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As of 1 February 2021, Nasdaq is introducing specific admission requirements for SPACs for Nasdaq Stockholm. Following regulatory approval it will be rolled out to the remaining Nordic markets, including Nasdaq Copenhagen on 12 April 2021.
Special Purpose Acquisition Companies (SPAC) are being introduced into the Nordic market by Nasdaq Stockholm following amendments to the Nordic Main Market Rulebook as of 1 February 2021. SPACs are a US financial invention developed for leveraged acquisition finance transactions. A SPAC is essentially a shelf company designed to take target companies public without having to go through the lengthier initial public offering (IPO) process to gain admission to trading as a listed company on a regulated market. The SPAC will be listed as a company to raise capital to finance one or more potential acquisition opportunities after the initial public offering. At the time of the IPO, the SPAC will not have an on-going business on its own but a stated intention to acquire the on-going businesses of target companies within a certain set of pre-determined parameters.
A listing through a SPAC vehicle is similar to a standard reverse merger. However, unlike a standard reverse merger, a SPAC comes with a "clean slate "publicly-listed shell company and certainty of financing in place. A SPAC will typically be incorporated and listed by experienced sponsors with a long track record in acquiring companies. A SPAC has a specified time frame within which it must complete an acquisition of one or more targets following the IPO. With the recent amendments to the Nordic Main Market Rulebook to accommodate SPACs, Nasdaq Nordic seeks to accommodate the rising interest from market participants for this US-style acquisition vehicle in the Nordics. Initially, the new SPAC rules only applied to Nasdaq Stockholm. However, the SPAC rules have been been extended to the other Nordic exchanges, including Nasdaq Copenhagen as of 12 April 2021 following approval by the national regulators.
In contrast to a traditional stock exchange listing, the stock exchange does not require a SPAC to have an accounting and business history, given that by its very nature it cannot meet this requirements at the time of its listing. It is however required that the SPAC acquires one or more target companies within a specified period in accordance with the prospectus and the proposed parameters of the acquisitions. A SPAC will still have to meet the usual requirements for the preparation of a prospectus and the supporing documentation in accordance with the prospectus rules to gain admission to the market. This financing technique permits the SPAC investors to finance the early acquisition stage and to invest in the acquired target companies within a liquid market such as Nasdaq, all the while not necessarily knowing the specifics of the targets. With the financing in place, the SPAC can commence identifying the acquisition targets and enter into negotiations with the potential vendors.
While SPACs have previously been possible in Denmark, they constituted a rarely used exception to the general market. With the recent developments, an increase of SPACs in the Danish market is to be expected for the benefit of the potential investors.
Following final regulatory approval by the Danish FSA, Nasdaq announced on 8 April 2021 that the specific admission requirements for SPACs will come into force for Nasdaq Copenhagen on 12 April 2021.
Two-Step Listing Procedure for SPACs
The revised Nasdaq Nordic Main Market Rulebook allows SPACs to be listed on the main market in a two-step process:
the exempt SPAC IPO before any acquisitions; and
the post-acquisition process of a target company.
Firstly, the SPAC must publish an approved prospectus to satisfy the general admission requirements under the Nordic Main Market Rulebook. However, it is exempt from the requirements for historical financial information and business operations. Moreover, the requirement that the members of the management are employed by the issuer can also be waived, provided that there is sufficient managerial competence and experience in place to adequately manage a listed company.
Secondly, following the acquisition of a target company, the SPAC is required to meet all listing requirements set out in the Nordic Main Market Rulebook for the merged company post-acquisition. The proposed merger will however require the prior approval of Nasdaq for a full listing to be effective.
Listing Requirements for SPACs
The key listing requirements for SPACs on Nasdaq's Nordic exchanges are the following:
Deposit of Proceeds in Trust Account: At least 90% of the proceeds from the listing must be deposited in a trust account with an independent bank as trustee pending the future acquisition of one or more target companies.
36-Month Deadline and Minimum Market Value for Acquisition of Target Companies: The SPAC must within a 36-months' period from the date of the listing (or a shorter period specified in the prospectus) have completed one or more acquisitions with an aggregate market value of no less than 80% of the value of the trust account, excluding any underwriter fees and taxes.
Special Requirements until the 80%-Threshold is Satisfied:
Until the 80%-treshold is met, any proposed acquisition of a target company by the SPAC requires that:
a majority of the independent board members of the SPAC must approve the acquisition;
a majority of the general meeting must approve the acquisition;
Nasdaq must be notified of the acquisition prior to it's announcement to the market; and
the merged company must meet Nasdaq's listing conditions as set out in the Nordic Main Market Rulebook.
This means that as soon as a definitive acquisition agreement has been agreed, the SPAC must initiate a new listing process in relation to the merged company. The merger will therefore be conditional on Nasdaq's confirmation that the merged company will meet Nasdaq's listing requirements. The SPAC cannot complete the acquisition before approval is granted. At thrre time of writing, It is not entirely clear from Nasdaq's rules on SPACs how these listing requirements will have to be met in practice. Nasdaq intends to publish further guidelines on the disclosure requirements in relation to target companies and the resulting business combinations in due course.
Possibility of Cash Redemption for Shareholders
For as long as the 80%-treshold has not been satisfied, the SPAC's articles of association must provide the shareholders the opportunity to demand that their shares be redeemed in cash. The redemption must be equal to the shareholders' pro rata share of the aggregate amount held in the trust account less any taxes payable and amounts distributed to the management for working capital purposes. The redemption can be subject to a specific limit set by the SPAC. The shareholder redemption requirement does however not extend to the management, the sponsors or their affiliates.
Pending the result of the regulatory process by the Danish FSA, it remains an open question if the Danish regulator will permit the redemption right to be based on a shareholder’s pro rata share of the cash trust account to be implemented in its current form with respect to SPACs to be listed on Nasdaq Copenhagen. It may potentially be considered price manipulation by the Danish regulator and therefore remains an open issue pending regulatory approval.
Further Information
SPAC Product Sheet publisged by Nasdaq Nordic
For further information on the Nasdaq Nordic listing requirements, Nasdaq has published a helpful Q&A guide on the topic to facilitate the understanding of the Nasdaq Nordic Main Market admission requirements, admission process and disclosure requirements in relation to the listing of a SPAC and the subsequent continued listing of a new entity consisting of the SPAC and one or more target companies. The Q&A published by Nasdaq Nordic supplements the rules and guidance text set out in the Nordic Main Market Rulebook for Issuers of Shares.
For further information, please contact Dr. Andreas Tamasauskas or Michael Rosenberg.