Saudi Arabia explores setting up framework for SPAC listings

Saudi Arabia’s market regulator is looking into setting up a legal framework to allow special-purpose acquisition companies (SPAC) to list in the kingdom.

“This is one of the things that we are allowing for businesses to reach the market easier,” Yazeed Saleh Aldemaigi, deputy, strategy and international affairs at the Capital Market Authority, said at the Financial Sector Conference in Riyadh Thursday.

Also known as blank-check firms, SPACs are publicly listed vehicles that merge with private firms.

Aldemaigi didn’t give a time frame for when the framework could be introduced.

SPAC in Saudi

Saudi Arabia’s plans come after the SPAC industry has quickly gone from being one of Wall Street’s hottest fads to a sector beleaguered by poor returns, pulled deals and fading investor enthusiasm.

After exponential growth — mainly in the US — as everyone from politicians to celebrities and Wall Street titans rushed to create them amid ultra-low interest rates, the frenzy came crashing down as regulators put the products under more scrutiny and rising interest rates turned many investors off such listings.

In the Middle East, the SPAC market is still tiny. A blank-check firm backed by Abu Dhabi wealth fund ADQ and Chimera Investments was the first to list in the region last year, while two other planned SPACs have been delayed.

The chief executive officer of Saudi Arabia’s main stock exchange said last year the bourse was looking at allowing SPACs, but that the timing would need to be carefully planned.

Options trading

Aldemaigi also said Saudi Arabia may allow options trading, part of move by regional exchanges to allow derivatives trading. The Tadawul stock exchange has also introduced single-stock futures contracts and index futures in recent years.

Options give the buyer the right to buy or sell an asset at a specific price at any time during the contract’s life. Futures, meanwhile, oblige the buyer to acquire the asset, and the seller to sell, at a specific future date.

Aldemaigi said the regulator is currently reviewing initial public offering plans by 80 companies, demonstrating that the pipeline for new listings in the kingdom is strong, even though market conditions in the region have weakened since last year.

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