Cayman Islands for SPACs

A special purpose acquisition company (“SPAC”) has no commercial operations and is essentially a blank check company which goes public with the sole intention of acquiring a target entity within a set time period (typically 18 or 24 months).

2021 saw a significant increase in the number of successfully launched SPAC IPOs as an alternative way to raise capital and we have continued to see this trend into Q1 2022. The Cayman Islands has proven itself to be the domicile of choice for around one third of all SPACs globally who have chosen to be structured as Cayman Islands exempted limited companies. 679 SPACs were launched in 2021 globally, worth a combined US$172.2 billion.

Market activity dramatically slowed in the second quarter of 2021 due primarily to SEC concerns regarding forward looking statements and the accounting treatment of warrants, but since that time there has been a steady uptake as sponsors adjust to evolving market terms.

The majority of SPAC IPOs have been arranged by seasoned US managers and take place on NASDAQ or the New York Stock Exchange. However, Asian and European sponsors and investors have begun to enter this space using Cayman Islands SPACs from which to raise capital. The interest from Asia is due primarily to The Singapore Exchange announcing new rules in September 2021 enabling SPACs to list on the Main Board of the Singapore Exchange. As a result of this we expect to see a number of Asian focused SPACs established in the Cayman Islands in 2022 together with ‘de-SPAC’ transactions as the entities find and execute deals.

Should you require any advice relating to SPACs in the Cayman Islands please contact megan.wright@stuartslaw.com or your usual Stuarts attorney.