UK Edition
The City watchdog is preparing to throw open the door to the "blank cheque" craze sweeping US and European markets in a major shake-up of London's listing rules.
The Financial Conduct Authority said it was proposing to ease rules that act as a major barrier to special purpose acquisition companies (Spacs) listing in the UK, as part of the Government's push to make the London market more competitive.
Under existing rules, Spacs – shell companies that list on a stock exchange with a promise to swoop on a takeover target – are effectively impossible to engineer in Britain due to rules that force these cash shells to suspend their shares in the event of a reverse takeover.
However, as part of new proposals which are expected to be introduced by the summer, the FCA said it will no longer require Spacs to suspend their listing when they announce an acquisition.
London has missed out on the Spac boom which has swept Wall Street and Amsterdam, raising $83bn (£60bn) last year alone.
These vehicles have surged in popularity in recent months, attracting the likes of musician Jay-Z, NFL quarterback Patrick Mahomes, former Credit Suisse boss Tidjane Thiam and former politician Paul Ryan.
Earlier this week, British used car site Cazoo agreed to be acquired by a US Spac, valuing the company at £5bn.
The move by the FCA comes after Lord Jonathan Hill recommended that the UK follow other countries by loosening rules on Spacs in a landmark review earlier this month.
Charles Howarth, a corporate partner at law firm CMS, said: "The whole point of investing in a Spac is that change, from a cash shell to a trading company, and suspension under the current listing rules just adds insult to the injury caused through lack of an ability to redeem shares or vote on the acquisition.
"Removing the suspension requirement and providing for a shareholder vote and redemption rights would make Spacs a rather more attractive prospect on the London market."
However, there are concerns that London might already have missed the Spac boom as the market has slowed in recent week amid worries about a bubble. An index of Spac listings has fallen by about a fifth since its February high.
Chancellor Rishi Sunak has said the Government is determined to enhance London's reputation among investors now the UK has left the EU.
Lord Bellingham, a Tory peer and executive chairman of fintech payments group Sokin, said: "We are very pleased to see the FCA moving fast, and with a short timescale, to look at Spacs in the UK.
"The announcement of the FCA consultation comes on a day when we have seen Deliveroo shares fall sharply on opening which also shows the importance of the Hill report in creating the right listing environments for fintechs, as well as investors."
The consultation will be open for four weeks and the FCA aims to bring in new rules or guidance by early summer.
- Read more: Spacs and the City – investors beware