An influential MP has urged the City to back the boom in special purpose acquisition companies to avoid falling behind European rivals.
Data released last month suggests European exchanges have already surpassed annual records in 2021 as they cash in on blank-cheque company listings.
Amsterdam has pipped London to the biggest deals, however. The Dutch capital’s five Spacs so far this year have been worth more than $2bn combined, compared to the City’s three listings, of which just one has raised more than $2m, and major UK companies Hedosophia European Growth Spac and Crystal Peak Acquisition opted to head to the Netherlands.
Speaking with Financial News All-Party Parliamentary Group for Financial Markets and Services chair and former HSBC executive Bim Afolami MP said that fears in London over loose regulation could harm the City’s ability to compete for Spac deals.
“Where are most Spacs going in Europe? Amsterdam. Is anyone accusing Amsterdam of being the Wild West? It’s just not true,” he said. “The attitude of some of the people in the City of London itself is one I think is not necessarily going to lead to a successful City of London in the next 20 to 30 years.”
“I do not think personally that Spacs are the be-all and end-all. We have had cash shells before. It’s not in and of itself revolutionary, but we should seek to embrace innovation and do it properly rather than see it go to Amsterdam.”
Spacs use public markets to raise money for acquisitions, which usually take place within 24 months. The vehicles are seen as a swifter route to financing than traditional IPO structures. The FCA has already proposed rolling back the requirement to suspend listing for some Spacs after pressure from the Lord Hill review to liberalise the rules around them.
“The question is do you allow investors freely entering into contracts to invest in what they want to invest in as long as it doesn’t cause systemic damage or harm to retail investors? You should do that as much as you possibly can,” Afolami told FN.
“When the big bang happened a lot of people said it was going to destroy everything about how the City worked,” he added. “These innovations come about…you need to round off the edges if there are rough edges and embrace innovation done in a safe way.”
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