In a significant move aimed at modernizing the financial landscape in Egypt, the Financial Regulatory Authority (FRA) has approved the establishment of the country’s first Special Purpose Acquisition Company (SPAC), Catalyst Partners Middle East (CPME). This marks a turning point for Egypt’s venture capital sector, coming two years after Cairo-born startup Swvl’s high-profile SPAC listing on the Nasdaq in New York. Catalyst Partners’ approval, formalized under FRA Resolution №2323 of 2024, signals the government’s focus on fostering innovation in non-banking financial services and fintech — two rapidly growing sectors in the country.
The approval follows regulatory reforms aimed at integrating SPACs into Egypt’s capital markets. These new rules, outlined in FRA Decisions №140 and №148 of 2024, allow for the formation of SPACs with an initial paid-up capital of EGP 10 million, with the potential for significant capital expansion through private subscription by qualified investors. Catalyst Partners has committed to listing its shares on the Egyptian Exchange (EGX) within a month and plans to increase its capital to EGP 100 million within three months of listing, focusing on attracting financial institutions and high-net-worth individuals.
A New Vehicle for Growth
Catalyst Partners’ SPAC structure is designed to provide a streamlined avenue for companies in fintech and non-banking financial services to access public capital, bypassing the traditional complexities of an Initial Public Offering (IPO). As the first entity of its kind in Egypt, Catalyst Partners is set to play a pioneering role in facilitating mergers and acquisitions within these key sectors. The SPAC will seek out companies undergoing rapid digital transformation, particularly in payment platforms and financial services, aiming to tap into Egypt’s burgeoning digital economy.
SPACs are increasingly seen as an attractive alternative to traditional IPOs, offering both speed and flexibility in capital-raising activities. In Catalyst Partners’ case, the company will have a two-year window to acquire one or more target companies. Failure to do so would result in the dissolution of the SPAC, a safeguard to ensure that SPACs remain focused on their mission of acquiring high-growth businesses in Egypt.
Catalyst Partners will operate under a strict set of transparency guidelines, including submitting detailed investment plans to the FRA. These plans must cover the sectors it aims to target, the experience of its founders and board members, and the strategies it will employ in executing its acquisitions.
Regulatory Overhaul Paves the Way
The FRA’s decision to approve Catalyst Partners follows broader regulatory changes designed to accommodate SPACs and other innovative financial instruments in Egypt’s capital markets. FRA Chairman Dr. Mohamed Farid has highlighted the importance of these reforms in creating a more dynamic investment environment. “By simplifying the process for establishing and listing SPACs, we aim to expand the range of investment opportunities available in Egypt’s capital markets, particularly in fintech and non-banking financial services,” said Farid.
The regulatory framework now requires that SPACs list their shares on the EGX within one month of obtaining a license, or face the risk of having their license revoked. The FRA has also updated its criteria for qualifying investors, lowering the threshold to encourage broader participation. Investors must now possess EGP 5 million in liquid assets, down from the previous EGP 10 million threshold, allowing for greater local and international involvement in SPAC ventures.
Foreign entities are also now eligible as qualified investors if they hold ownership rights worth at least EGP 50 million ($1 million) or its equivalent in foreign currency. These revisions are expected to increase the pool of investors, offering SPACs like Catalyst Partners a broader base of potential financial backing.
Egypt’s First SPAC: A Template for Future Growth?
The establishment of Catalyst Partners is not Egypt’s first encounter with SPACs. In 2022, Swvl, a Cairo-founded mobility startup, went public via a SPAC merger with Queen’s Gambit Growth Capital, a women-led acquisition firm. Swvl’s $1.5 billion valuation at the time of the deal marked a significant milestone as the first unicorn from the Middle East and North Africa to list on Nasdaq through a SPAC.
However, Swvl’s story has been a cautionary tale, with the company facing significant challenges post-listing. In September 2024, Swvl was hit by a damning report from short-seller Wolfpack, casting doubts on the company’s future and dragging its stock price down. This volatility has raised concerns about the sustainability of SPAC-driven deals, both in Egypt and globally. Catalyst Partners, therefore, enters the market under a mix of anticipation and caution, with investors keen to see how the company navigates its acquisition strategy and delivers on its promises.
A Broader Strategic Shift
For Egypt, the approval of its first SPAC signals a broader strategic shift aimed at boosting market liquidity and driving investment into key sectors such as fintech and non-banking financial services. As the country looks to attract both domestic and international capital, SPACs offer a fresh channel for investors to participate in high-growth opportunities without the delays and complexities traditionally associated with IPOs.
As Egypt’s fintech sector continues to grow, with companies leveraging the rise of digital payments and financial inclusion, SPACs are likely to play a pivotal role in funding the next wave of startups. Catalyst Partners could serve as a model for future SPACs, potentially triggering a surge in such ventures across Egypt’s financial markets.
While the success of Catalyst Partners remains to be seen, the company’s establishment marks a new era for Egyptian finance, one that embraces innovation and new investment mechanisms to fuel economic growth. With more SPACs expected to follow, Egypt is positioning itself as a regional hub for fintech and non-banking financial services, further integrating into the global financial ecosystem.
As Egypt ’s first SPAC prepares to make its market debut, stakeholders will closely watch the company’s performance to assess its potential impact on the country’s evolving capital markets.