The UK’s financial regulator, the Financial Conduct Authority (FCA) has proposed the removal of a barrier that could lead to the rapid development of “Special Purpose Acquisition Companies, (SPACs), also known as “blank check companies”. This follows a detailed review by the UK Listing Authority.

Currently, listings for SPACs in the UK are suspended when they secure a purchase, leaving investors in limbo until the deal is completed. The FCA’s proposal would mean certain blank cheque companies could avoid this requirement if they were able to 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 would also be required to obtain permission for any acquisition with clear key conditions if the director has a conflict of interest through the selected target company.

It is likely that this proposal is a response to the active role that financial companies have played in conducting IPOs in the United States. This trend has led to increased investment in the United States and the withdrawal of funds from British companies, with a similar pattern of companies choosing locations in Amsterdam or Frankfurt away from 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 there have been just 33 SPACs in the UK so far, of which 40% are currently suspended. As with all regulatory changes and attempts at market liberalisation, the pros and cons must be weighed up carefully. 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, with investment in SPACs creating results for investment banks and major lenders, the scene could soon be set for the UK to benefit from the blank cheque company boom.

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