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The ISA has formulated principles and terms for initial public offerings of SPACs in Israel

25 May 2021

Dear clients and colleagues,
Recently, the Israel Securities Authority (“ISA”) published a list of principles and terms for the initial public offering of Special Purpose Acquisition Companies (“SPAC”). This is in light of the increasing global trend of SPACs initial public offerings.

The ISA has examined this issue during the past year, and has conducted thorough examination of the regulations on this matter in other international capital markets – particularly in Singapore, the United Kingdom and the United States. The ISA has formulated the following principles and terms with the aim to reinforce investors’ protection mechanisms:

Principles and Terms for an Initial Public Offering by SPACs in Israel 1. Raising capital by the SPAC: a. With respect to raising capital, the amount raised be no less than NIS 400 million, through the issuance of shares or shares and warrants; b. In addition, the sponsor's investment ("skin in the game") should be, at least, NIS 40 million; c. Participation by institutional investors in at least 70% of the aggregate capital raised. 2. Acquisition of a target company and completion of business combination: a. The SPAC will have a period of up to two years to identify a target company, with a value of at least 80% of the capital raised, and to complete the business combination with such target; b. The completion of the business combination will be conditioned by the approval of the general meeting, excluding the votes of the sponsor(s); c. Until the completion of the business combination, the capital raised will be invested in solid investment channels only through an independent trustee; d. Shareholders who vote against the completion of the business combination will be entitled to a refund of the amount of their investment. 3. Restrictions Imposed on the Sponsor(s): a. The “Upside” to the sponsor is conditioned by the completion of the business combination and is limited to 10% of the capital of the company post-completion of the business combination; b. The sponsor's shares are subject to the following restrictions: (i) a full lock-up on the Sponsor's initial investment until the completion of the business combination. Part of the initial investment will remain locked-up for additional 6 months following the completion of the business combination; and (ii) the shares issued to the sponsor in the framework of the business combination will be locked-up for three years following the completion of the business combination; c. The investors will be entitled to a refund of their investment if the business combination is not completed or if the sponsor leaves within a certain period. 4. In addition, the majority of the company's directors will be independent, and the company will be subject to disclosure and reporting obligations to investors, in accordance with the law and such obligations as shall be set out in the prospectus.

The ISA is expected to approve prospectuses of sponsors who have experience in managing public funds and who meet the criteria listed above. In addition, the ISA holds discussions with with the Tel Aviv Stock Exchange Ltd. (“TASE”) in order to incorporate these criteria in the TASE Rules and Regulations.

Our firm has extensive experience in M&A transactions, securities law, corporate governance and capital markets regulation, including specific and extensive expertise in advising on business combinations with SPACs and public offerings by SPACs. We are at your disposal for  any questions or clarifications relating to these matters.

Corporate, Securities and Capital Markets
Herzog Fox & Neeman


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