RIYADH - The Saudi Capital Market Authority (CMA) has approved a regulatory framework for offering Special Purpose Acquisition Companies (SPACs) in the Nomu parallel market.

This is through amendments to the Executive Regulation of the Companies Law for listed joint stock companies, the Rules on the Offer of Securities and Continuing Obligations, and the Glossary of Defined Terms used in the CMA’s regulations and rules. The amendments will come into force upon publication.

The amendments aimed to diversify available investment products and encourage private sector companies to pursue listing, contributing to meeting financing needs, increasing offerings, and enhancing liquidity in the parallel market. They also provide investors access to non-listed companies that were previously difficult to invest in directly.

The framework regulates the conditions and requirements for registering and offering SPAC shares in the parallel market. Key provisions include requiring the company to be established by a sponsor and allowing its shares to be redeemable at the option of shareholders.

Shareholders are granted the right to redeem their shares for a cash amount from the escrow account in proportion to their holdings, in specified cases, including when a SPAC completes a transaction with a target company and a shareholder votes against approving the transaction.

The amendments also require that post-offering capital must not be less than SR100 million, supporting the efficiency and attractiveness of the parallel market.

The amendments further outline conditions for completing acquisition or merger transactions between SPACs and target companies, ensuring stronger governance and protection of investors’ rights.

These include prohibiting the sponsor, or any investment fund managed by the sponsor, from holding direct or indirect ownership in the target company, requiring the value of the target company to represent at least 80 percent of funds held in the escrow account, and ensuring that SPAC shareholders hold no less than 30 percent of the target company’s shares after the transaction.

Regarding timelines, SPACs are required to complete transactions within 24 months of listing in the parallel market, with a possible extension of up to 12 additional months subject to approval by the extraordinary general assembly.

The sponsor and its affiliates are not permitted to vote on extension decisions, and the CMA must be notified accordingly.

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