CMA seeks public input on introducing SPACs in Nomu

The Capital Market Authority (CMA) called upon relevant and interested capital market participants to share their feedback on a draft bill to introduce a new investment product, special purpose acquisition companies (SPACs), in the Nomu-Parallel Market.

This is expected to positively impact liquidity levels by boosting Nomu listings, according to the CMA website.

The consultation period will last for 30 calendar days, ending on May 8.

The proposed draft aims to encourage private sector companies to list on Nomu through SPACs. This shall help meet the financing needs of the economy and support the growth and depth of the capital market through the introduction of a diverse investment products.

The offering of SPACs requires the presence of a sponsor from capital market institutions, licensed by CMA to manage investments and operate funds.

The draft regulatory framework defines the role and obligations of the sponsor in the SPACs, including restrictions on the disposal of shares during predetermined periods.

The sponsor's ownership must not fall below 5% of a SPAC's capital at any time and must not exceed 20% of its capital.

The move will enable qualified investors in Nomu to invest in unlisted companies that were formerly inaccessible directly. It will also allow shareholders to request the redemption of their redeemable shares in exchange for a cash amount from the escrow account, proportional to their ownership in the SPAC.

This applies in specific cases outlined in the proposed regulatory framework, including, for example, the completion of the acquisition or merger transaction with the target company or if a shareholder votes against the transaction.

If the draft is approved, SPACs will be permitted to list in Nomu in accordance with the Rules on the Offer of Securities and Continuing Obligations, similar to other listed capital market players.

At least 90% of the SPAC's post-offering capital must be deposited into a dedicated escrow account held with a local bank.

These funds are not accessible except in specific cases outlined in the proposed regulatory framework, including the completion of an acquisition or merger transaction with the target company.

One of the key pillars proposed in the draft is the regulation of the terms and requirements for registering and offering shares of SPACs in Nomu, along with the ongoing obligations applicable to such companies.

These include adopting the structure of a joint stock company, ensuring that the offered shares are redeemable at the discretion of shareholders. Nomu-listed SPACs will also adhere to a minimum capital cap of SAR 100 million post-listing, in a bid to bolster market liquidity.

The draft bill also covers regulating the terms and requirements for completing an acquisition or merger transaction between a SPAC and a target company, in a manner that ensures enhanced protection of shareholders' rights.

Among these conditions is that neither the sponsor nor any investment fund managed by the sponsor may hold—directly or indirectly—any shares or interests in the target company.

Additionally, the value of the target company must represent at least 80% of the funds deposited in the escrow account. Besides, shareholders of the SPAC must hold no less than 30% of the target company’s share capital upon completion of the transaction.

The proposed draft, if approved, requires SPACs to complete the acquisition or merger transaction with the target company within a period not exceeding 24 months from the date of its Nomu debut.

This period may be extended for an additional 12 months at most, provided the approval of the extraordinary general assembly. The sponsor and its affiliates, if any, must not participate in the voting on the resolution issued by the extraordinary general assembly, and the CMA must be notified accordingly.

The CMA emphasized that opinions of relevant and interested persons will be taken into full consideration for the purpose of approving the final proposed amendments, in the efforts to enhance and develop the market’s regulatory environment.

Opinions and comments can be received through the Istitlaa platform or via email (Laws.Regulations@cma.org.sa).

View the draft bill here:

The Draft Regulatory Framework to Allow Offering Special Purpose Acquisition Companies (SPACs) on the Parallel Market