It’s high time tech companies listed in London, and with EU rules having been terminated on December 31, 2020, Prime Minister, Boris Johnson, and his government, are keen to ensure the attractiveness of the UK’s financial markets.
Where SPACs (special purpose acquisition companies) are concerned, there’s been a notable trend across Europe for listings to be placed on the US markets, given an apparent advantage thanks to share structuring and more favourable valuations.
The government commissioned a review regarding the same, and the recommendations were for London to reform it’s listings rules. To that end, a number of proposals have been put forward.
Lord Jonathan Hill, a former EU financial stability chief, led the UK listings review and, broadly speaking, he outlined that there should be:
a) Relaxing of rules around special purpose acquisition companies, or SPACs
b) Reducing free float requirements to avoid diluting early backers and
c) Allowing dual class share structures to give founders more control.
If those measures were followed, WGP Global believe that there’s every chance that companies will use London as their market of choice for their SPAC vehicles.
Wall Street has gained significant traction on the SPAC phenomenon thanks to their listing method, and clearly things won’t turn to London’s advantage overnight.
However, the playing field will certainly be levelled by the end of the year if Lord Hill’s review is adhered to.
It has to be, frankly, particularly when you consider the pathetic three SPAC listings in Europe in 2020 ($495m raised) compared to 244 ($78.2 billion) in the US.
That is just one reason why WGP Global have already positioned themselves at the forefront of the UK SPAC revolution in order to realign that imbalance.
“We asked Lord Hill to lead this review because we wanted bold ideas. The UK is one of the best places in the world to start, grow and list a business — and we’re determined to enhance this reputation now we’ve left the EU,” Chancellor, Rishi Sunak, was recently quoted as saying.
Easing London’s Strict SPAC Regulations
Frankly, if you’re given an opportunity to make a significant amount of money, you’d be foolish to turn that down. Particularly in such tough economic conditions.
That’s reason enough to ensure that regulations are changed to oil the wheels and ensure many more SPACs are listed in London.
At present, once a SPAC deal is announced in the UK, trading of shares may have to be suspended. With many investors wanting to get in early on any SPAC, such a move is bound to put some of them off.
Whilst WGP Global insist that this isn’t enough to stop a SPAC listing in London, particularly when we have the expertise to ensure a successful listing for any SPAC that wishes to approach the company, WGP Global do understand a certain reticence.
If a SPAC chooses to list in London, Schwimmer is keen to ensure that appropriate flexbility is available in order that deals conclude successfully.
That’s because if certain tweaks to the regulations can be made here and there – for example, the disclosure of forward-looking statements to investors – it’s bound to bring significant business to UK shores.
Furthermore, there could be as much as 4.6 percent, payable in full at the merger stage, available to institutions and banks involved in any deal, compared to 3.4 percent of the deal value for a European IPO.
If you consider companies worth more than $1 billion could be interested in listing in London if they move to adopt a similar system to the US, clearly London needs to act fast.
More so now given that the US is starting to ‘froth’ from having too many SPACs listed there.
An abundance of them being listed in New York isn’t good for regulators, investors or market participants, and Schwimmer believes that there’s certainly a chance of things ending poorly in the US if the status quo continues.
London has to be ready to take NASDAQ’s lead, though not with regard to the recent, and highly speculative, investing in what has been termed Wall Street’s ‘hottest new vehicle.’
Worries and concerns continue in the US after a cannabis blank-check firm merged with a space company and a leisure-focused SPAC did a biotech deal.
Even in such tough financial times, it is imperative for SPACs to be heavily promoted in London, as the potential regulatory changes will enhance the UK’s credibility.