UAE securities regulator approves GCC’s first Spac regulatory framework

The move is expected to pave the way for the first Spac listing on the ADX this year

The Spac regulatory framework is part of the UAE's plans to develop its capital markets and bring its products and services in line with those of global peers. Reuters

The Abu Dhabi Securities Exchange (ADX) welcomed the Securities and Commodities Authority’s approval of the region’s first special purpose acquisition company (Spac) regulatory framework.

The framework is part of the UAE's plans to develop its capital markets and bring its products and services in line with those of global peers.

The move is expected to pave the way for the listing of the first Spac on the ADX this year, the Abu Dhabi bourse said on Monday.

Spacs, or blank-cheque companies, are entities with no commercial operations and trade without business fundamentals.

They are formed with the intention of raising funds through an initial public offering and seek to acquire existing companies.

Spac-led IPOs have lighter disclosure requirements than regular ones and have been increasingly used over the past two years to take fast-growing companies public quickly.

Spacs provide investors seeking to diversify their portfolios with growth opportunities that are protected by some of the world’s strongest regulations

Hisham Malak,
ADX chairman

“Spacs provide investors seeking to diversify their portfolios with growth opportunities that are protected by some of the world’s strongest regulations,” said ADX chairman Hisham Malak.

“We are committed to rolling out the Spac framework in a timely manner and preparing the exchange to be operationally ready to support sponsors with listings, marketing and communication advice.”

The UAE's Spac regulatory framework was developed by the ADX and the Abu Dhabi Department of Economic Development (Added), in conjunction with the SCA and legal and investment specialists.

The framework is benchmarked and assessed against best-in-class US and international Spac regulations, the ADX said. It also makes provisions for sponsors outside the UAE, giving them the ability to apply for approval to list their Spacs on the ADX, the region’s second-largest stock market.

Created with attractive incentives and an innovative share structure, the UAE Spac regulations provide sponsors with a seamless and efficient process to take companies public, the ADX said.

Sponsors will be required to raise a minimum of Dh100 million ($27.22m) in the IPO and units sold will comprise warrants that give investors and sponsors the right to convert them into shares.

Once the IPO is complete, a Spac must ensure that 90 per cent of proceeds are placed in a non-interest-bearing account to protect investors, the bourse said.

“Abu Dhabi’s strong regulations, coupled with its tax-free status, stable business environment and a strong pipeline of fast-growing regional companies have created attractive opportunities for Spac sponsors looking to take companies public,” said Added chairman Mohamed Al Shorafa.

“By enhancing the dynamism of our capital markets and continuing to connect issuers with investors, we are contributing to the growth and diversification of Abu Dhabi’s economy.”

Spacs were first created in the 1990s but have registered a 10-fold rise in investment inflows since 2019, with globally recognised investors such as the SoftBank Group setting up their own entities to invest in technology start-ups, cementing their popularity.

Many regional and global companies backed by Middle East investors are listing on global exchanges through blank-cheque companies.

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

Middle East start-up Swvl, which provides mass transit and shared mobility services, said it will list on the Nasdaq through a Spac with Queen’s Gambit Growth Capital.

Mubadala Capital, the asset management arm of Mubadala Investment Company, unveiled a $200m blank-cheque company IPO in August, which will seek acquisitions in media and technology sectors.