FCA offers Spacs flexibility in return for protections

The Financial Conduct Authority has allowed special purpose acquisition companies more flexibility in return for stronger consumer protections in a push to attract more of the vehicles to the UK.

Spacs currently have their listing suspended when they have identified an acquisition target to prevent disorderly trading. This locks investors into the Spac until the deal completes, often taking many months.

The regulator said in return for not being suspended Spacs would have to let investors leave a Spac before an acquisition is completed and ring-fence money raised from public shareholders. The Spac would also have to get shareholder approval for a proposed acquisition and be subject to a time limit if no acquisition is completed.

The FCA published its final rules after a consultation announced at the end of April. Since then it has reduced the minimum a qualifying Spac would have to raise at initial listing to £100m from £200m and introduced an option for an extra six months operating period to conclude a deal when an acquisition is advanced. It will also give issuers more guidance on being within the rules to qualify for suspension being withheld.

Spacs are acquisition vehicles set up to take private companies public without the cost and hassle of an IPO. They have boomed in the US over the past two years but interest has waned after disappointing share performances after deals and more scrutiny from US regulators.

"Spacs continue to have risks and remain a more complex investment, which investors should ensure they can adequately assess and understand before investing," the FCA said. "Investors, particularly individual investors, should carefully consider all available information and risks before deciding whether to invest in a Spac, regardless of whether a Spac has structured itself to comply with our new rules and guidance."