Special purpose acquisition companies (SPACs) are one step closer to trading on Tadawul’s parallel market Nomu, after the Saudi Exchange published draft amendments (pdf) to its rulebook last week. The proposal will be open for public consultation until next Tuesday, 7 October, the bourse said in a separate statement. The move comes nearly five months after the Capital Market Authority (CMA) set the guardrails for SPAC listings on Nomu, as part of a broader push to deepen the Kingdom’s capital markets.

SOUND SMART- A SPAC, or “blank-check” company, is created with the sole purpose of merging with or acquiring a private business and taking it public. This route to an IPO means the SPAC — which doesn’t actually have any commercial operations of its own — doesn’t face the rigors of a traditional listing. This route is particularly attractive for fast-growing firms that want quicker access to capital markets without being hostage to volatile valuations, especially those still investing heavily before turning profitable. It’s the path that MENA-born names like Anghami and SWVL have already taken to public markets.

No shortcuts to the main market: SPACs will only be able to transfer to Tadawul’s main market once they complete an M&A transaction and transition into an operating company. Under the draft rules, direct main market listings are off the table, with all SPACs required to start life on Nomu.

Dealmaking mechanics: SPACs would have 24 months to complete an M&A, with a one-year extension possible if shareholders agree. SPAC investors must end up holding no less than 30% of the combined target company, which, according to the CMA framework, must be worth at least 80% of the funds raised. Trading is suspended once a merger is declared complete.

What happens if it falls through? If the SPAC fails to close an M&A within the deadline, or if escrowed funds are depleted, the listing is cancelled and investors get their money back within three days, and the company must publicly disclose the reasons for cancellation and its impact.

Also in the draft:

  • Only CMA-licensed investment firms can act as sponsors, and both the SPAC and its sponsor must appoint two dedicated representatives to address the exchange;
  • Listing applications by a SPAC require approvals from both the SPAC’s board and the sponsor’s board;
  • A SPAC has to be a joint-stock company with at least SAR 100 mn in capital at listing;
  • The listed SPAC must have at least 50 public shareholders, and will face the same minimum requirement for a 20% public float (or SAR 30 mn market value) as for other Nomu issuers;
  • SPACs can issue new shares through a rights issue before completing a merger, a flexibility not usually granted to other Nomu listings.
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