The Luxembourg Stock Exchange issues its first guidelines for SPACs listings
The Luxembourg Stock Exchange (LuxSE) has published on 19 August 2021, its first guidelines for the listing of SPACs on each of its markets. The guidelines aim at striking the right balance between the needs of sponsors (and other financial intermediaries) and investor protection.
Rounding off a year that saw the rapid growth of acquisition activity by SPACs, the LuxSE issued on 19 August 2021, its first guidelines for the listing of SPACs on both its regulated market (Bourse de Luxembourg) and the Euro MTF market (the Guidelines).
The Guidelines also apply to listings on the professional segments of each of these two markets, thus allowing SPACs that do not target retail investors to restrict their shareholding to professional or qualified / well-informed investors.
SPACs are blank check companies designed for acquisition finance transactions. Upon admission to trading, a SPAC does not have any underlying operating business nor assets, other than cash and limited investments. It raises capital to finance the acquisition of usually one operational target company (or group of companies) within a limited timeframe.
The Guidelines consists of a set of recommendations to guide sponsors and other professional intermediaries in listing SPACs on the LuxSE’s markets, while protecting the interests of investors and market integrity.
The LuxSE encourages sponsors of SPACs to consider the following recommendations during the SPACs’ structuring process:
- Funds raised by SPACs should be placed in an escrow account with a regulated financial institution and issuers should document an order of priority for outgoing payments.
- The issuer should grant redemption rights to the SPAC shareholders and describe the conditions under which these rights can be exercised.
- The majority of the shareholders should approve the business combination with the target company in a general meeting (de-SPAC process) and the issuer should provide the shareholders with the information necessary to make an informed decision about the exercise of their redemption rights.
- In the prospectus accompanying the admission to trading, the issuer should describe its business strategy to deliver insights on the target industries and geographies where it seeks acquisition opportunities.
- The timeframe for the consummation of the business combination should be defined and limited in time.
The Guidelines do not constitute an exhaustive or mandatory list of features that SPACs should meet to secure admission by the LuxSE and are only complementary to the Rules and Regulations of the LuxSE. Indeed, during its eligibility assessment, the LuxSE can consider any other feature of a SPAC (e.g. management lock-up periods, sponsor commitments or remuneration mechanisms).
Furthermore, in addition to the general admission rules detailed in the Rules and Regulations of the LuxSE which apply to a SPAC listing application, certain specific documents will also be required by the LuxSE : (a) a general presentation highlighting the experience and track record of the SPAC sponsor / management; and (ii) a legal memorandum regarding the position of the issuer under the Luxembourg AIFM law (in order to confirm that the SPAC does not qualify as an AIF)