SPAC Listing Boom 'Fades'... April SPAC Listings Down 90% Compared to Previous Month

Stock Prices of Companies Listed via SPACs
Average 39% Decline from Peak
Only 13 New IPOs in April
90% Decrease Compared to March
Impact of Enhanced US SEC Oversight

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kwon Jae-hee] The SPAC (Special Purpose Acquisition Company) investment craze that once heated up the U.S. stock market has come to a sudden halt. The stock prices of companies that went public through SPACs have plummeted by about 40% from their peak, and the number of new IPOs via SPACs last month dropped by approximately 90% compared to the previous month. The U.S. regulatory authorities' announcement to strengthen oversight of SPACs appears to have poured cold water on the SPAC frenzy.

According to a report on the 3rd by Nihon Keizai Shimbun citing SPAC Research, the number of new IPOs via SPACs in April was only 13. This represents a roughly 90% decrease compared to March (109 cases), when SPAC listings peaked. The amount raised also fell by 90% month-on-month to $3.1 billion. Considering that half of the $230 billion raised globally over the past year flowed into SPACs, the sharp decline in the SPAC craze is notable.

As the SPAC fever cooled, the stock prices of companies listed through SPACs also plunged. According to major foreign media, among 41 companies that went public via SPACs since early 2020, only three maintained stock prices within 5% of their peak. Among them, 18 companies saw their stock prices drop by more than half, and some fell by over 80%. On average, the decline was 39%. This data was investigated by financial information provider Refinitiv, focusing on companies with valuations over $1 billion that were acquired and listed through SPACs.

The cooling of the SPAC craze is attributed to the U.S. Securities and Exchange Commission (SEC) strengthening its oversight. The SEC's thorough review of disclosure items and earnings forecasts of companies going public via SPACs has lengthened the listing process. SPACs exist only on paper; investors first pool money to create a SPAC, list it, and then merge it with an actual company, effectively taking the existing company public through a backdoor listing. This method allowed high-quality unlisted companies to become listed without complicated procedures, fueling a global investment frenzy earlier this year. However, as the SEC tightened supervision, the investment appeal of SPACs diminished, causing institutional investors to lose interest.

Professor Shibaram Rajgopal of Columbia Business School said, "With the SPAC craze sweeping the market, many low-quality companies went public, and as a result, SPACs were exploited as a channel for listing poor-performing companies."

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