Nasdaq, NYSE Propose Aligning Deadlines for SPAC Mergers, Delistings

The quest for uniformity between the major U.S. stock exchanges when it comes to mergers of special purpose acquisition companies took an interesting turn this week.

First, a primer on recent events for the uninitiated. SPACs are shell companies. Their sponsors essentially bypass the traditional process of holding an initial public offering by listing SPACs on stock exchanges with the goal of raising funds to acquire private companies. Once completed, these “de-SPAC” mergers allow the private companies to go public without the expenses and oversight required for standard IPOs.

The SPAC fad with investors appears to have died a natural death. That, however, hasn’t stopped stakeholders from trying to get a better handle on how to regulate the zombie companies.

In April, the New York Stock Exchange proposed a rule to extend the deadline for SPACs to complete their de-SPAC transactions from 36 months to 42 months. In doing so, the NYSE’s listing standards for SPACs would align with those of the Nasdaq, its chief rival among stock exchanges. (Nasdaq’s delisting process can allow companies extra time to complete de-SPAC deals with the approval of a hearings panel from the exchange.) Ultimately, the NYSE’s goal would be to increase competition between exchanges for SPAC listings.

The SEC on July 9 issued an order stating it needed more time to consider the NYSE’s proposal,  pointing to concerns about investor protections. The existing three-year limit on completing a business combination was designed to limit the time in which SPACs can hold investors’ funds while it works to complete a business combination.

But here comes the plot twist. In a July 15 release, the SEC revealed Nasdaq filed a proposed rule change to amend its procedures for suspending and delisting acquisition companies. The objective: align its standards with those of the NYSE.

So, it would appear that each exchange wants to amend its de-SPAC rules to match those of the other, even though the other doesn’t want its own rules anymore. Confused yet?

In reality, though, SPACs aren’t clamoring for de-SPAC extensions anymore, according to data compiled using the Intelligize platform. A search of SPAC proxy statements shows a clear downward trend in SPAC requests for shareholders to approve an extension of time to consummate a business combination. Between the first six months of 2023 and the last six, requests for extensions fell by 17%, while extension requests fell by 34% in the first six months of 2024 versus the previous six-month period.

We could attribute the declining number of extension requests to a range of factors, including the dwindling number of SPACs on the market. Whatever the reason for the decline may be, if fewer requests are being made for extensions, the timing of the NYSE proposal seems dubious.