Riyadh - Mubasher: The Capital Market Authority (CMA) has invited interested parties and participants in the financial market to submit their proposals regarding the introduction of a new investment product in the parallel market, namely the launch of special purpose acquisition companies (SPACs). SPACs will positively impact liquidity levels by increasing the number of offerings. The SPACs will be available for a period of 30 calendar days, ending on May 8, 2025.

The Authority explained that the project aims to encourage private sector companies to list on the parallel market through a special purpose acquisition company, which will help meet the economy's financing needs and enhance the size and depth of the financial market by adding diverse investment products.

Special purpose acquisition companies (SPACs) must be listed on the stock exchanges with a sponsor from among the financial market institutions licensed by the Authority to conduct investment management and fund operation activities in the financial market. The proposed regulatory framework also specifies the role and obligations of the sponsor in the SPAC.

She explained that these obligations include preventing the sponsor from disposing of its shares during specific periods, and that its ownership at any time must not be less than 5% of the capital of the special purpose acquisition company, and must not exceed 20% of its capital.

The project proposed by the Authority is expected to enable qualified investors in the parallel market to invest in unlisted companies that would otherwise be difficult to invest in directly. It will also enable shareholders to request the redemption of their redeemable shares in exchange for a sum of money from an escrow account proportional to their ownership of shares in the special purpose acquisition company.

This applies in specific cases specified in the proposed regulatory framework, including, for example, the completion of an acquisition or merger with the company with which the transaction is to be completed, and a shareholder voting against the completion of the transaction.

If the project is approved, the special purpose acquisition companies will be offered on the parallel market and subsequently listed on the parallel market (Nomu) in accordance with the rules governing securities offerings and ongoing obligations, similar to those for companies listed on the financial market. At least 90% of the special purpose acquisition company’s capital will be deposited after the offering in a company-specific escrow account at a local bank. Disposal of the capital will only be permitted in specific cases specified in the proposed regulatory framework, including the completion of an acquisition transaction or a merger with the company with which the transaction is to be completed.

Among the most prominent proposed key elements of the draft law are those relating to regulating the terms and requirements for registering and offering shares of special purpose acquisition companies (SPACs) on the parallel market, and the ongoing obligations of such companies. These include requiring the company to adopt a joint-stock company structure, that the offered shares be redeemable at the shareholders' option, and that the capital of the SPAC be no less than 100 million Saudi riyals after the offering, in order to contribute to supporting liquidity in the parallel market.

The proposed project also includes regulating the terms and requirements for completing an acquisition or merger deal between a special purpose acquisition company and the target company, ensuring enhanced protection of shareholders’ rights. These terms and requirements include that the sponsor or an investment fund managed by the sponsor does not own shares or stakes - directly or indirectly - in the company with which the deal is to be completed, that the value of the company with which the deal is to be completed constitutes at least 80% of the amounts deposited in the escrow account, and that the percentage of ownership of the shareholders of the special purpose acquisition company is not less than 30% of the shares of the company with which the deal is to be completed, after the completion of the deal.

The proposed project, if approved, also requires the special purpose acquisition company to complete the acquisition or merger deal with the company with which the deal is to be completed within a period not exceeding (24) months from the date of listing its shares in the parallel market, with the possibility of extending this period for a maximum of (12) additional months, provided that the approval of the extraordinary general assembly is obtained, provided that the sponsor and its affiliates - if any - do not participate in voting on the decision that will be issued by the extraordinary general assembly, and notify the authority of that.