Stikeman Elliott LLP has the distinction of acting as legal adviser to the first ever IPO of a Canadian SPAC to date. A Special Purpose Acquisition Corporation (a SPAC) is a publicly-traded shell company that has as its primary purpose the acquisition of one or more companies. SPACs raise money from the public and use those funds to acquire one or more operating companies. While the TSX adopted specific rules to permit for the listing of SPACs in 2008, no SPACs had been launched in Canada until this month.
Generally, a SPAC is founded by a sponsor (or founder) with the credibility and expertise to raise funds and identify a promising operating business. The founder (together, if desired, with some or all of the directors or officers of the SPAC) holds 100% ownership of the SPAC before its IPO and establishes the management team of the SPAC.
Once formed, the SPAC must apply to be listed on the TSX, satisfying various listing-related requirements. After listing, a SPAC has a maximum of 36 months to complete a qualifying acquisition. Specific listing requirements imposed by the TSX include having a minimum offering price of $2 and at least 1,000,000 freely tradeable shares with an aggregate market value of at least $30,000,000 (held by a minimum of 300 “board lot” holders). Further, at least 90% of the proceeds raised from the IPO are subject to escrow to be applied towards the funding of the qualifying acquisition, and at least 50% of underwriting commissions must similarly be placed in escrow to be released upon completion of same.
It should be noted that there may be marked differences among ongoing compliance requirements of the TSX and Canadian securities regulators as compared to U.S. best practices, where the market for SPACs is further developed. It may therefore be necessary to negotiate exemptions in order to address the differences and avoid inefficiencies in the listing and operation of SPACs in Canada.