The UK’s financial regulator, the Financial Conduct Authority (FCA), has proposed removing a barrier to the development of SPACs. These companies are also known as “blank check companies.”This follows a detailed review by the UK Listing Authority.

Currently, the UK suspends SPAC listings when they secure a purchase, leaving investors in limbo until the deal is completed. The FCA’s proposal would allow certain blank cheque companies to avoid this requirement. This exemption would apply if they demonstrate a higher level of investor protection.

The FCA is considering approving a minimum amount of £200 million for the first listing of these types of companies. Shareholders must obtain permission for any acquisition involving a director with a conflict of interest related to the target company. Clear key conditions will apply in such cases.

This proposal likely responds to the active role that financial companies have played in conducting IPOs in the United States. This trend has increased investment in the United States and led to fund withdrawals from British companies. A similar pattern shows companies choosing locations in Amsterdam or Frankfurt to avoid the regulatory limitations of the UK. The proposal looks like part of the UK’s goal to maintain its prominent role on the financial world stage.

The London market is ripe for change with regard to blank cheque companies. FCA estimates suggest that the UK has seen only 33 SPACs so far, with 40% currently suspended. As with all regulatory changes and market liberalization efforts, stakeholders must carefully weigh the pros and cons. The FCA has warned of the diverse returns yielded by SPACs and the need for investors to carefully consider the terms before maintaining SPACs. However, investment in SPACs is generating results for investment banks and major lenders. This could soon set the stage for the UK to benefit from the blank cheque company boom.

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