Saudi Arabia is considering the launch of special purpose acquisition companies (SPACs) on its parallel market, Nomu, aiming to encourage more private sector listings and expand investment opportunities.
The Capital Markets Authority (CMA) is seeking public input on a proposed regulatory framework for SPACs, part of a broader effort to deepen the capital market and diversify available investment products. The initiative is designed to address the financing needs of the economy and support market growth.
Under the proposal, SPACs would be established as joint stock companies, primarily to acquire or merge with unlisted Saudi firms. These transactions would follow existing rules for securities offerings and ongoing obligations.
The framework proposes several key requirements:
- SPACs must complete an acquisition or merger within 24 months of listing on Nomu, with a possible 12-month extension if approved by shareholders.
- At least 80% of SPAC funds must be held in escrow, and shareholders should own no less than 30% of the target company post-transaction.
- Sponsors, who must be licensed institutions, are required to hold between 5% and 20% of the SPAC’s capital and face restrictions on selling their shares during certain periods.
- SPACs must have a minimum post-offering capital of SR100 million and offer redeemable shares to investors under specific conditions.
- A minimum of 90% of raised capital should be kept in a local escrow account until certain criteria are met.
The CMA is also working to improve regulations for direct listings and is collaborating with tax authorities to remove withholding tax on all listed securities, aiming to attract more local and international investors.
In recent activity, Nomu saw 28 IPOs and three direct listings, raising about SR1.1 billion. The new SPAC framework is expected to increase market liquidity and participation by making it easier for companies to go public.