Editor’s note: This is general educational information about a listing structure and the exchange rules that govern it. It is not investment advice and it does not concern any particular company. It is based on the exchange guide, national instruments and exchange statistics listed at the end.
A company listing on Toronto Stock Exchange normally has to prove it is a business. A special purpose acquisition corporation proves the opposite. It has no commercial operations and no assets other than cash, it lists through an initial public offering, and it then has a fixed period to buy something. Almost every protection an investor has in that structure comes from an escrow account and a set of exchange rules about who may touch it.
What is being listed
TSX describes a SPAC as an investment vehicle allowing the public to invest in companies or sectors normally sought by private equity firms. The corporation is formed by a sponsor group of founding shareholders, typically executives, finance professionals or private equity professionals, and it contains no operations at the point of listing. It raises a minimum of $30 million in its IPO, places 90% of the funds raised in escrow, and must complete an acquisition, defined as the qualifying acquisition, within 36 months of listing. The resulting issuer must then meet the exchange’s original listing requirements before its shares continue trading as an ordinary listing.
The distribution requirements are specific. The offering must reach at least 150 public shareholders, at least 1,000,000 freely tradable securities must be held by public holders, and those securities must be issued for no less than $2.00 a share or unit. A SPAC may issue common shares, or units consisting of a common share and up to two warrants. The listing package filed with the exchange includes a draft listing application, the listing application fee, the preliminary prospectus, a draft escrow agreement governing the IPO proceeds, certified charter documents and a personal information form for each officer, director or 10 percent holder.
SPACs become reporting issuers through the IPO, so the provincial securities commissions regulate them alongside the exchange, and the prospectus itself is governed by the general prospectus requirements in National Instrument 41-101.
The escrow, and the two ways out
The escrow is the substance of the structure. At least 90% of the gross proceeds of the IPO, together with the underwriters’ deferred commissions, must be placed with an escrow agent unrelated to the transaction and acceptable to TSX, and the agent must hold the money in permitted investments. Underwriters must agree to defer and deposit a minimum of 50% of their commissions into that escrow, and those deferred commissions are released to them only on completion of a qualifying acquisition within the permitted time.
Two mechanisms return the money. The redemption right allows public shareholders who voted against a proposed qualifying acquisition to have each security redeemed for their pro rated share of the cash held in escrow. The liquidation distribution feature applies where no qualifying acquisition is completed in time, and entitles shareholders to their pro rated share of that cash. If the deal never happens, the underwriters’ deferred commissions do not go to the underwriters; they are distributed to holders as part of the liquidation distribution, and a shareholder exercising redemption rights is entitled to a pro rata portion of the escrowed funds including those deferred commissions.
The exchange also closes the obvious route around the escrow. A SPAC is prohibited from obtaining debt financing other than ordinary course short term trade payables, apart from unsecured loans up to an aggregate principal amount equal to 10% of the funds in escrow. A credit facility may be entered into before a qualifying acquisition but may only be drawn contemporaneously with it, and the IPO prospectus must contain a statement certifying that the SPAC will borrow only on those terms. Security based compensation arrangements are not permitted before the qualifying acquisition completes.
Founders, warrants and the order of payment
The founding shareholders must subscribe for units, shares or warrants, and are expected to hold an aggregate equity interest of between 10% and 20% depending on the price paid, with the terms of that initial investment disclosed in the IPO prospectus. They must agree not to transfer any founding securities before the qualifying acquisition completes, and, in the event of liquidation and delisting, that their founding securities will not participate in the liquidation distribution. The founders are behind the public in the queue for the cash and cannot sell out ahead of the decision.
The warrant terms carry the same logic. Warrants issued as part of a unit must not be exercisable before completion of the qualifying acquisition. They expire on the earlier of a fixed date specified in the IPO prospectus and the date the SPAC fails to complete a qualifying acquisition within the permitted time. They carry no entitlement to the escrowed funds on liquidation, and no more than two may be included in a unit. A warrant is therefore a claim on the outcome of a deal and nothing else.
The acquisition, and who has to agree to it
A qualifying acquisition must be completed within 36 months of the closing of the IPO, though a particular SPAC may set a shorter termination date in its prospectus. Where the qualifying acquisition comprises more than one acquisition, they must complete concurrently and each must be approved.
Approval runs on two tracks: a majority of the directors unrelated to the qualifying acquisition, and a majority of the votes cast by shareholders at a meeting called for the purpose. Shareholder approval is not required where 100% of the gross IPO proceeds were placed in escrow rather than the 90% minimum. Where a meeting is held, the SPAC must prepare an information circular containing prospectus level disclosure of the resulting issuer assuming completion, and the circular must be pre cleared by TSX before distribution. The SPAC must also prepare and file a prospectus covering itself and the proposed acquisition in each jurisdiction where it and the resulting issuer are or will be reporting issuers. A SPAC may add conditions to the approval, such as declining to proceed if more than a set percentage of public holders vote against and exercise their conversion rights.
Where the target is connected to the sponsors, a further regime applies. Multilateral Instrument 61-101 defines a related party transaction as a transaction between an issuer and a person that is a related party at the time the transaction is agreed to, and requires minority approval, meaning approval by a majority of the votes cast by holders of each class of affected securities at a meeting called to consider the transaction, together with a formal valuation prepared under Part 6 of that instrument, subject to the exemptions it sets out.
Analysis: what the rules price, and what they leave open
The TSX framework is best read as a set of constraints on what can happen to the IPO proceeds before shareholders vote. Each rule closes a specific route. The escrow keeps the money out of operating use before a vote. The debt cap limits borrowing against it. The founder transfer restriction bars any sale of founding securities until the acquisition completes. The deferred commission withholds half the underwriting fee until a qualifying acquisition closes. Set against a normal listing, where the exchange assesses an operating record, the SPAC rules assess nothing about the eventual target and instead police the custody of the cash until shareholders get to look at it.
That leaves one thing conspicuously unpriced, which is the quality of the acquisition itself. The rules require the resulting issuer to meet original listing requirements, they require prospectus level disclosure in the circular, and they require independent director and shareholder approval. None of that is a view on the price paid. The exemption from shareholder approval where 100% of proceeds are escrowed is the clearest illustration: the exchange treats full escrow as a substitute for a vote, on the reasoning that a holder who dislikes the deal can take the cash instead.
The clock is the other thing worth watching. The 36 month deadline narrows the set of available outcomes as it runs down, because the alternative to completing an acquisition is liquidation, which returns the escrow and pays the founding shareholders nothing. The structure aligns founders with completion rather than with any particular price, and the redemption right is the mechanism that is supposed to hold the two apart. A careful reader would look at how much time is left, at what proportion of proceeds sits in escrow, and at whether the target is a related party for the purposes of MI 61-101.
Canadian activity in this structure is currently thin. In the MiG Report for July 2026, TSX recorded no CPC or SPAC IPOs on the senior exchange year to date, with all five in that category listing on TSX Venture Exchange, against 278 new listings across the two exchanges of which 176 were exchange traded products. The rules are in place. The deal flow is somewhere else.
