On April 3, 2023, significant amendments (the “Amendments”) to the policies of the Canadian Securities Exchange (the “CSE”) came into force. The CSE has amended each of its ten policies – some of the Amendments are material and comprehensive, while others are consequential changes made for housekeeping purposes.
We are releasing a series of blog posts which summarize the material Amendments implemented by the CSE. In this fourth and final post, we will focus on Amendments related to the establishment of special purpose acquisition corporations (“SPACs”). Readers are also encouraged to review our recent posts on the qualifications for listing of new issuers on the CSE and the distribution of securities. Those posts are available here and here and here.
Special Purpose Acquisition Corporations
A SPAC is a shell company which is formed strictly to raise capital through an initial public offering for the sole purpose of acquiring a private company, thus making it public without going through the traditional listing process. The Amendments allow for the listing of SPACs on the CSE. The requirements related to SPACs are similar to those of the Toronto Stock Exchange and the Cboe Canada.
Initial Listing Requirements for SPACs
The Amendments introduce specific listing criteria related to SPACs. SPACs must submit a listing application to demonstrate that they meet the CSE’s SPAC listing requirements, which are as follows:
a minimum initial public offering raise of $30,000,000 through the sale of shares or units;
at least 1,000,000 freely tradable securities are held by public holders;
at least 150 public holders of securities, holding at least one board lot each;
the aggregate market value of the securities held by public holders is $30,000,000; and
a minimum initial public offering price of $2 per share or unit.
The CSE may grant or deny a SPAC listing application, notwithstanding it meeting the listing requirements. In exercising its discretion, the CSE must be satisfied that public interest considerations are satisfied, and will also consider the experience and track record of the officers and directors of the SPAC, the nature and extent of officers’ and directors’ compensation and the founding shareholder’s equity interest in the SPAC.
Qualifying Acquisition
The proceeds raised from an initial public offering of a SPAC will be held in escrow. Within 36 months an in initial public offering, a SPAC must complete either a “qualifying acquisition” or a liquidation distribution. The businesses or assets forming the qualifying acquisition must have an aggregate fair market value equal to at least 80% of the aggregate amount then on deposit in the escrow account. Any proposed qualifying acquisition must be approved by a majority of directors unrelated to the qualifying acquisition and, subject to limited exemptions, a majority of the votes cast by shareholders of the SPAC at a meeting duly called for that purpose. SPACs are also required to file a prospectus containing disclosure regarding proposed qualifying acquisitions in each jurisdiction in which the SPAC and the resulting issuer is, and will be, a reporting issuer. Completion of the qualifying acquisition without a receipt for the final prospectus will result in the delisting from the CSE. The listed issuer resulting from the completion of the qualifying acquisition by the SPAC must meet the CSE’s original listing requirements for an “NV Issuer”.
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DISCLAIMER: This post is intended to convey general information about legal issues and developments as of the date above. It does not constitute legal advice and must not be treated or relied on as such.