The London Stock Exchange (LSE) is set to welcome its first special-purpose acquisition company (SPAC) since new listing rules came into force in August. Hambros Perks Acquisition Company, a venture firm, has announced its intention to float in London. Here’s everything you need to know about this first-of-its-kind listing, including whether you can buy shares in the firm.
What is a SPAC?
A SPAC, also known as a ‘blank cheque company’, is a company formed solely for the purpose of acquiring or merging with an existing company.
It does not have a business of its own. The SPAC raises money by listing on a stock market. The proceeds are then used to fund a merger with or acquisition of a target firm, which it then takes public.
Basically, a SPAC provides an easier way for private companies to go public without the arduous process of a typical IPO.
How did the rules change to allow SPACs in the UK?
Back in August, the UK revised some of its SPAC listing rules following recommendations from a government-commissioned review that was led by Lord Jonathan Hill. The review’s goal was to make London a more appealing destination for listings following Brexit.
Key rule changes include a minimum threshold of £100 million raised from third-party investors (down from a planned £200 million) when a SPAC’s shares are first listed.
Another change was the removal of the suspension of trading in a SPAC’s shares upon the announcement of a potential business combination.
The latter was one of the most distinctive aspects of the UK’s listing rules, and it was one of the primary reasons why SPACs chose to list on other European exchanges, such as Amsterdam, rather than London.
First SPAC listing on the LSE: what do we know so far?
As mentioned, Hambros Perks is set to be the first UK SPAC to go public under the new listing rules. The company, which was founded in 2013 and owns stakes in more than 100 companies, according to the Financial Times, hopes to raise £150 million.
It will then look to buy a fast-growing private European tech business within 15 months. The company is targeting a £2 billion deal, including debt.
The company’s chief executive, Dominic Perks, told the Financial Times that the changes to SPAC listing rules had been instrumental in bringing the company to the UK market. He said, “We looked at the US, we looked at Amsterdam, but London was right for us. The changes to the rules have opened the market up.”
He added that Hambros Perks aims to bring “a European tech champion” to the public market.
The official date of the IPO has not yet been announced.
How can you invest in a SPAC?
Once a SPAC has conducted its IPO, you can invest in it in the same way that you would any other publicly-traded company.
The easiest and often the cheapest way to do this is through an online share dealing account or a stocks and shares ISA. If you invest through a stocks and shares ISA, your investment returns will be tax free.
However, keep in mind that SPACs are still a relatively new phenomenon, particularly in the UK. So make sure you do your research and consider seeking professional advice before investing your money.