Saudi Arabia: A Corporate/Commercial Overview
SPACs in Saudi Arabia: A New Exit Route
Special purpose acquisition companies, or SPACs, are publicly listed companies with no operating business of their own. Their purpose is to identify and combine with a private business, whether by acquisition or merger, so that the private business becomes publicly listed.
SPACs originated in the United States in the early 1990s as a more disciplined form of the blank-check company structure that had previously existed. The modern structure was designed to give private companies a faster, more controlled route into the public markets than a traditional IPO, while introducing a set of investor protections that have since defined the form: a trust account holding the IPO proceeds, the right of investors to redeem their shares if they do not support a proposed acquisition, and a fixed window within which the SPAC must identify and complete a business combination with a target.
In Saudi Arabia, the Capital Market Authority (CMA) formally acknowledged the SPAC structure on 2 April 2026, and introduced it into the local capital markets framework, specifically on Nomu, the Kingdom’s parallel (secondary) market, which is limited to qualified investors, as identified by the CMA in its regulations.
This decision is significant on two levels. First, it gives Saudi private companies and their existing shareholders a new exit route that sits alongside the traditional IPO and a private sale. Second, by anchoring the framework in Nomu rather than the main market, the CMA has chosen to introduce the structure into a market environment already designed for higher-risk, growth-stage issuers and qualified investors.
The introduction of the SPAC framework expands the liquidity options available to shareholders of Saudi private companies. Generally, shareholders seeking to realise value from their investment would pursue either a private sale or a traditional IPO. Each route has its limitations. A private sale depends on identifying a suitable buyer at an acceptable valuation and agreeing transaction terms that are acceptable to the existing shareholders. A traditional IPO, meanwhile, is generally a longer, more complex, and market-sensitive process. The SPAC framework introduces an additional pathway through which shareholders may achieve liquidity while facilitating the company’s transition to the public markets.
The SPAC route adds a third option that combines elements of both a private sale and a traditional IPO. Like a private transaction, the valuation is negotiated with an identified counterparty and is generally agreed at the time the transaction is signed, rather than being determined later through a market book-build process. At the same time, the transaction results in the target business gaining access to the public markets through its combination with a listed SPAC. This combination makes the route distinctive: a traditional IPO provides access to the public markets but with valuation determined through the IPO pricing process, whereas a private sale offers a negotiated valuation but does not result in a public listing.
Whether this will materially accelerate M&A activity in Saudi Arabia is yet to be tested. The framework on its own is only one piece of the picture; its impact will depend on whether capital market institutions find the sponsor role commercially attractive enough to commit capital and reputation to it, investor appetite on Nomu, the willingness of high-quality private targets to engage, and how efficient the regulatory pathway proves to be in practice.
Every SPAC must be established by a sponsor that is a capital market institution (ie, an investment bank licensed to manage investments or operate funds), and that sponsor must retain “skin in the game” throughout the vehicle’s life. Its ownership must sit between 5% and 20% of the SPAC’s capital at all times following the offering, and its shares must be ordinary and fully paid. Once a transaction completes, the sponsor’s shares are locked up for a year, with a carve-out allowing up to 50% to be disposed of after six months.
The SPAC’s capital must be no less than SAR100 million after the offering, and the bulk of that capital is ring-fenced for investors. At least 90% of the proceeds must be placed in an escrow account with a local bank that is not affiliated with the sponsor, and the escrow may only be used for narrowly defined purposes: completing the acquisition, paying redemption amounts to dissenting shareholders, or being held in low-risk money market instruments and bank deposits. Borrowing is permitted up to 25% of the escrow, only to fund the acquisition or its completion costs, and never with the escrow itself as security.
On timing, the SPAC has 24 months from listing to complete its acquisition or merger, extendable by up to 12 months with the approval of an extraordinary general assembly in which neither the sponsor nor its affiliates may vote. Layered over that timetable are strong redemption rights for non-sponsor shareholders. All shares other than those held by the sponsor and its affiliates are redeemable, and a shareholder may cash out of the escrow if the general assembly approves the transaction over the shareholder’s objection, the deadline or target criteria are changed without the shareholder’s approval, the transaction is not completed in time, or the non-escrow amounts are exhausted before a deal closes. These redeemable shares convert to ordinary shares only once the acquisition has been completed.
The framework also specifies what the SPAC can acquire. The target must be a Saudi company that is not listed on any exchange, must satisfy the Parallel Market listing conditions, and must be valued at no less than 80% of the amounts held in escrow. After completion, the SPAC’s shareholders must collectively hold at least 30% of the target. The sponsor (and any fund it manages) cannot already own shares in the target, which removes a clear conflict of interest from the structure. The SPAC’s bylaws must prohibit it from engaging in any business activity other than what is needed to achieve its objective.
Finally, the framework sets the approvals and disclosure pathway around the transaction. Board approval of the SPAC must be in place, and the transaction must then be approved by an extraordinary general assembly that also approves the redemption of shares held by objecting shareholders and the related capital reduction. The SPAC must produce a shareholders’ circular containing the information required to allow an informed vote, and that circular cannot be published until the CMA has reviewed and approved it. Once trading begins after the transaction, substantial shareholders of the target cannot dispose of their shares for at least six months, or for a longer period if specified in the circular.
For target companies, a negotiation with a SPAC sponsor can be materially different from a private sale. First, a SPAC operates against a hard regulatory deadline within which it must complete its acquisition, and that defined timeframe can work in the target’s favour, both by giving the process a predictable shape and by creating leverage as the SPAC’s deadline approaches. Second, the transaction is conducted within the CMA’s framework, which most private companies have no direct experience of, adding a layer of approvals and procedural steps that do not arise in a bilateral private sale. Third, the deal is published in the shareholders’ circular and announced to the market, meaning the target’s business, financials, and key terms enter the public domain well before the listing itself. That disclosure happens before the shareholders’ vote, so a target’s sensitive information may end up public even if the deal is not approved or does not complete. How widely the SPAC framework will be adopted in Saudi Arabia is a question for the years ahead, and one that practitioners and clients alike will be watching closely. What is already clear is that the framework introduces a structurally new route to a Nomu listing, with meaningful protections for investors and disciplined parameters for sponsors and targets. For Saudi private companies and their shareholders weighing how and when to monetise, the choice of exit is no longer simply between a private sale and a traditional IPO. Sell-side counsel will need to treat the SPAC route as a third option from the outset.