Top Exchanges Battle for SPACs

September 27, 2017

On September 14, venture capital firms Social Capital and Hedosophia made headlines by raising $600 million in an initial public offering of Social Capital Hedosophia Holdings Corp., a special purpose acquisition company, or SPAC, reports Bloomberg. According to Bloomberg, the SPAC’s business plan “is to invest the funds in one or more late-stage companies—likely those valued at $1 billion or more, dubbed unicorns.” Chamath Palihapitiya, Social Capital’s managing partner, argues that the idea offers the SPAC’s potential acquisition targets several advantages compared to the traditional IPO process, “including giving employees a way to cash out their shares sooner and more easily, and allowing leaders of venture-backed companies to skip a distracting regulatory and marketing process.”

The exchanges were ready to seize this kind of listing. On August 25, Nasdaq filed a request to change its listing rules to accommodate SPACs. Nasdaq has over 90 such listings and has attracted 95% of all SPAC IPOs listing on a national exchange, boasts a recent Nasdaq report on SPACs. The proposed change at Nasdaq, which remains subject to SEC approval, would reduce the number of shareholders required for a SPAC from 300 to 150. In July, the SEC approved an NYSE rule change to lower its SPAC requirement for shareholders from 500 to 300, matching the Nasdaq level at that time.

For more on the competition between Nasdaq and the NYSE to attract more SPAC listings, read this recent account from The Wall Street Journal.

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