New Rules for the ‘[New] Kids on the Block’? The FCA Consults on SPACs

Although they may have been around as long as the late 80s-early 90s boy band, special purpose acquisition companies (SPACs) have risen in popularity since 2020. SPACs list with the laser-focused purpose of making a (profitable) acquisition and have found somewhat of a home in the tech, start-up and innovation sector.

With their rise in popularity and media attention, these "blank cheque companies" have also attracted the attention of the FCA.

On 30 April 2021, the FCA launched a consultation proposing changes to its Listing Rules for certain special purpose acquisition companies to protect investors and provide some flexibility.

A harm the FCA are trying to reduce is the impact of the effective 'investor lock-ins' created when the listed shares of a SPAC are suspended when it identifies and announces a potential acquisition.

The consultation does not propose removing the suspension presumption but instead seeks views on the creation of an ‘alternative approach to suspension’. This proposed 'alternative approach’ (which allows suspension to be avoided) will only be open to those SPACs that meet a certain size threshold (and have presumably undergone a higher level of due diligence and scrutiny due to their size and level of institutional investment).

Amongst the proposals is also a 'redemption' option allowing investors to exit a SPAC prior to any acquisition being completed – as well as a time limit on a SPAC's operating period if no acquisition is completed.

The suite of FCA proposals also include themes that we are used to seeing in other protective regimes (such as ring-fencing of money, disclosure to investors and shareholder approval).

The deadline for comments on the proposals is around the corner (28 May 2021) - but what do you think about them?

Necessary? Encouraging? Have they got the right stuff?