SPAC Losing Investment Momentum...102 Trillion Won Liquidation

[Asia Economy Reporter Yujin Cho] As more SPACs (Special Purpose Acquisition Companies) are liquidating due to a lack of suitable investment targets, approximately $75 billion (about 102.225 trillion KRW) is expected to be returned to investors over the next six months.

On the 4th (local time), major foreign media outlets cited SPAC Research data reporting this trend. According to SPAC Research, SPACs worth about $75 billion are scheduled to mature and liquidate between this month and February next year, with an additional $36 billion worth of SPACs expected to liquidate in March next year.

Market experts predict that since few new SPACs are being established, this capital will likely flow back into the stock market.

SPACs overheated during the COVID-19 pandemic as funds with no clear destination poured in due to monetary easing. The increase in companies seeking quick listings amid market volatility caused by COVID-19 led to a frenzy of initial public offerings (IPOs) through SPACs.

Together with meme stocks and Bitcoin, massive funds flowed into SPAC investments, with over $250 billion (about 340.75 trillion KRW) invested in SPACs from early 2020 over the course of two to three years.

However, with the stock market downturn stalling company listings and low-quality or marginal companies exploiting SPACs as a backdoor, regulatory bodies such as the U.S. Securities and Exchange Commission (SEC) have moved to draft regulations, causing the SPAC investment fever to cool rapidly.

As a result, hedge funds that led SPAC formations saw their investment returns fall by 6.8% in the second quarter.

A SPAC is a shell company that raises funds through a public offering, lists on the stock market, and exists to merge with an unlisted company within a set period (two years). If a target company is not found within the SPAC’s two-year validity period, the SPAC returns the collected funds to investors and proceeds with liquidation.

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