ESMA Statement on SPACs

Aug 11, 2021 Benn-Ibler Rechtsanwälte

Special Purpose Acquisition Companies (SPACs) have gained strong popularity within the European Union since the beginning of the year. In a public statement, the European Securities and Markets Authority (ESMA) has now commented on questions regarding the content of prospectuses and investor protection.

In simple terms, a SPAC is a company whose sole purpose is to go public in order to buy one (or more) companies with the capital generated by the issue of shares.

The initial trading of shares in a SPAC begins with the Initial Public Offering (IPO). In this context, an approved prospectus of the SPAC is published. In this regard, the ESMA considers it essential to create a comparable framework for the content of these prospectuses.

The respective competent national authorities are to proceed in a coordinated manner when examining these prospectuses, for better understanding. Private investors are also to be protected, as they often do not understand the complexity of SPACs and the consequences of a purchase.

The ESMA statement therefore contains a list of recommended requirements that the competent authorities should observe when reviewing prospectuses. In overview, these include:

• All risk factors
• Presentation of a clear picture of the investment strategy, as well as criteria for the acquisition of the company
• Managers and their experience
• Potential for conflicts of interest
• Shareholder rights and information on major shareholders
• Information on the planned purchase of the company, especially in the event that there is not enough capital for the entire purchase
• Information on the share price

In addition, the prospectuses should contain information on the future of the company after the targeted company has been acquired or what will happen if no suitable company is found for acquisition.

ESMA states that this list is not exhaustive and leaves it open to the authorities to take into account further criteria in the examination in the context of investor protection.

ESMA32-384-5209 (15.07.2021)