SPACs On their way to UK

When the Financial Conduct Authority (FCA) made substantial changes to its rulebook last year in order to attract a slice of the SPAC (special purpose acquisition company) action, many of them thought that it could be a game changer. There was enough support for the move from those looking to sink money into SPACs. It was easy to see both the appeal of SPACs and the aims of those looking to see them become a possibility in the UK.

Operating the institutional equivalent of a blank cheque, a SPAC is a company formed with the express purpose of raising money. SPACs were attracting ever higher levels of investment in the US. This prompts the envious glances from this side of the Atlantic. But in 2022, the UK has only seen one SPAC so far, with little sign of there being more in the pipeline. The SPAC bubble burst before it could land in the UK? Which is doubtful. The obvious enthusiasm for SPACs has not evaporated. It could be argued that some of the UK’s regulations remain more rigid than those in other countries. The rise of SPACs in the UK was always likely to gather momentum gradually rather than being a sprint.

The requirement for shares of a listed company to be suspended when a reverse takeover becomes widely known about. It reduced its proposed £200 million minimum for SPAC fundraising to £100 million. It also protected investors by giving them rights to redeem funds. Limits were also introduced on how long a SPAC would have to complete a deal. The FCA may have wanted a well-managed gold rush. London has not yet become a magnet for SPACs. The UK’s restrictions on what a SPAC’s creators and its initial, major investors can do may also be more attractive. Time will only tell if it has gone about this in the right way.

The UK is still an international hub for financial markets. It sets out its SPACs stall. They are now in a period where what is on that stall is being assessed by those who are considering if, when and where they should conduct SPAC activities. There have been plenty of headlines in the past year or two. It could be some time before such things become regular occurrences. The takeovers that emphasise the value of particular SPACs and the success of a country do not happen overnight. The FCA and those it regulates may already be looking eagerly for the first signs of a new, SPAC-inspired financial dawn. However, it could be some time before they know for certain whether that dawn is a real or false one.