Introduction

As the popularity of special purpose acquisition companies (SPACs) for initial public offerings (IPOs) continued to grow globally across 2020 and 2021 – there were 613 SPAC IPOs globally in 2021 (up from 248 in 2020) – we take a look here at the different listing options available in the U.K.

Historically smaller companies have sought to list on the AIM market of the London Stock Exchange (AIM), but the pace of such listings slowed following a change to the AIM Rules that was implemented in 2016 which increased the fundraising threshold, at the time of listing, from £3 million to the current threshold of £6 million. One of the results of this rule change was that companies turned their attention instead towards listing SPACs on the standard segment (Standard List) of the main market (Main Market) of the London Stock Exchange, given that this only required a minimum market capitalisation of £700,000 in order to secure a listing on this market. However, following the changes made to the Listing Rules in July 2021[¹], SPACs must now raise a minimum of £100 million in order to be able to list on this market. This effectively means that smaller SPACs that are not able to meet these minimum fundraising thresholds will now need to look elsewhere for a suitable listing venue in the U.K. One suitable exchange may be the Aquis Growth Market of Aquis Stock Exchange (AQSE) as this only requires fundraise of £2 million for SPACs.

The AQSE Growth Market is now made up of two segments, following certain changes made to the AQSE rules in December 2020, and comprises the Access segment and the Apex segment. The Apex segment is aimed at larger, more established companies and requires applicants to have a minimum market capitalisation of £10 million and prepare a U.K. Growth Prospectus in order to list, whereas the Access segment is designed for early-stage companies and SPACs.

This article therefore focusses on the key requirements for listing a SPAC on the Access segment of the AQSE Growth Market. A table outlining how those key requirements compare to those required for listing a SPAC on AIM and the Standard List is set out at the end of this article for ease of reference.

SPACs

A SPAC is a company formed to raise capital from investors, through an IPO, for the sole purpose of making one or more future acquisitions in a targeted industry sector or a specific geographic region (or both). A SPAC can be listed on different exchanges – each with their own specific requirements for listing – such as AQSE, AIM and the Standard List of the London Stock Exchange (LSE). It should be noted that the premium segment of the Main Market is not available for listing SPACs. Under the updated AQSE Access Rulebook[²] (AQSE Rules), a SPAC is now referred to as an ‘enterprise company’.

Requirements for Listing a SPAC on the AQSE Access Growth Market Segment

A minimum amount of, at least, £2 million must be raised by or at admission to the market by an issue of shares for cash, and the company should have an expected market capitalisation of no more than double its net tangible assets.

• Prior to the formal application process, any applicant intending to submit an application for listing must appoint and retain an AQSE Corporate Adviser. The role of the AQSE Corporate Adviser is to manage the application process and to provide advice on the continuing obligations of the applicant prior to, during and after the applicant is admitted to the AQSE. A list of AQSE Corporate Adviser firms can be found on the AQSE website – with AQSE’s own business development team available to applicants to offer guidance and support in identifying and engaging a suitable firm.
• There are specific corporate governance requirements for an AQSE application. Any company admitted to AQSE must have due regard to the principles laid down by a ‘recognised corporate governance code’, insofar as that particular code relates to the company (such as the nature and size of the company).
• To list on AQSE, a SPAC must, within two years of admission, execute its stated strategy. Should the company fail to do so, AQSE can suspend the trading of its securities. An applicant to the Access segment of the AQSE Growth Market requires the publication of an Admission Document (see later on in this article for more information on this point). For a SPAC, the Admission Document must contain information including the strategy, performance and business management, and should identify specific sectors industries to be targeted, as well as an expected timeframe for executing its strategy.
• For SPACs listing on AQSE, at least 25% of shares must be in “public hands”. This rule is designed to maximise liquidity and limit volatility. It should be noted that the requirements under the AQSE Rules in this regard are more onerous than other entities, which generally only require at least 10% of shares to be held in public hands. Securities of an issuing company are not in public hands if they are:

1. ‘Held, directly or indirectly by:
   1. a director of the applicant or of any of its subsidiary undertakings; or
   2. an associate of a director of the applicant or of any of its subsidiary undertakings; or
   3. the trustees of any employees’ share scheme or pension fund established for the benefit of any directors and employees of the applicant and its subsidiary undertakings; or
   4. any person who under any agreement has a right to nominate a person to the board of directors of the applicant; or
   5. any person or persons in the same group or persons acting in concert with an interest in 5% or more of the securities of the relevant class;
2. subject to a lock-up period of more than 180 calendar days.’  

• There are other specific requirements set out under the AQSE Rules which applicants will need to consider alongside the other general requirements of a U.K. incorporated company.

Admission Document

• While not required, AQSE encourages applicants to arrange for their appointed AQSE Corporate Adviser to contact AQSE an at early stage and submit a pre-application form on their behalf, ahead of the formal application being made. The pre-application form allows for the AQSE Corporate Adviser to submit information relevant to the applicant’s suitability for admission and to raise any matters which the adviser considers may complicate or affect the application, including but not limited to:

1. the applicant’s structure;
2. business model;
3. directorship; and
4. substantial shareholders.

• An Admission Document is required for listing on the Access segment of AQSE. The Admission Document must be published and contain the required information set out under Appendix I of the AQSE Rules. This document must contain such information as required to enable investors to make an informed assessment of the assets and liabilities, financial position, profits and losses, and prospects of the company and the rights attaching to its securities.
• Alongside the Admission Document, there will be various ancillary documents to be prepared as required by applicable law or the AQSE Rules. In particular, should funds be raised at the time of listing by an appointed adviser, then separate agreements will need to be drafted which set out the terms on which any fundraise is conducted on behalf of the company.

Post-Listing Requirements

• Once the SPAC has been listed and it prepares to make its acquisition(s), the acquisition itself will be treated as a ‘reverse takeover’. Upon the announcement of the reverse takeover, trading in the company’s securities will be suspended until:

1. the publication of an Admission Document in respect of the issuer as enlarged by the reverse takeover; or
2.  AQSE is satisfied that sufficient information is publicly available about the reverse takeover such that an informed assessment can be made as to the financial positions and prospects of the company as enlarged by the reverse takeover.

• The acquisition must be conditional upon shareholder approval and therefore this must be factored in as part of the acquisition process and the overall timetable.
• The company’s admission will be cancelled once it completes the reverse takeover, and it must therefore re-apply to AQSE for admission of the enlarged group to the AQSE once again. As such, this necessitates drafting a further Admission Document to include information about the enlarged group, which can usually be drafted whilst the acquisition is being negotiated, to allow for listing as soon as possible after the acquisition is completed.

Our Experience at Armstrong Teasdale

As can be seen from the above, the AQSE offers an alternative listing venue for smaller investment companies to AIM and the Standard List. The listing process is a relatively straightforward one, and the U.K. Capital Markets team at Armstrong Teasdale have noticed an uptick in the SPACs seeking to list on this market of late. Joan Yu, Head of U.K. Capital Markets, comments: “It will be interesting to see how the rule changes now impact on the listings of SPACS on the various exchanges going forwards and whether the trend we have noticed of smaller and mid cap listings of SPACs on AQSE is set to continue.”

This publication is provided by Armstrong Teasdale Limited for informational purposes only. The information contained in this publication should not be construed as legal advice. Any questions or further information regarding the matters discussed in this publication can be directed to Armstrong Teasdale’s U.K. Capital Markets team.

Resources

• Table: Comparison of the Eligibility Criteria and Continuing Obligations for Listing SPACs on the Main Market and AIM of the London Stock Exchange; and the AQSE Growth of the Aquis Stock Exchange