UK Markets Regulator Wants To Ease SPAC Rules

The Financial Conduct Authority, the U.K.’s markets regulator, released plans Wednesday (March 31) to reform its rules governing special-purpose acquisition companies (SPACs).

According to the Financial Times, the FCA wants to ease the regulations stipulating that an acquisition by a SPAC — also known as a blank-check company — was considered a reverse takeover, thus suspending trading on its shares. This rule puts trading on hold until a deal prospectus is produced.

Because there’s no set deadline for publishing the prospectus, investors hoping to sell their shares can find themselves locked in.

“Our proposals will help to ensure that SPACs operate within a framework of high regulatory standards and oversight,” the FCA said in a statement.

“Where such protections are in place, we consider that the existing presumption of suspension of the listing for such companies at the point of announcement of an acquisition target is no longer required and we therefore intend to consult on this basis, aligning this element of our rules more closely with other major jurisdictions.”

The Financial Times says the move is part of the British government’s attempt to make London more competitive in an area where it has lagged behind Wall Street and countries in the EU.

As PYMNTS reported earlier this month, the use of SPACs as a way of going public skyrocketed in 2020 and has only grown more popular in 2021. So far this year, SPACs have taken in far more than the $83.4 billion they raised last year.

The process involves raising funds through an initial public offering (IPO). From there, the SPAC, which itself has no operations, goes looking for a company or companies to purchase.

This method has raised more than the $29.5 billion raised by IPOs of existing companies thus far in 2021.

To learn more about SPACs, read the PYMNTS 2020 report on the changing face of public offerings.