisition; that investor funds be “ring-fenced” to either fund an acquisition or be returned; and, investor redemption rights.
These deals must also raise at least £200 million when a SPAC’s shares are initially listed, “to encourage a high level of institutional investor participation,” the FCA said.
“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,” said Clare Cole, director of market oversight at the FCA, in a release.
“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,” she added.
The proposals follow a review of the U.K. listing rules that recommended a series of changes designed to rejuvenate new issue markets in the country.
Despite the effort to make the rules more accommodating to SPACs, the FCA also cautioned investors that these listings remain risky: “Based on evidence from the U.S. market, SPACs have highly varied returns for public investors and can often result in losses, despite a degree of hype around these vehicles,” the regulator said.