London eyes major rule changes to cash in on the SPAC boom as Amsterdam targets top spot after Brexit
- A major review has recommended an overhaul of London's rules to welcome SPACs.
- The UK has lagged far behind the US, and major players are eyeing Amsterdam as Europe's hub.
- The British government wants to show the benefits of leaving the EU.
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After falling behind New York and even Amsterdam, London is eyeing a major overhaul of its stock-listing rules so it can cash in on the boom in special purpose acquisition companies (SPACs) and reassert its financial power after Brexit.
A major review into the City of London has recommended the removal of a rule that currently deters special-purpose acquisition companies from listing in the UK's financial hub.
SPACs have continued to boom in 2021, with around 180 so-called blank-cheque companies listing in the US already, raising more than $50 billion. The City has also lost out on share-trading to Amsterdam after Brexit, and many investors are now looking to the Netherlands as the future centre of SPACs in Europe.
A SPAC is an entity that exists solely to list on the stock exchange to raise money, in the hope of finding and merging with a target company to take it public. It can be extremely lucrative for the people who set up the SPAC, and can be an easier way for a company to go public than via a direct listing, or initial public offering.
But London has been almost completely left out of SPAC-mania. This is mainly due to a rule that says shares in the company must be suspended after it picks a target, which can leave investors with their cash locked up, even if they want to sell.
The report recommended the UK's financial authority remove this rule "and replace it with appropriate rules and guidance further to increase investor confidence in these companies."
Lord Hill, a former EU financial commissioner who chaired the review, said London needed to work on "closing a gap which has already opened up" between it and other global financial hubs.
Amsterdam is emerging as something of a SPAC centre, with LVMH boss Bernard Arnault backing a vehicle that plans to list there. A former Commerzbank chief is also weighing a Netherlands listing, according to Bloomberg.
The review expressed concerns that some of the UK's fastest-growing companies could be poached by foreign SPACs and listed abroad.
Chancellor Rishi Sunak said: "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."
UK Finance, the UK's banking lobby group, said the proposals should "foster a more dynamic regulatory regime fit for the 21st century and the fast-growing innovative companies choosing to list in the UK."
The Hill review expressed some concerns about SPACs, including the way they are skewed towards big payouts to "sponsors" as well as concerns about their performance over time.
Yet it said competitive pressures and the benefits of the model meant rule changes should be considered
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