National security on LSE’s SPAC agenda
Sponsors wishing to list on the LSE have seen delays as checks are increased for companies that may be tied to “dirty money” or hostile foreign states. 

SPACs in the UK are already being held in a queue while sponsors wait for recommendations from the government-commissioned Hill Review. Some have also been diverted from the Netherlands as the Dutch regulator is limiting new issuances this year due to record-breaking trading activity over the past 12 months. 

This latest national security concern could add yet another layer of uncertainty over reporting requirements.

Listing matters have hitherto been the responsibility of the UK Listing Authority, part of a regulatory body of the Financial Conduct Authority (FCA). However, moves by the UK Parliament’s Foreign Affairs Committee could see the National Security Council become involved.

MPs are concerned that the FCA’s role is too narrow to combat stealth influence by hostile foreign states on UK and multilateral organisations. They believe that the body’s powers should be combined with a far broader assessment of national security considerations, according to a recent report.

Dealing with unknowns is always difficult; but the banks underwriting a SPAC may be able to assess the prospective counterparties more thoroughly. And if they were to raise questions, administrators such as Intertrust Group would certainly act accordingly. 

Is the SPAC queue moving?
These delays are likely to last for a good part of the summer, given the latest accounting considerations on warrants and projections. However, after a bottleneck in April and May, the queue is now moving as US SPAC teams, their lawyers and accountants have sorted matters out, according to a June Law360 report. This hold-up will not materially impact the SPAC market in the grand scheme of things. Indeed, a market pause could improve structures, protecting institutional and retail investors alike. 

SPAC listing rules: getting them right the first time
The UK government and the FCA will want to get listing rules right the first time. London clearly wants a very prosperous exchange. And new capacity will be particularly welcome in the wake of Brexit. 

The LSE will therefore want to promote a sustainable market that gives retail investors rare access to IPOs that were traditionally unavailable to them. A lot of positives could come from reconditioning the SPAC market in its infancy; one of them being its long-term sustainable growth.