As of 6th December 2021, SPACs can be listed and traded on the SIX Swiss Exchange. Authorization from all of the relevant authorities has been obtained. The new listing standard for SPACs, developed by SER and approved by Swiss Financial Market Supervisory Authority (FINMA), caters for the specific characteristics of these vehicles while upholding an appropriate degree of investor protection.
A Special Purpose Acquisition Company (SPAC) is a shell company founded for the sole purpose of acquiring a non-listed target company – thus taking this company public. The SPAC first raises capital through an initial public offering (IPO). The SPAC then invests this raised capital in the acquisition of a target company, whereby the latter is listed on the stock exchange as part of the acquisition (De-SPAC).
SIX Swiss Exchange is currently one of only two trading venues in the world that relies on specific regulation of SPAC. Why?
Despite the fact that SPAC has been around for a long time, the trend for SPAC to go public has only really taken off in the last few years. This investment vehicle is not free of risks; nevertheless, an exchange trading venue must be able to offer suitable instruments for risk-sensitive investors as well. In order to achieve appropriate investor protection as well as corresponding transparency, SER, together with FINMA, has decided to specifically extend and supplement its regulations with regard to SPAC.
What specific attention was paid to in the regulation of SPAC?
SER has worked primarily to maintain the highest possible level of transparency with respect to SPAC and investor protection. In doing so, we are following in the best tradition of our existing approach that investor protection is given the greatest attention on SIX trading venues.
How exactly does such a process work?
Our specialists, in this case specifically our listing professionals, develop proposals on how SPAC can be regulated. We then submit these proposals to the SIX Regulatory Board, where the individual details are discussed intensively and also controversially. Once a status is reached that satisfies all stakeholders, we submit the elaborated proposals to FINMA for final approval. In this process, we also enjoy the advantage of the composition of the SIX Regulatory Board: various market participants sit on this body and can thus contribute their specific views to the regulation. In this way, we not only create transparency and an appropriate level of investor protection with regard to SPAC, but also generally offer the greatest possible proximity to the market.
This approach is a great advantage; due to the self-regulation in Switzerland, we can ensure such a great market proximity. In our eyes, this form of regulation and supervision is a key success factor for the entire Swiss Financial Center.
Are issuers already using this form of IPO?
Yes, the first IPO of a SPAC on the SIX Swiss Exchange already took place shortly after the approval of the extended and supplemented regulations.
What exactly has been regulated with regard to SPAC?
SER has adjusted various aspects regarding the listing of SPAC. In doing so, we have placed particular emphasis on the following rules.
Only stock corporations incorporated under Swiss law can be listed as SPAC on SIX Swiss Exchange. The SPAC’s duration is limited to a maximum of three years. The proceeds raised in an IPO (initial public offering) must be deposited in an escrow account held with a bank. The SPAC must grant all shareholders a fundamental right to return the shares acquired in the IPO.
The board of directors, management, founders, and sponsors of SPAC must conclude binding lock-up agreements with a lock-up period of at least six months. Instead of shares, the SPAC can offer investors portions of a convertible bond in the IPO. The requirements of Art. 11 and 12 LR do not apply to SPAC. The issuer of a SPAC does not have to meet the listing requirement of the minimum duration for the existence of an issuer (“track record requirement”) or to have prepared corresponding annual financial statements for the three full fiscal years prior to the listing application.
The capital resources of SPAC are determined including the IPO shares or convertible bond regardless of their respective recognition as equity or debt in accordance with the accounting standard LR in conjunction with Art. 15 LR.
A SPAC must disclose additional quantitative and qualitative information in the prospectus in accordance with the Swiss Financial Services Act (Finanzdienstleistungsgesetz, FIDLEG) that is prepared with regard to the IPO. The quantitative information particularly relates to disclosures on the dilutive effect, for example due to warrants, and on the costs to be borne by a public shareholder if the shares are returned.
The requirements for maintaining a SPAC’s listing are based on Art. 49–56 LR. In addition, there are different or supplementary regulations for issuers of SPAC; for example, the approval of the IPO share subscribers is required for a de-SPAC. Along with the invitation to the investor meeting in connection with voting on a de-SPAC, the issuer must also publish appropriate information on the intended de-SPAC. In addition to the members of the board of directors and the management, sponsors and founding shareholders of the SPAC are also considered to be persons subject to reporting requirements as defined in Art. 56 (2) LR and must accordingly disclose their management transactions. This requirement continues to apply after the completion of the de-SPAC until 1 month after the end of the lock-up agreement.