The AMF points out that French law is perfectly suited to the reception of these structures on the Paris Stock Exchange and to the protection of investors. Robert Ophèle spoke about the subject during the presentation of the 2020 annual report, expressing a cautious benevolence. The SEC has just expressed some reservations in the United States.

The Autorité des Marchés Financiers (AMF) has joined the market's efforts to support SPACs by issuing an encouraging statement.

These promising Special Purpose Acquisition Companies are companies with no commercial activity that go public to finance the acquisition of one or more unlisted companies that are not yet known to investors at the time of listing. The investors sign a sort of blank cheque to the founders, personalities who have already proved themselves and in whom they have confidence. However, the investors have a right of review or vote on the investment made. If they do not acquire the property within the specified period (18 to 24 months), the money invested is returned to them.

The AMF welcomes

"The AMF, along with the entire Paris financial centre, is delighted to be able to host these projects, which reflect and contribute to the attractiveness of France's financial markets", even concludes the text of the regulator.

The AMF points out that the French regulatory framework is well suited to these innovative structures, while ensuring investor protection. Two SPACs have been listed on the professional segment of Euronext Paris in recent years, it said, adding that both transactions had been approved by the AMF. The stock market regulator is referring to Mediawan and 2MX, launched by Xavier Niel and Matthieu Pigasse.

It is true that these structures are already much more popular on the other side of the Atlantic, to the point that some experts speak of a traffic jam, and that they constitute the majority of IPOs currently being carried out on Wall Street.

Several devices

Among the various options available under French law, the AMF cites the following: 

• the preference share regime allows the creation of shares with specific rights and to differentiate, within the framework of a SPAC, the shares subscribed by the founders and sponsors from those offered to investors;
• the issue of redeemable preference shares to investors allows them, under certain conditions, to have their shares bought back by SPAC if they do not wish to remain shareholders of the company after the completion of the initial business combination (IBC);
• share warrants (BSA) allow investors to acquire shares at a predetermined price at a later date and thus benefit from the company's eventual success after the IBC;
• the possibility of issuing warrants and capital increases reserved for a class of persons provides SPAC with the flexibility to raise additional funds that would be needed to finance the CBI;
• the SPAC may place the funds raised during the IPO in escrow pending the IBC, by setting up an escrow agreement. In France, several types of secure and very flexible escrow agreements are available, some of which involve the remittance of the funds to a first-rate public institution (Caisse des Dépôts et Consignations).

Prospectus in English if needed

In a show of good faith, the AMF also reminds investors that prospectuses are prepared in a timely manner and, if the issuer so wishes, in English.

However, the regulator stresses that it is committed to protecting investors, in line with its remit. In this respect, the AMF is particularly attentive to

• the existence of commitments by the founders of SPAC to retain their shares and to manage conflicts of interest;
• to ensure that the information provided to investors is complete, understandable and consistent. The regulator is, for example, attentive to information relating to the sector of activity, risk factors, governance and the management of possible conflicts of interest; 
• the setting up of an escrow for the funds raised during the IPO pending the first acquisition and therefore the possibility for investors to be reimbursed if the operation does not take place;
• the possibility for shareholders, at the time of the IBC, to be reimbursed by the repurchase of their shares (or any other equivalent mechanism);
• the procedures for approving the initial acquisition transaction (IBC) and the information disseminated to investors in this regard.

A more cautious approach

Robert Ophèle, the president of the AMF, also touched on the subject on Thursday when he gave the speech presenting the 2020 annual report with a more nuanced tone than the press release:"In a way, the United States has shown us the pitfalls to be avoided with almost all SPACs launched by poor-quality sponsors that turned out to be losers. So let me be very clear: the AMF is not opposed to SPACs on principle. If they are well structured to ensure that interests are aligned, SPACs are a way to float large companies, complementing traditional IPOs and establishing a potentially fruitful link with private equity.".

For its part, the SEC (Securities and Exchange Commission) also seems to be opting for a more cautious approach to SPACs. In two "public statements" in the form of warnings to investors, John Coates, Acting Director in the Corporate Finance Division of the US Securities and Exchange Commission, expresses his concerns and points out certain risks legal and accountants related to these structures.