Going Dutch? Comparing Regulatory and Contracting Policy Paradigms Via Amsterdam and London SPAC Experiences

Abstract

The Special Purpose Acquisition Company (SPAC) is a cash-shell listed with the sole purpose of acquiring an operating business. Although SPACs, in a high interest rate environment, may have recently fallen out-of-favor, it was not long ago when they dominated the US markets. SPACs did not, though, come without controversy. Arguably the incentives ingrained in typical SPACs make them poor investments for long-term shareholders, while lucrative for their sponsors and shareholders seeking to exit prior to an acquisition. Europe was not immune to the SPAC craze, but London and Amsterdam took differing approaches. While London employs a regulatory paradigm pursuant to which SPACs (to avoid a trading suspension upon announcement of an acquisition) must adopt specific terms, Amsterdam follows a contracting paradigm, giving market participants broad scope to implement any SPAC terms that they see fit. In this article, the terms of the cohort of London- and Amsterdam-listed SPACs from 2021 and 2022 are comprehensively scrutinized in the context of the terms that are embedded in the typical US SPAC. This article finds that many of the terms mandated by London’s regulatory rules are also found in Amsterdam-listed SPACs. However, many of those London- and Amsterdam-listed SPACs also display many of the qualities seen in the US which have caused so much consternation. Taking inspiration from the phrase ‘going Dutch’, it is argued that an optimal SPAC policy that assuages concerns levied at US SPACs should take contributions from both the regulatory and contracting paradigms.

Keywords: SPACs, Special Purpose Acquisition Companies, stock market regulation, Listing Rules, London Stock Exchange, Euronext Amsterdam

JEL Classification: G18, G30, G34, G38, K20, K22