The Botswana Stock Exchange (BSE) is preparing to introduce Special Acquisition Companies (SACs), which are shell companies designed to raise capital through an initial public offering (IPO) with the intent to acquire or merge with an existing business. Thapelo Moribame, the BSE’s Head of Market Development, highlighted that SACs offer a modern and efficient path for companies to go public, particularly relevant in a time when global markets have been affected by events like the COVID-19 pandemic.
Moribame explained that SACs are increasingly being recognised as a legitimate method for capital raising in mergers and acquisitions. The BSE has incorporated provisions in its listings requirements to accommodate SACs, including stringent guidelines ensuring regulatory and operational compliance before approval. The capital raised by SACs is held in an escrow account until a suitable acquisition target is found.
A crucial aspect of SAC success in Botswana will be the availability of capital, and the country’s pension funds, managing assets of around P143 billion, could provide significant backing. Recent changes in Pension Fund Rules (PFR2) have increased the onshore investment allocation from 30 percent to 50 percent, creating more opportunities for local investment, including SACs.
Moribame pointed out that SACs will offer local investors access to a wider range of investment products, although they come with inherent risks. SACs are required to identify and complete an acquisition within 24 months, failing which the capital is returned to investors after deducting operational expenses.
Although SACs carry risks, the BSE is focusing on investor education to ensure that the market is prepared. The exchange has already taken steps, including webinars, to inform potential investors and issuers about SACs.
