London Spac ditches attempt to raise funds for insurance deal

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A blank-cheque company has abandoned an attempt to raise up to £300mn from London stock market investors for a new insurance venture, in a setback for the UK market.

Financials Acquisition Corp, a special purpose acquisition company, said on Monday it had terminated a plan to combine with a newly created entity, London Innovation Underwriters, after the latter received “insufficient commitments” to meet a minimum target of £150mn.

LIU had intended to use the funds to invest in Lloyd’s of London, the world’s oldest insurance market. Under the plan, the money would have gone through London Bridge, a platform that enables investors to gain direct exposure to the market’s performance by providing capital to the syndicates that underwrite risks from cyber attacks to hurricanes.

Spacs and their sponsors typically raise cash by listing on the stock market before then seeking a merger with a private company. A Spac frenzy swept Wall Street in the final throes of the US equity bull market, catapulting tens of companies on to public markets.

However, Spacs have struggled to get off the ground in London. While London sought to attract Spacs, authorities have largely focused their efforts on trying to persuade more companies to list in London. Concerns over the market’s future deepened earlier this year after building materials group CRH decided to swap its listing for the US, and UK chip designer Arm also chose New York for its IPO.

FAC said on Monday it had cancelled a shareholder meeting scheduled for Tuesday and that it was now “unlikely” it would be able to find a new target and complete a business combination before the end of the year, the deadline under its articles of association.

Rather than seeking a further extension period, FAC would “cease operations, other than for the purpose of returning funds to shareholders and conducting an orderly winding up of the company”, it said.

In the run-up to the fundraising, the Spac had already cut the amount it was trying to attract. At the time, the company said this did not reflect investor sentiment but the difficulty of getting a significant amount of money into Lloyd’s syndicates in time for the next underwriting cycle.

The news will also come as a setback to attempts by Lloyd’s to bring more investors into the insurance market, which is a centuries-old hub for specialist commercial insurance and reinsurance.