The UAE has approved the first special purpose acquisition company (Spac) regulatory framework for the Gulf Cooperation Council (GCC) region, following record activity for this funding approach over the last two years.
The Securities and Commodities Authority, the UAE’s market watchdog, says the framework paves the way for the first Spac listing on the Abu Dhabi Securities Exchange (ADX) later this year.
‘Benchmarked and assessed against best-in-class US and international Spac regulations, the robust framework will provide international investors with access to unique growth opportunities,’ notes an announcement released by the Abu Dhabi government media office.
‘The regulation also makes provisions for sponsors outside of the UAE, giving them the opportunity to apply for approval to list their Spacs on the ADX.’
Under the framework, Spac sponsors will need to raise a minimum of AED100 mn ($27.2 mn) and, to protect investors, 90 percent of proceeds must be held in a non-interest-bearing account following the IPO.
Hisham Khalid Malak
‘We are excited to be creating a regional hub for Spacs on ADX,’ says Hisham Khalid Malak, chairman of the Abu Dhabi Securities Exchange, in a statement. ‘Spacs provide investors seeking to diversify their portfolios with growth opportunities that are protected by some of the world’s strongest regulations.
‘We are committed to rolling out the Spac framework in a timely manner and preparing the exchange to be operationally ready to support sponsors with listings, marketing and communication advice.’
Spac surge
Spacs, also known as blank-check companies, raise capital in an IPO and then search for a private company to merge with, taking the business public in the process. The sponsors have a time limit, usually 24 months, to find a target or return the money to investors.
Listings surged in popularity in 2020, with 248 Spacs raising $83.4 bn, according to data provider SpacInsider. The following year saw a mammoth 613 listings, but activity trailed off after US regulators began to closely scrutinize the funding route. Most Spac IPOs from the last two years are yet to find a merger target.
The vast majority of Spac activity takes place on US markets, but other countries have tried to get in on the act by making their regulations more friendly to this type of listing. Last year, the UK brought in new rules to encourage Spac IPOs, while also strengthening protections for those investing in the vehicles.
UAE’s Spac framework is ‘a natural next step to take in developing its capital market,’ says Tala Al Jabri, a venture capital investor, according to CNBC. ‘I expect other GCC countries will follow to enact frameworks.’
