Special Purpose Acquisition Companies on the Danish Capital Market

Abstract

This master’s thesis examines Special Purpose Acquisition Companies (“SPAC”) on the Danish capital market. Whilst SPACs is quite common on the US capital markets and some SPACs has been admitted to trading on European markets, there are yet to be seen a SPAC admitted to trading on the Danish stock exchange, Nasdaq Copenhagen A/S. Thus, this thesis seeks to examine to which extent it is possible for a SPAC to operate in Denmark in a legal context. Furthermore, the thesis examines the performance of US traded SPACs after completed business combination. The examination of the performance is conducted in a structural perspective to assess whether any structural features of the SPAC can explain the stock-performance of the postmerger entity (“de-SPAC”). Finally, the thesis examines how to make the SPAC structure a more suitable investment asset on the Danish capital market. The legal analysis is conducted by using the legal dogmatic method and including comparative perspectivations to the regulation of SPACs in the US. The economic analysis is based on the application of a BHAR calculation, with the Russell 2000 as benchmark, and a multiple linear regression for the structural analysis. Finally, the integrational part of the thesis is conducted by applying game theory and different aspects of principal-agents-theory, as well as assessing de lege ferenda. The thesis concludes that, there are no legal obstacles for admitting a SPAC to trading on a regulated market, although the thesis finds a legal uncertainty regarding whether a SPAC could be considered a regulated entity. The thesis also finds that there is no regulatory explanation for why the construction is widespread on the US markets, and yet no SPACs has been admitted to trading in Denmark. Furthermore, the thesis finds a significantly poor stock-performance of SPACs compared to the Russell 2000 index, and that there are no structural features in the US SPACs which has a significant impact on the performance. Finally, the thesis finds that there are opposing incentives between the sponsors and investors embedded in the SPAC structure, and that the structure should be changed to efficiently align the incentives of the parties to become a more suitable investment asset.