First UAE-listed SPAC

Can SPACs offer new equity model for UAE tech sector

This week saw the announcement of the UAE's first SPAC, or special purpose acquisition company, which will be listed on Abu Dhabi Securities Exchange (ADX) and will focus on technology-driven companies. The SPAC will be launched by Abu Dhabi groups Chimera Investment and ADQ (previously Abu Dhabi Developmental Holding Company). 

The move reflects well on two Abu Dhabi trends: i) the development of ADX to become a bigger and more diverse market and ii) the continuing diversification of the emirate's venture capital ecosystem and its potential impact on UAE tech.

A SPAC is a company created specifically to raise funds to finance a merger or acquisition opportunity within a set timeframe, often before such an opportunity has been identified. The investment vehicle allows investment firms and targets to raise funds in highly liquid markets, accessing capital that they may not have been able to reach via traditional funding initiatives. However, when a SPAC IPOs to raise that capital, it is a shell company with no commercial operations and so investors are heavily reliant on the prospectus offered by the investment firm concerned.

Although there are no SPACs listed in the UAE, they are not an unknown investment category. In fact, Shuaa Capital listed a new $100 million tech-focused SPAC on NASDAQ Global Exchange in New York last month. Since they've become more popular, bourses in Saudi Arabia and the UAE have been considering allowing them, and, in January, Abu Dhabi's Securities and Commodities Authority approved ADX's first SPAC framework, paving the way for SPAC listings on the exchange this year.

Although venture capital firms have been slower to adopt SPACs than other investors, SPACs have started to be used more and more for emerging technology ventures. Deeptech startups and those focusing on emerging sectors that are still in an early stage, such as urban mobility, often have substantial capital requirements that can be hard to raise funds for. So, SPACs have allowed some of those to not only raise large sums, but also become listed via mergers with a well-funded SPAC. 

Now, - returning to Abu Dhabi's venture capital ecosystem - the government has been actively encouraging growth and diversification of venture capital via development of new regulatory frameworks, fund of funds initiatives that support the launch of new funds, and funds that match the equity investments of new local VCs. Of course, much of this is skewed to support investment in the technology sector. 

Chimera Investments and ADQ already have a number of tech-related funding initiatives including; the Alpha Wave Incubator (AWI) fund set up to invest in early-stage tech startups in India and bring their R&D to Abu Dhabi; and the recently announced Alpha Wave Ventures II, a $10 billion fund aimed at tech and tech-related ventures that are fund raising for Series A upwards or pre-IPO. 

The new ADX SPAC could both demonstrate how Abu Dhabi is actively diversifying the venture capital options available to local and global tech ventures, and, perhaps (which is pure speculation on my part), quickly scale-up a promising technology development either already residing in the UAE, or via a foreign venture that sees listing in the UAE as a strategic move. Will the possibility of listing SPACs encourage more deeptech to locate in the UAE? We'll have to wait and see!

Find out more about this story:

• See my Linkedin post from this week.

• Read the SPAC story in The National.

• Read about Alpha Wave Ventures in Middle East AI News 27-Jan-22.