Tel Aviv, November 29,2021 - TASE (TASE: TASE) posts for public comments the rules for the listing of Special Purpose Acquisition Companies (SPAC).
SPAC is a company that on its IPO date has no business activity. The company is established by experienced and reputable entrepreneurs for the ultimate purpose of merging with a private company with existing operations that is looking to list on TASE. The company has a limited window to merge a target company. If it is unable to do so within the defined timeframe, the money is returned to the public and the company is delisted.
To date, three prospectuses had been submitted to TASE and to ISA for Issuing SPAC Companies in Israel, of which one issuing has been completed, by iSPAC 1, and the securities of which are traded on TASE since August 22, 2021.
For the purpose of formulating the principles and requirements for listing SPACs in Israel, the TASE and ISA staff have examined, inter alia, the listing requirements for SPAC's overseas, and consolidated the rules suitable to the characteristics of the local market.
Following are the principal proposed rules for the listing of SPACs on TASE:
A. Company value, minimum free float value and minimum institutional participation rate - The requirements include a minimum company value of NIS 400 million, a minimum free float value of NIS 300 million and a minimum 70% participation by institutional investors in the offering, to ensure that the company size is significant and that the founders' reputation is scrutinized by institutional investors.
B. Skin in the game - Entrepreneurs' participation in the risk - the founders will undertake to make a cash purchase, prior to the listing, of shares and warrants at a price identical to the price of allotment of the securities to the public, in an amount of at least NIS 40 million. This criterion, combined with the prolonged lockup period that applies to the founders, ensures that the founders partake in the risk and are motivated to reel in a good deal.
C. Manner of investment and holding capital received from the IPO and from future capital raising - Offerings consideration will be deposited with the trustee and will be used to acquire a target company. If such acquisition is not achieved, the capital raised will be returned to the investors. Until the capital is used, the trustee will work to protect its value by investing it in low-risk channels.
D. Types of securities allowed and minimum share price in additional capital raising rounds - Until the acquisition of the target company is complete, the company may only issue shares or warrants to the public, as well as warrants (unregistered) to the founders. The share price and the exercise price of warrants in additional offerings shall not fall below the price of the share on the IPO on TASE.
E. Activity period and minimum value of investment -
a. The SPAC will undertake to acquire a target company within 24 months of the date of the IPO. Inside 3 months prior to the end of the aforesaid 24-month period, the company may apply to TASE for an extension of the activity period by an additional 6 months, subject to the signing of a memorandum of understanding for the acquisition of one target company.
b. The target company will be acquired for an amount, in cash or shares, equal to at least 80% of the amounts raised, with the addition of the founders' investment.
F. Lockup arrangements - The SPAC founders will be subject to a longer lockup period than that applicable to a stakeholder in a new company. Lockdown will apply until the acquisition of a target company has been completed. Once the acquisition of a target company has been completed, a stakeholder could sell shares in the amount of the value of his investment prior the IPO, provided that the selling price is not less than the share price in the IPO and subject to a quantity limit that is based on the daily trading volume, in order to ensure that proper trading is maintained after the target company has been acquired. In order to ensure that the founders also hold an interest in the target company that they are proposing to merge, in addition to the aforesaid lockup arrangements, unregistered warrants allotted to the founders will also be under lockdown for a period of 12 months after the completion of the acquisition of a target company, to be followed by a 24-month trickle period.
G. Acquisition of a target company - The completion of the acquisition of the target company will be subject to the general meeting approval of the acquisition by a simple majority, excluding the votes of the founders and of anyone holding personal interest, and to TASE's confirmation that the merged company complies with the requirements for the listing of a new, non-SPAC company.
H. Reimbursement of money to the SPAC shareholders - An obligation to reimburse money will arise in two instances: a. To those opposed to the acquisition of a target company that has been approved at the general meeting. b. If the company is unable to merge a target company within the defined period (not later 30 months), or if a founder who is a key member of the company retires and a successor has not been approved by the general meeting.
I. A SPAC may only be included in the Tamar Universe at the end of 90 days from the completion of acquisition of the target company.