Saudi Arabia’s Capital Market Authority (CMA) has officially approved a regulatory framework for Special Purpose Acquisition Companies (SPACs), clearing the way for them to be offered on the Nomu parallel market. This move is set to diversify investment products and provide a new, alternative route for private companies in the Kingdom to access public funding.
Quick Facts
- SPACs now approved for listing on the Nomu market.
- Minimum post-offering capital requirement is SR100 million.
- SPACs have 24 months to complete an acquisition.
Detailing the New Framework
The newly established regulations aim to streamline the process for private companies to go public while establishing clear guidelines for investors. A key requirement is that SPACs must raise a minimum of SR100 million in capital after their offering.
Once listed, a SPAC has a 24-month window to identify and merge with a target company. This period can be extended by an additional 12 months, but only with the approval of the extraordinary general assembly.
To ensure the substance of these deals, the regulations mandate that the value of the target company must represent at least 80% of the funds held in the SPAC’s escrow account. Furthermore, following the transaction, the original SPAC shareholders must hold no less than 30% of the newly combined company’s shares.
Investor Protection and Governance
The CMA has built several measures into the framework to protect investor rights and ensure strong governance. Shareholders who vote against a proposed merger transaction will have the right to redeem their shares for a cash amount proportional to their holdings in the SPAC’s escrow account.
To prevent conflicts of interest, the framework explicitly prohibits the SPAC’s sponsor, or any investment fund managed by the sponsor, from holding any direct or indirect ownership in the target company prior to the acquisition. This rule is designed to ensure that merger decisions are made objectively and in the best interest of all shareholders.
The introduction of SPACs is part of a broader CMA initiative to enhance liquidity in the parallel market and provide investors with access to non-listed companies that were previously difficult to invest in directly. By creating this new listing vehicle, the CMA aims to encourage more private sector companies to pursue public listings, thereby meeting financing needs and contributing to economic growth.
About the Capital Market Authority (CMA)
The Capital Market Authority is the financial regulatory body for the capital market in Saudi Arabia. It is a government organization responsible for regulating the Saudi Arabian stock market (Tadawul) by issuing rules and regulations to protect investors and ensure fairness and integrity in the securities markets.
Source: Zawya
