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HomeCapital Markets: Nasdaq introduces SPAC listings in the Nordics and updates the Main Market Rulebook

Capital Markets: Nasdaq introduces SPAC listings in the Nordics and updates the Main Market Rulebook

Following strong market interest and the development in the SPAC (Special Purpose Acquisition Company) market in the US, Nasdaq is introducing the specific admission requirements for SPACs on 1 February 2021 for Nasdaq Stockholm with the remaining Nordic markets to follow subject to regulatory approvals including with respect to Nasdaq Copenhagen. Nasdaq’s amended Nordic Main Market Rulebook will come into effect from 1 February 2021 and provides the framework for the listing of SPACs while specific questions is still to be answered through guidelines or case law.

On 19 January 2021, Nasdaq announced the (re)-introduction of specific admission requirements for Special Purpose Acquisition Companies (“SPACs”) to the harmonized Nordic Main Market Rulebook for Issuers of Shares. Nasdaq has as a part of the introduction of SPAC rules published amended Nordic Main Market Rulebook for the Issuers of shares, which comes into effect on 1 February 2021.

Initially, SPACs may be admitted to trading and official listing from 1 February on Nasdaq Stockholm with the remaining Nordic markets to come subject to regulatory approvals including with respect to Nasdaq Copenhagen.

A SPAC is an alternative to the conventional process for initial public offerings and admission for trading and official listing of an issuer’s shares on the regulated markets of Nasdaq in the Nordics. With a SPAC it is possible to list a special purpose acquisition company without any activity and business operations and raise funds through an initial public offering in order to acquire one or more businesses and indirectly take them public. SPACs are therefore sometime referred to as ‘blank check’ companies since the investors do not invest in a company with particular assets, operations or financial history. However, a SPAC is typically formed by sponsors or investors with competencies in a particular industry and with the intention to pursue deals in that area, but without a specific target business at the time of formation of the SPAC.

With the SPAC rules, Nasdaq intends to meet the interest from the market participants in Europe and provide an alternative to the SPAC market in the US. The new Nordic SPAC rules are in line with the rules and principles applied for Nasdaq’s US market.

Listing of a SPAC

The amended Nordic Main Market Rulebook allows SPACs to be listed on main market and the listing process is twofold, a) the initial listing of the SPAC and b) following the completion of an agreement on a business combination described under the SPAC requirements below.

Nasdaq’s initial listing process is similar to an ordinary IPO where the SPAC is required to publish an approved prospectus and shall satisfy the admission requirements in the Nordic Main Market Rulebook. However, requirements with respect to historical financial information and business operations are not applicable until a business combination is carried out. The normal rulebook requirement under which it is required that the members of the management are employed by the issuer can also be deviated from, if the Exchange accepts that the issuer has shown that there is sufficient competence and experience available in order to manage a listed company.

SPAC requirements

The key requirements for SPACs set out in the Nordic Main Market Rulebook are as follows:

  • At least 90 per cent of the gross proceeds from the IPO or a subsequent equity issue by the SPAC must be deposited in a blocked bank deposit account maintained by a financial institution independent from the issuer.
  • The SPAC must complete one or more business combinations within 36 months from admission with an aggregate fair market value of at least 80% of the value of the deposit account.
  • Following any business combination, all the customary admission requirements in the Nordic Main Market Rulebook shall be satisfied.

Until the ‘80% requirement’ mentioned just above is satisfied, the completion of any business combination by the SPAC is subject to:

  • Approval by a majority of the directors who are independent of the issuer and the management of the SPAC,
  • Approval by majority of the voting rights at a general meeting of shareholders,
  • Notification of the Exchange about a proposed business combination prior to public disclosure hereof,
  • Approval by the Exchange of satisfaction of all the customary admission requirements set out in the Nordic Main Market Rulebook after the initiation of a listing process related to the SPAC and the business combination.

Redemption right of shareholders

In addition, until the 80% requirement mentioned above is satisfied, the new SPAC rules in the Nordic Main Market Rulebook require that the SPAC’s articles of association shall grant the SPAC’s shareholders a right to redeem their shares into cash equal to their pro rata share of the aggregate amount then in the deposit account (net of taxes payable and amounts distributed to management for working capital purposes) and subject to a limit set by the SPAC, which may not be lower than 10% of the total share capital.

The right of conversion shall not apply to certain shareholders including founding shareholders of the issuer as well as members of the board of directors and the management and their related parties.

It remains to be seen if the outcome of the regulatory process in Denmark will allow the redemption right based on the shareholder’s pro rata share of the cash deposit account to be implemented in its current form with respect to SPACs admitted to trading and official listing on Nasdaq Copenhagen, or if such a rights will be considered to potentially constitute price manipulation.

The Danish FSA has in a previous ruling of 13 March 2012 ruled that a public listed investment company could not carry out acquisition of its own shares at book (intrinsic) value in connection with a liquidity program as they deemed such structure could constitute price manipulation under the previous applicable rules set out in the Danish Securities Trading Act on prohibition against price manipulation. The investment company was organized as a public limited liability company and not as an investment fund or UCITS, where redemption rights at book (intrinsic) value is a statutory right of a unit holder. The Danish FSA at that time found that a program with a right for shareholders to sell their shares at book (intrinsic) value resulted in the share price of the issuer to be secured at an abnormal or artificial level, since the price would be established by the issuer itself and would not be determined in the market between parties with opposite interests.

Timing and outstanding questions

The updated Nordic Main Market Rulebook for issuers of shares will enter into force on 1 February 2021.

However, the specific SPAC rules will only enter into force on 1 February 2021 for issuers on Nasdaq Stockholm while the implementation of the SPAC rules on Nasdaq Copenhagen, Nasdaq Helsinki and Nasdaq Iceland is subject to regulatory approvals in Denmark, Finland and Iceland, respectively. As mentioned above, the Danish regulatory process will amongst others have to consider the redemption right of shareholders at book (intrinsic) value in light of the Danish FSA’s previous ruling from 2012 in this area.

Nasdaq is further planning to provide guidelines on disclosure of the target company and intended business combination.

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