Egypt Becomes Africa’s First Country To Approve SPAC Rules For Startups
The Egyptian Financial Regulatory Authority, in a bid to provide multiple funding options to startups in Egypt and after reviewing many international practices, has approved the establishment and licensing of companies for the sole purpose of acquisition — also known as SPAC. The Board of Directors of the the Auithority reasoned that SPACs are gradually becoming a preferred exit route for founders and major shareholders in startups in developed economies.
Mohammed Omran, Chairman of the Financial Supervisory Authority, said the board’s decision reflects a desire to develop financing solutions that will make it easier for investors, particularly small and medium-sized businesses, to access capital, in order to support Egypt’s Vision 2030, which aims to empower and expand the private sector, and that the Authority’s initiative will provide an opportunity for startups and promising businesses on the one hand, and for established businesses on the other.
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According to the new SPAC guidelines which is subject to the provisions of the country’s Capital Market Act №95 of 1992, the acquisition proceeds will be deposited in fixed-income savings pools until the transaction is completed. The SPAC will be dissolved and the funds will be returned to shareholders if an acquisition transaction is not completed within two years.
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The new rules will open up new chances for startups with tremendous growth potential to expand through the capital market, raise their business volume, and contribute more to Egypt’s economic growth.
Swvl, an Egyptian ride-sharing startup based in Dubai, recently announced that it was going public through a merger with a special purpose acquisition company (SPAC). According to The Wall Street Journal, the mobility company is merging with Queen’s Gambit Growth Capital, a SPAC founded by a group of female CEOs early this year (which claims to be the first women-led SPAC). Victoria Grace, the company’s CEO, is the founder of Colle Capital, a venture capital firm based in New York.
Swvl will be the second Middle Eastern business to go public using the SPAC route. Anghami, an Abu Dhabi-based music streaming platform, stated earlier this year that it intended to go public by merging with Vistas Media Acquisition Company, a SPAC.
A SPAC, sometimes known as a blank-cheque company, is founded to obtain funds through an IPO in order to purchase and publicize an existing company. It will be the first Egyptian-born technology company to list on NASDAQ (or outside Egypt), as well as the second Egyptian technology company overall (Fawry being the first one).
According to the report, Queen’s Gambit Growth Capital raised $300 million when it was founded in January and another $45 million afterwards through underwriters’ overallotment option. Swvl’s purchase will also involve a $100 million PIPE (private investment in a public firm) from a consortium of investors including Agility, Luxor Capital, and Zain Group. Swvl will now have $445 million in additional capital to invest in its growth and expansion.
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Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning write