The Financial Regulatory Authority (FRA) of Egypt has announced significant amendments to its regulations governing Special Purpose Acquisition Companies (SPACs), following a global decline in SPAC performance and heightened scrutiny of their financial viability.

The changes, outlined in FRA Resolution №140 of 2024, introduce stricter requirements for SPAC licensing, share ownership, and listing procedures. Notably, the FRA has removed previous provisions that allowed for a grace period for SPACs to list their shares on the Egyptian Exchange (EGX) after obtaining a license. Now, SPACs must apply for listing within one month of licensing, or their license will be nullified.

Additionally, the FRA has mandated that any SPAC delisted from the EGX must initiate liquidation procedures, unless it can provide satisfactory justification to the authority. These measures are aimed at ensuring that SPACs actively pursue their intended purpose of acquiring target companies and contributing to the growth of the Egyptian economy.

This regulatory shift comes in the wake of a global SPAC slowdown, with many SPACs facing challenges in identifying suitable acquisition targets and completing deals within the stipulated timeframe. The high-profile struggles of companies like Swvl, an Egyptian ride-hailing startup that went public through a SPAC merger, have further underscored the risks associated with this investment vehicle.

Swvl’s share price has plummeted since its Nasdaq listing, and the company recently canceled a major acquisition due to market turbulence. This has raised concerns about the sustainability of the SPAC model, prompting regulators worldwide to reassess their oversight of these entities.

Experts see the FRA’s decision to tighten SPAC regulations as a proactive step to protect investors and maintain the integrity of the Egyptian capital market. By imposing stricter requirements and accelerating the timeline for SPACs to fulfill their obligations, the FRA aims to mitigate risks and promote transparency in this evolving financial landscape.

The long-term impact of these regulatory changes on the Egyptian SPAC market remains to be seen. However, it is clear that the FRA is committed to adapting its regulatory framework to address emerging challenges and ensure the stability and growth of the country’s financial sector.

As the global SPAC landscape continues to evolve, regulators worldwide are closely monitoring developments and adjusting their oversight accordingly. The Egyptian FRA’s actions reflect a growing trend towards more stringent SPAC regulations, as policymakers seek to strike a balance between fostering innovation and protecting investors in this dynamic market.

The new regulations have been published in the Egyptian Gazette and are effective immediately. They represent a significant change in the regulatory landscape for SPAC operations in Egypt and are expected to have a lasting impact on the development of this investment vehicle in the country.