Nasdaq (re-)introduces SPAC listings
Nasdaq has, with effect from 1 February 2021, updated its rules to enable listing of SPACs on the Nordic stock exchanges. Listing of SPACs is a strong trend at the moment, particularly in the US, and Nasdaq has now decided to follow suit on the Nordic stock exchanges. For the present, the new SPAC rules apply only on Nasdaq Stockholm, but they are expected to be introduced on the other Nordic stock exchanges as well, including Nasdaq Copenhagen (subject to approval by the national authorities).
What is a "SPAC"?
A SPAC (abbreviation for "Special Purpose Acquisition Company") is a company without any activities which is formed for the sole purpose of raising capital through an initial public offering (an "IPO") for the purpose of acquiring one or more target companies with business activities within a given period. Thus, the target(s) are listed indirectly through the SPAC without having to go through the traditional IPO process.
The stock exchange does not require the "empty" SPAC to disclose historical financial information and business operations as are required in connection with traditional IPOs, and the stock exchange may also waive requirements applying to the management. The SPAC will, on the other hand, be required inter alia to complete one or more business combinations with targets within a given period to ensure that the listed company thereby gets activities. The SPAC will still have to draw up a prospectus, etc. under the prospectus rules.
The shares of the SPAC are offered to institutional and private investors in connection with the IPO in the usual way. The proceeds (or most of the proceeds) from the IPO will be deposited in an blocked deposit account and will be released to the SPAC only when the acquisition of a target company is to be completed. Hence, the shareholders finance the purchase of the target company in which they invest without (necessarily) knowing the identity of the target at the time of the investment. SPACs are therefore also referred to as "blank cheque companies".
SPACs have become a significant trend in recent years, particularly in the US, but also to some extent on European markets.
It has previously been possible to list a SPAC in Denmark1, but they never became "common". Now, Nasdaq has decided to re-introduce the possibility of listing SPACs on the Nordic stock exchanges. So far, the new rules apply only on Nasdaq Stockholm, but they are expected to be introduced on the other Nordic stock exchanges as well. However, this is subject to approval by the national authorities, which means that the Danish Financial Supervisory Authority will have to approve the listing of SPACs on Nasdaq Copenhagen.
SPAC listing requirements
The most important requirements to be met for SPACs to be admitted to trading on Nasdaq's Nordic stock exchanges are:
- Proceeds to be deposited in a blocked deposit account
At least 90 % of the gross proceeds from the IPO, including the proceeds from any secondary sale, must be deposited in a blocked deposit account with an independent bank (until the amount can be used to purchase the target(s)).
- 36-month time limit and minimum market value of target(s)
Within 36 months of the date of admission to trading (or any shorter period as specified in the prospectus), the SPAC must complete one or more business combinations having an aggregate fair market value of no less than 80 % of the value of the blocked deposit account, exclusive of any underwriters fees and taxes.
- Specific requirements until the 80 % rule has been met
Until the 80 % rule in paragraph 2 is met, the acquisition of target companies is subject to the following requirements:
a) each business combination must be approved by a majority of independent directors in the SPAC
b) each business combination must be approved by the general meeting by a simple majority of votes
c) Nasdaq must be notified of each business combination before it is disclosed to the public
d) the "new" company must meet Nasdaq's admission requirement
As soon as the agreement on acquisition of the target has been entered into, the SPAC must initiate a new listing process concerning the "new" company, i.e. the SPAC and the target company. The combination of the target company and the SPAC can be completed only when Nasdaq has confirmed that the "new" company will meet Nasdaq’s admission requirements. It is not clear from Nasdaq's rules how these admission requirements are to be met. It may be assumed that some of the requirements, including in relation to publication of a prospectus, negotiable shares and 25 % free float, are already met at the time of listing of the SPAC. However, the combination of the SPAC and the target(s) will make the requirement for financial information and business activities relevant.
- Cash redemption
As long as the 80 % rule in paragraph 2 has not been met, the articles of association of the SPAC must provide the shareholders (but not the management, the founders or their related parties) with the possibility of having their shares redeemed in cash.
Capital market law and IPO specialists
If you have any questions in relation to the obligations of listed companies or the listing criteria, please do not hesitate to contact our capital market law specialists. Our team has extensive experience in handling initial public offerings and providing advice to listed companies.
1SPAC listings were left out of Nasdaq’s rules when the new joint Nordic Main Market Rulebook for Issuers of Shares entered into force on 1 May 2020.