For those doing SPACs, you may want to take note of this recent proposed rule change from the NYSE. The proposal would amend Section 102.06 of the Listed Company Manual to allow a SPAC to “remain listed until forty-two months from its original listing date if it has entered into a definitive agreement with respect to a business combination within three years of listing.”
Under current rules, the NYSE will “promptly commence delisting procedures” for any listed SPAC that fails to complete its de-SPAC merger within the shorter of three years or the time period specified by its constitutive documents or by contract—even if the listed SPAC has entered into a definitive de-SPAC agreement within three years of its listing date, but is unable to complete the transaction before the three-year deadline. The NYSE indicates that, “as a practical matter,” the SPAC would have to “liquidate, transfer to a market that provides a longer period of time to complete the Business Combination, or face delisting.” The NYSE notes that the three-year limitation is solely a creation of NYSE rules and that “many SPACs have been able to extend their lives beyond three years either by shareholder approval or other mechanisms provided under their organizing documents.” Under current rules, however, any extension beyond three years, even if approved by shareholders, does not avert the delisting mandate.
The NYSE notes that, while Nasdaq’s SPAC listing requirements include a similar three-year limitation, Nasdaq appeal panels have granted additional time to SPACs that have entered into definitive agreements and requested additional time beyond the three years to consummate the de-SPAC merger.
The proposed amendment to Section 102.06e would extend the period that the SPAC can remain listed if it has signed a definitive de-SPAC merger agreement. As amended, Section 102.06e would provide that the SPAC “will be liquidated if it has not (i) entered into a definitive agreement with respect to its Business Combination within (A) the time period specified by its constitutive documents or by contract or (B) three years, whichever is shorter or (ii) consummated its Business Combination within the time period specified by its constitutive documents or by contract or forty-two months, whichever is shorter.” If the SPAC fails to comply, the NYSE will promptly commence delisting procedures.
