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Abu Dhabi offers the region’s first Spac regulatory framework

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The Abu Dhabi Securities Exchange and the Abu Dhabi Department of Economic Development have submitted a proposal to the Securities and Commodities Authority for a Special Purpose Acquisition Company (Spac) regulatory framework, the first of its kind in the Middle East and in North Africa.

The move is part of the emirate’s strategy to develop its capital markets and align its products and services with those of its global peers.

A Spac, or blank check company, is an entity with no business operations and trades without a business foundation. It is incorporated with the intention of raising funds through an initial public offering and seeks to acquire existing companies.

After being reviewed by the SCA, the proposal will require formal regulatory approval, the ADX said on Tuesday. If approved, it will become the first Spac framework in the Arab world.

The move is expected to boost the region’s second-largest stock market by allowing blank check companies to register publicly and allowing sponsors outside the United Arab Emirates to seek approval to list their Spacs on the local exchange and, in turn, by allowing the initial public offers on the ADX.

The stock market has a market capitalization of over 1.5 trillion dirhams ($ 415 billion) on Tuesday and is up more than 58% this year thanks to IPOs, rising foreign investment and rising prices. oil price.

“The introduction of a Spac regulatory framework will be an important step for Abu Dhabi, offering growing companies a new avenue of financing,” said Mohamed Al Hammadi, president of Added.

“Added’s involvement in the creation of the Spac settlement reflects our commitment to supporting the growth of Abu Dhabi’s economy and making the emirate an attractive destination for international capital. “

Spacs were first created in the 1990s, but have seen a 10-fold increase in investment inflows since 2019, with globally recognized investors such as the SoftBank Group creating their own entities to invest in start-ups technology, thus cementing their popularity.

Lucid Motors, which is backed by Saudi Arabia’s Public Investment Fund, said it would go public by merging with Churchill Capital IV Corporation Spac while music streaming service Anghami said in March it would go public. to Nasdaq through a merger with Vistas Media Acquisition. Society.

Mubadala Capital, the asset management arm of Mubadala Investment Company, unveiled in August an IPO of a $ 200 million blank check company, which will seek acquisitions in the media and tech sectors. .

Spaces are generally formed by investors or sponsors. These may be private equity funds or investors specializing in a particular industry who intend to enter into transactions in that area of ​​activity.

Investors in Spac IPOs can be other funds, high net worth individuals or the general public.

The creation of a market for Spacs reflects “Abu Dhabi’s” commitment to create a vibrant capital market environment, “said Sameh Al Qubaisi, executive director of Added’s executive affairs office.

Targeted businesses in UAE and beyond will also reap many benefits from a Spac merger

Sameh Al Qubaisi, official of the Ministry of Economic Development of Abu Dhabi

“Targeted businesses in the UAE and beyond will also experience many benefits from a Spac merger, ranging from faster execution and lower marketing costs to up-front price discovery and access to the operational expertise of the Spac sponsor, ”he said.

ADX and Added worked with legal and investment specialists to develop the proposed Spac regulations. They assessed the regulatory landscape and compared US and international Spac regulations, the exchange said.

“The introduction of Spac regulations will further strengthen our efforts to provide market participants with the widest range of vehicles and investment tools, including the recent introduction of a derivatives market,” Saeed said. Al Dhaheri, Managing Director of ADX.

“Over the past few months, the exchange has undertaken rigorous Spac simulations, operational readiness testing and preparation of educational material for sponsors and investors. ADX is now fully prepared to respond to requests from sponsors and investors ahead of the expected approval of the proposal.

Updated: November 9, 2021, 12:58 PM