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European investors warm to SPACs

But US landscape is more favourable – for now


Pete Carvill

Changing regulation in Europe is set to alter the development of the Special Purchase Acquisition Companies (Spac) market, according to Pinsent Masons.

The report, published on 19 October on the law firm’s website, said that while the growth in Spacs in the US has been exemplary, Europe has lagged due to an adverse regulatory environment.

Wrote Dr Susanne Lenz and Alexander Spoor, partners at the company: “The US Spacs market dwarfs Europe’s currently. According to Deloitte, the value of Spac IPOs recorded for the first five months of 2021 in Europe was $3.9bn, compared to $98.5bn in the US. The number of issuances in Europe was 12 over the period, compared to 331 in the US.”

The disparity in growth between the US and Europe, said the authors, was due to the regulatory environment.

They wrote: “US regulation is also more favourable to Spacs than in Europe. The EU’s Alternative Investment Fund Managers Directive can trigger regulatory obligations on Spacs depending on how they are set up, for example. There are signs of growth in the European market, however. Deloitte’s report highlighted the rise in activity levels in 2021 compared to 2020 where there were just four Spac IPOs in 2020, valued at $496m in total.”

According to the company, Amsterdam is proving to be ‘increasingly popular’ for Spac listings, given that its regulatory environment is closer to the US than its European counterparts.

The authors write: “One aspect of regulation in the Netherlands that reflects the US regime, and which differs from most EU countries, is that investors can withdraw their money from a Spac in the Netherlands after the Spac has announced its target for acquisition.

“Pierre François of Pinsent Masons in Paris said the minimum amount required to invest in a Spac in Amsterdam is much lower than in Paris, and this is a further regulatory factor that is helping Amsterdam into a leading position in the European market.”

Spacs, according to the Wall Street Journal, have become attractive to investors recently as an alternative to bonds. Writing on its pages last week, reporter Ben Goldfarb said: “While the mania helped increase the number of Spacs to 6.5 times what it was in the early days of the covid-19 pandemic, this year’s rout has driven down share prices. That has created what some describe as a near risk-free opportunity that offers an attractive return compared with alternatives like short-term US Treasurys [sic].”