FSMA consultation about the SPACs (Special Purpose Acquisition Companies)
A SPAC, or Special Purpose Acquisition Company, is a new company established for the specific purpose of raising capital, applying for a stock exchange listing and within a short period thereafter, financing a merger or acquisition.
The FSMA is proposing to introduce minimum standards for SPACs. These minimum standards concern the structure of SPACs, information disclosure and the arrangements whereby investors may withdraw from the SPAC. The FSMA also takes a position on the extent to which SPACs are suited, and should thus be accessible, to retail investors.
Market participants are invited to submit reactions and suggestions regarding the FSMA’s proposal. The consultation will run between 10 and 31 May 2021.
Proposed FSMA recommendations:
The FSMA’s proposed minimum standards for the design and trading of SPACs and for information disclosure are included under section III of this document. These are as follows (pages 22-25):
- The governance structure of a SPAC and the rules governing decision-making on business combinations must offer investors maximum protection against conflicts of interest
- The SPAC’s redemption option must offer investors who choose to retain their shares maximum protection against dilution
- The SPAC prospectus must comprise various dilution scenarios and indicate what level of return is needed to neutralize the investor’s dilution
- SPAC shares listed on Euronext Brussels will have to carry a notice that they are reserved for professional investors
- Additional recommendations : As indicated above, SPACs may take different forms and offer investors different levels of protection. The FSMA encourages issuers of SPACs to provide maximum protection in the vehicles they establish in this form. The forms of protection they may add include:
- attaching conditions to the investment in terms of the minimum percentage of the funds that may be used, confirmation by an expert of the availability of the cash necessary for the investment and for the structural and the acquisition fees;
- requiring a very high rate of positive votes needed to accept the business combination in the general meeting;
- linking the founders’ remuneration to the value creation (such as the requirement that a set share price be reached) and not to a payment up front by the allocation of nearly free shares; · etc. Market participants are invited to submit reactions an