Tel Aviv Stock Exchange Now Welcomes SPACs

Special purpose acquisition companies (SPACs) can now trade on the Tel Aviv Stock Exchange (TASE) following new regulations established by the Israel Securities Authority (ISA), Reuters reported on Monday (May 24).

ISA Chairwoman Anat Guetta said the rules are intended to help protect investors while also giving local startups access to another funding route. She said there have already been inquiries. She added that the decision was made that there would be a “relatively high” minimum to participate in the market.

“It will likely take time for our market to become more sophisticated and reach a place where deals are of a similar profile to Wall Street, and we didn’t want to expose our investors to any harm that without a doubt would be inherent in the learning process,” Guetta told Reuters.

The rules indicate that funds raised must be at least 400 million shekels and if investors vote against an acquisition, they have the option of backing out and getting their money back, Reuters reported.

Under the new mandates, SPACs have two years to merge with a startup and have to invest at least 40 million shekels ($12 million) so they have “skin in the game,” per Reuters. Further,  institutional investors must commit to a 70 percent minimum participation.

The worldwide SPAC volume in the first quarter of 2021 was $286 billion, compared to $163 billion during the same period the previous year, Reuters reported, citing Refinitiv data.

There have been 44 initial public offerings (IPOs) in Tel Aviv this year and 28 were technology startups. Last year there were 27 IPOs and 19 were tech firms.

The PYMNTS IPO/SPAC Tracker showed that as of May 21, a little over 24 banks and 12 payment firms filed for a public offering so far this year. SPAC Research estimates that there have been 325 IPOs so far in 2021, up from 248 total in 2020.

Overall, however, investors could be backing away from SPACs due to poor performance. Further, many times SPAC shares drop in value after the deal closes and the shares are publicly traded. Research from the University of Florida showed that share prices for the 44 tech startups going public with SPACs dropped an average of 12.6 percent as of May 17 last year and in the first quarter of this year.