In a move that appears to be equal parts reformist and experimental, the Financial Regulatory Authority (FRA) of Egypt has unveiled new regulations aimed at making Special Purpose Acquisition Companies (SPAC/s) more versatile, less cumbersome, and — arguably — more attractive to investors. The latest decree, issued by FRA’s Board of Directors and helmed by Dr. Mohamed Farid, introduces a slew of amendments that broaden SPAC utility beyond mere mergers. Instead, the rules now accommodate share swaps, credit balance acquisitions, and public trading under revised conditions, effectively reshaping Egypt’s capital market landscape.

The Egyptian Style

The conventional SPAC playbook has been relatively straightforward: form a blank-check company, raise capital through an IPO, and identify a promising private firm to merge with, thereby taking it public. However, as with most financial innovations, rigidity can be a killer. Recognizing this, the FRA has injected a measure of flexibility into the process, allowing SPACs to merge into target companies instead of the traditional one-way acquisition, while also permitting equity swaps and credit-financed transactions.

In what is perhaps the most notable shift, the new rules allow SPAC shares to trade publicly post-acquisition, provided that they meet a prescribed free-float threshold and shareholder count. Previously, such shares were only available to institutional or qualified investors, effectively limiting liquidity and accessibility. Moreover, in a move aimed at avoiding price manipulation, the FRA has mandated that initial subscribers in capital increases can trade their shares at fair value rather than at a nominally set price — a subtle but crucial change that aligns market value with investor expectations.

Easing the Reins on Founders and Investors

One of the more controversial aspects of SPAC structures has been the requirement that founders and board members maintain significant ownership stakes for an extended period post-acquisition. Egypt’s FRA, apparently less keen on handcuffing investors to their own deals, has relaxed this requirement from 100% to 51%, giving founders and management teams much-needed flexibility. This change is particularly important in scenarios where acquired firms contribute their shares to a capital increase in the SPAC, making way for a smoother transition and greater investor liquidity.

Similarly, small and medium-sized enterprises (SMEs) have been granted a reprieve from the three-year lock-up period that previously governed majority shareholders transferring from the SME market to the main exchange. By easing these constraints, the FRA hopes to encourage SMEs to scale up and tap into deeper capital markets more efficiently.

The new SPAC rules come at an opportune time, as Catalyst Partners Middle East, Egypt’s first SPAC, embarks on a high-profile acquisition of fintech startup Qardy. This deal, set to be executed through a share swap, represents the first major test of the revised regulatory framework. Catalyst, an affiliate of impact investment firm Catalyst Partners, has been on an acquisition spree, aiming to consolidate financial technology and non-banking financial services companies.

Qardy, founded in 2022, has rapidly positioned itself as a key player in Egypt’s digital lending space. With over 6,000 corporate clients and facilitated loans exceeding $12 million, the startup’s growth trajectory aligns with Egypt’s push to expand financial access for MSMEs. Qardy’s recent seven-figure pre-seed funding round, backed by White Field Ventures and Vastly Valuable Ventures, underscores investor confidence in its business model.

Catalyst’s acquisition of Qardy involves issuing new shares in exchange for the startup’s equity, a deal structure enabled by the FRA’s updated SPAC regulations. To support the transaction, Catalyst recently increased its issued capital to EGP 10 million and has secured FRA approval for a further capital raise to EGP 235 million. The deal, therefore, serves as a pivotal case study in how Egypt’s new SPAC rules can facilitate market growth and fintech expansion.

A Bold, Calculated Gamble?

While Egypt’s move to revamp SPAC regulations is ambitious, it is not without risks. On one hand, easing trading restrictions and broadening acquisition mechanisms could attract more investors and facilitate much-needed capital flows into high-growth sectors like fintech. On the other, the relaxation of founder lock-ups and the introduction of alternative acquisition structures could potentially expose investors to volatility, particularly in a market that is still acclimating to SPAC-driven financing models.

Nevertheless, the FRA’s initiative reflects a broader push to modernize Egypt’s capital markets while maintaining a delicate balance between regulatory oversight and investment freedom. By allowing SPACs to function as more than just glorified shell companies, Egypt may well have positioned itself as an unlikely innovator in a financial landscape that has, until now, been largely dictated by Western models.

For investors, the message is clear: SPACs in Egypt are no longer just about mergers. They are about options.