SPAC in Switzerland

Special Purpose Acquisition Companies or SPACs are listed shell companies with the purpose of acquiring equity in rising, unlisted companies and thus facilitating the acquired companies’ access to the capital market. Instead of an IPO of the acquired company, the shell company is listed on the stock exchange, where investors inject capital. As a rule, it is not yet known at the time of listing which company is to be acquired. The purpose of the SPAC may specify a fixed time frame in which to search for potential investments and the intended industry of the target company. If no suitable company is found for acquisition within the set time frame, the SPAC is liquidated and the investors receive the majority of their investment back. If a suitable company is found, it is usually integrated into the SPAC through a merger and the newly formed company continues the business of the purchased company with access to the capital market.

SPACs are already a valid alternative to IPOs in the USA and other European countries, as they allow time savings of around one third and cost savings of up to 50% compared to IPOs. The Swiss capital market has lagged behind so far though. Now the SPAC boom is to find its way into Switzerland as well.

Since in Switzerland only companies in the legal form of a company limited by shares (Aktiengesellschaft) can be traded on the stock exchange, the Swiss SPAC is subject to stock corporation law. This is associated with the disadvantage that in the event of an unsuccessful search for a target company or the withdrawal of a larger investor (redemption), the SPAC cannot easily buy back its shares. This is because, under current company law, a company cannot hold more than 10% of its own shares. In addition, a buyback of shares would be associated with a capital reduction, which is why the general meeting would have the final say in a redemption. Thus, a tax-relevant (partial) liquidation must be carried out if the SPAC’s objective cannot be achieved or an investor does not agree with the planned acquisition.

In order to be listed on the SIX Swiss Exchange, the company must have existed for three years. Although the SIX already has exceptions, these include a 12-month ban on the sale of shares by shareholders who hold more than 3% of the capital. This could be another obstacle for investors.

The SPAC investment vehicle still has a long way to go in Switzerland if it wants to compete with foreign variants. In fact, no SPAC has yet been successfully listed on the Swiss stock exchange. The disadvantages in the area of buyback options, tax law and listing regulations have so far outweighed the advantages. With the introduction of the capital band through the revision of the company law, certain disadvantages could be cushioned, but further steps are needed by the legislator and the SIX to ensure the successful implementation of SPACs in the Swiss capital market. However, in view of FINMA’s recommendation to SIX to revise the listing rules regarding SPACs, the introduction of the investment vehicle can be expected soon.