Thought Leadership

The UK Opens the Door to SPACs

Client Updates
On November 3 2020 Baker Botts highlighted the main key differences in the treatment of SPACs (Special Purpose Acquisition Companies) under London's "Listing Rules" and under the US listing regime.  The marked trend we had seen in 2020 (248 US SPAC listings; 4 UK SPAC listings) has continued in 2021 - whilst around 180 SPACs have launched in the US in 2021 to date, there have been none on the London Stock Exchange.  In addition to this trans-Atlantic competition, London's status as the preeminent capital market in the European geography is being challenged by Amsterdam, including with respect to SPAC listings.
 
To recap, a SPAC is a newly formed cash shell company that raises its cash from investors based on a stated specific, or generic, acquisition strategy and the reputation of its founders or sponsors and is listed pending that acquisition, upon completion of which it "de-SPACs".  The benefits of a SPAC structure include that the process for listing a SPAC and then "reversing" a target operating business into it is speedier and less-restrictive than taking the target itself through the IPO process.
 
On 3 March 2021 Lord Jonathan Hill published his report following the review of the UK's listing regime.  His wide-ranging recommendations to increase the attractiveness of London as a market include a focus on many of the relative disadvantages of the London market as regards SPACs in the US markets that were highlighted in our previous thought leadership.
 
In the report Lord Hill stated its aim:
 
"was not about opening up a gap between us and other global centres by proposing radical new departures to try to seize a competitive advantage. It is about closing a gap which has opened up"
 

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