FSS Warns "SPAC Subscription Competition Surges... Caution on Principal Loss Upon Dissolution"

[Asia Economy Reporter Ji-hwan Park] The financial authorities recently urged investors to exercise caution when investing in Special Purpose Acquisition Companies (SPACs), which have been gaining popularity. If investors purchase SPAC shares at prices higher than the public offering price in the stock market, there is a possibility that the amount returned upon dissolution may be less than the principal investment amount, experts warn.

According to the Financial Supervisory Service on the 26th, the scale of SPAC initial public offerings (IPOs) reached a total of 13 cases and 194.9 billion KRW by August this year, representing increases of 8.3% and 91.5%, respectively, compared to 12 cases and 101.8 billion KRW during the same period last year. During the same period, the average subscription competition rate among general investors surged to 169.4 to 1, compared to 2.82 to 1 the previous year.

A SPAC is a nominal company listed through a public offering with the sole business purpose of merging with another company. It provides promising unlisted companies with stable funding and an opportunity to go public. For investors, it offers a chance to benefit from an increase in corporate value following the merger.

The Financial Supervisory Service explained that since a SPAC is a nominal company without business operations, even if its stock price rises, the merger price may be discounted by up to 30% from the stock price. Because merging with another corporation is its only business purpose, it cannot engage in any other business activities besides finding a merger target. SPACs raise merger funds by publicly issuing shares, and investors can become shareholders by subscribing to the public offering or investing in already issued shares on the stock market. The Financial Supervisory Service cautioned, "Unlike ordinary companies, SPACs do not generate profits from business activities, so it is difficult to expect dividends for shareholders."

Furthermore, the current success rate of SPAC mergers is 63.9%. Investors should also be aware that if a merger is not completed within three years after listing, the SPAC will be delisted and dissolved.

If many shareholders oppose the SPAC merger or if the amount exercised under the right to request stock purchase is large, there is a possibility that the merger may be canceled.

If you invested in a SPAC at a price higher than the public offering price in the stock market, the amount returned upon dissolution (around the public offering price) may be less than your principal investment. For example, if you invested in a SPAC on the stock market at a price higher than the typical public offering price of 2,000 KRW, you may receive less than your original investment upon dissolution.

Additionally, like other IPO public offerings, duplicate subscriptions using multiple securities accounts are prohibited for SPACs. A Financial Supervisory Service official stated, "We are reviewing SPAC securities registration statements submitted during IPOs and mergers to ensure that investment risk factors are thoroughly disclosed," and urged, "Investors should also refer to the securities registration statements for rational decision-making."

This content was produced with the assistance of AI translation services.