Swiss SPAC opportunities on horizon for asset managers

The Swiss Financial Authority (FINMA) has given Special Purpose Acquisition Companies (SPACs) the green light. Our colleagues in Switzerland, Managing Director Jurgen Borgt and Business Development Manager Emma Holthuizen, outline the listing standards in preparation for the 6th of December when SPACs can officially list on the Swiss Bourse SIX.

Look out for our upcoming Swiss SPAC opportunities report brought to you by the Intertrust Group team

Although SPACs will not be permitted to list and trade on the SIX until 6 December, there are already signs of activity. For instance, FINMA has approved one fund manager’s fund to partake in SPAC Investments as of 16 November, 2021.

The fund’s s co-founder has expressed that he is convinced that together with experienced entrepreneurs and industry experts, SPACs will make it possible to bring “hidden champions” to the Swiss stock exchange, which historically has an informed investor base.

What are the listing standards and investor protections for Swiss SPACs?

Swiss SPACs are subject to the same requirements as other listed companies. With this in mind, all SPACs in Switzerland must be listed as a stock corporation (AG/SA) with the sole purpose to merge or acquire one or more operating companies.

There is a three-year maximum limit for a Swiss SPACs to complete a targeted merger or acquisition. This is longer than in other SPAC markets, many of which have two-year time frames with special extensions up to three years.

If this term limit is not met, the SPAC will be automatically delisted and liquidated, and the funds in the escrow account will be returned to investors.

The freely tradable securities must amount to at least 20% of the outstanding shares and have a market capitalization of CHF 25 million (≅ USD 26.8 million). While there is neither a track record requirement nor an obligation to have financial statements going back three years for the issuer of the SPAC, this changes after the de-SPAC, as we explain below.

SIX has paid particular attention to investor – notably retail investor – protection. For example, SPACs are required to disclose who their founders are, any potential conflicts of interest and the amount retrievable when an investor does not agree with a merger or delisting.

Equally, information must be provided on the conditions under which additional capital may be raised as per the target company’s industry.

• The prospectus must include information on the dilutive effect of additional issues.
• Approval of the investors is required for acquisition(s) or merger(s).
• The combined entity after de-SPAC must publish quarterly financial statements for up to two years if the acquired company does not have audited financial statements going back three years.

Timelines, investor protections, certain conditions and disclosure standards have also been put in place. These include:

• Founding shareholder economic interests in the target company must be made known.
• The issue proceeds raised in an IPO must be deposited in an escrow account at a bank.
• The SPAC must grant all shareholders a fundamental right to return the shares acquired in the IPO.
• Instead of shares, investors may be offered convertible bonds in the IPO.
• The board of directors, management, founders and sponsors of SPACs must adhere to a lockup agreement barring directors and managers from selling shares for six months. They also have reporting requirements and must disclose management transactions. This applies until one month after the six-month blocking period.

Considering the above requirements, which are clearly aimed at investor protections, Swiss and international sponsors alike will have the advantage of hindsight from lessons learned from already active SPAC markets.

Why Intertrust Group?

As SPAC standards and capital markets evolve across the globe, you may need a bespoke approach from a service provider with a genuine understanding of how markets are changing. Our international team of experts in Switzerland and active SPAC markets can provide the following services:

• Company formation
• Global corporate secretarial services
• Domiciliation and management
• Process agent
• Trustee services
• Escrow services
• Facility agent
• Cash management