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CMA sets out to bring SPACs to Nomu: Special purpose acquisition companies (SPACs) may soon be allowed to list on Tadawul’s parallel market Nomu under a draft regulatory framework (pdf) released by the Capital Market Authority (CMA). The proposed bill — now up for public consultation on Istitlaa until Thursday, 8 May — will allow SPACs to be traded publicly as an investment product for the first time in the Kingdom. This comes as part of broader reforms to the domestic capital market.
SOUND SMART- A SPAC is a type of shell company investors use to acquire firms. SPACS raise money from the public in an IPO and then use the proceeds to merge with or acquire an appropriate company. Check out EnterpriseAM’s explainer for more on how SPACs work.
In a nutshell: The new regulations set detailed rules on sponsor eligibility, requiring a CMA-licensed investment institution to hold at least 5% and no more than 20% of the SPAC’s capital. The SPAC in question must raise at least SAR 100 mn, adopt a joint-stock structure, and deposit 90% of its post-offering capital in a local escrow account — accessible only in tightly defined cases like completing a transaction or shareholder redemptions. Investors may redeem shares for banknotes under certain conditions, such as voting against the proposed acquisition.
SPACs would have a 24-month window to complete a merger or acquisition, extendable by 12 months with shareholder approval, though the sponsor cannot vote. The sponsor and any managed funds are also barred from holding any stake in the target company, and the transaction must be worth at least 80% of the escrowed capital, with SPAC shareholders retaining no less than 30% post-transaction.
Why it matters: The move is designed to boost liquidity in Nomu by encouraging private sector companies to go public through SPACs, which is considered easier and faster than traditional IPO. It also opens the door for qualified investors to back acquisitions of unlisted, previously out-of-reach Saudi firms.
Catching up with the region: The UAE submitted the region’s first SPAC framework in 2021 through the Abu Dhabi Securities Exchange (ADX), allowing more flexibility in cross-border transactions and sponsor ownership. Egypt followed in late 2021 with stricter controls, including regulatory pre-approval of target companies.
