The backdoor stock-listings that are Wall Street's latest big-money boom aren't a guaranteed money-maker in Switzerland despite copious interest, finews.com reports.
More than 200 so-called blank-check firms were launched in the U.S. last year, commanding $70 billion in capital – a boom that ex-UBS and Credit Suisse bosses Sergio Ermotti and Tidjane Thiam also got in on after leaving their respective jobs last year.
The special purpose acquisition companies, SPACs for short, are poised to launch in Europe as well – and are being met with great interest in Switzerland. «We're in talks here with various parties who are interested in SPACs,» Stefan Weiner, J.P. Morgan's head of equity capital markets in northern Europe, said at a media briefing.
While Switzerland is a natural market to collect money for SPACs, actually launching the vehicles here is another story entirely. The Swiss central bank's six-year-long regime of surcharges on franc deposits is the main culprit.
Double Money Whammy
A major argument for SPACs' popularity is to park cash: the vehicles take investor funds with the pledge to invest in firms within typically two years. If the SPAC doesn't find a suitable target to list, investors get their money back – a potentially lucrative bet and at worst a safer one than, for example, private market funds.
Swiss-based vehicles face a double-whammy of 0.75 percent charges on major cash deposits, and then a stamp tax of 1 percent, taking a chunk out of their returns. «Both the stamp tax as well as negative interest rates are a challenge with potential SPACs,» Weiner said.
«Various Swiss Forces»
Structuring experts are grappling with the twin issues, and Swiss stock exchange operator is also intervening, along with banks, law firms, and consultants. «Various forces are working on a Swiss solution,» the J.P. Morgan veteran said.
Since it isn't clear whether the issues can be resolved, meaning potential sponsors may defer back to U.S. vehicles and in turn try to subsume Swiss targets, Weiner noted. J.P. Morgan predicts three to five initial public offerings on the Swiss market this year, including potentially a SPAC-covered listing.
