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Highlights
- UK financial watchdog, the Financial Conduct Authority, backed a listing reform review to attract SPAC listings in the UK.
- Globally SPACs have risen in popularity, raising over US$ 100 billion in total in the last 1 year.
- The new listing rules are expected to be introduced in the UK markets by the end of 2021 to benefit 2022 IPO listings.
The UK’s financial regulatory body, the Financial Conduct Authority (FCA), has expressed intention to support listing reforms in the UK in order to attract more Special Purpose Acquisition Company (SPAC) listings on the London Stock Exchange (LSE).
The FCA’s director, Clare Cole, said that listing rules on the LSE capital markets are still stuck in 1984. The regulatory body suggested that listing rules would need a significant reform in a post-Brexit world.
SPACs are a publicly listed companies with no operations that combine with a private company that seeks to directly float on the market. This SPAC form of public listing has boomed in the last one year due to companies bypassing the hassle of meeting several listing rules and conditions when considering an initial public offering (IPO).
Rise in SPAC listings
Globally SPACs have seen a total capital raising of over US$ 100 billion in the last one year, with the amount raised in 2021 already surpassing the previous year.
The US has recently seen a major SPAC listing trend, with several new companies taking the SPAC route rather than a conventional IPO. Some recent companies which have been publicly listed via SPACs include electric vehicle company Nikola Corp (NASDAQ:NKLA), Sir Richard Branson’s US based space flight company Virgin Galactic (NYSE:SPCE) and others.
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The FCA had earlier announced the waiving off of a suspension clause for a SPAC listing of a minimum amount of £200 million, down to £100 million in April.
The UK had seen a rise in SPAC listing in 2016-2017, during which 15 companies got listed in 2017.
In 2021, Amsterdam emerged as a SPAC destination within the EU as the Netherlands did not have any SPAC specific listing rules. This has thus heated up London’s competition for attracting more capital into its markets.
UK’s recent IPO Boom
The LSE has seen a record year in IPO listing in the last 18 months as more tech-based businesses have chosen to go public. The LSE has raised over £9.8 billion in IPO capital in H1 2021, the highest since H1 2014.
Despite this boom, FCA’s director said that capital had been raised in a disjointed and unclear manner. She added that in certain situations, the LSE runs the risk of being prohibitive for high quality listings.
Bottom Line
UK’s chancellor Rishi Sunak had asked the EU’s ex-commissioner, Lord Hill, as well as former American payment processing tech firm Wordplay head, Ron Kalifa, to review capital market listing rules separately in early 2021.
Some proposed changes include dual share structures and more. The FCA plans to introduce the newly changed rules by the end of 2021, such that IPOs planning to list in 2022 can be benefitted from the new rule changes.
