"High-Interest Rate Environment: Investing in SPACs Leads to Losses"... 'SPAC Listings' Also Being Withdrawn One After Another

[Asia Economy Reporter Park So-yeon] As the public offering market freezes, 13 companies have withdrawn their listings this year, and two SPAC listings have also been withdrawn. With direct IPOs becoming difficult this year, the detour route of SPAC listings was utilized, but even this has failed, signaling a serious situation.

According to the financial investment industry on the 8th, following Mirae Asset Securities, Yuanta Securities also faced the dishonor of withdrawing its SPAC (Special Purpose Acquisition Company) listing.

Yuanta SPAC No. 11 conducted a demand forecast targeting institutional investors at the end of last month but failed to receive positive evaluations, leading to the withdrawal of its listing earlier this month. This is the second SPAC listing withdrawal this year. The desired public offering price was 2,000 KRW, with plans to raise 15 billion KRW.

Founding shareholders included Medici Investment, Yuanta Securities, How Asset Management, Bright Asset Management, and USIS Investment Advisory. They planned to find merger target companies in manufacturing, electronics & telecommunications, software, bio & pharmaceuticals, gaming, entertainment, mobile, renewable energy, auto parts, and new materials sectors.

Last month, Mirae Asset Dream SPAC No. 1 also withdrew its listing after failing institutional demand forecasting. Founding shareholders included Atinum Partners, Mirae Asset Securities, AIP Asset Management, Fine Value Asset Management, and C&2 Investment.

Withdrawal of SPAC listings is very unusual. SPAC listings were introduced in 2009 as a system to support the listing of small companies that find direct listings difficult. Securities firms list on the stock market in advance, and when a general company seeking listing appears, they merge to list the company.

They raise investment funds through a public offering process, get listed on the stock market, and then find a merger target company with appropriate corporate value. SPACs must find a merger target and submit a listing review application to the exchange within 2 years and 6 months after listing.

Investors can buy SPAC shares to indirectly participate in corporate acquisitions, and companies can be listed simply by being acquired by a SPAC. Investors participate in the public offering to trade shares or sell when the SPAC merges with a company and the value rises to realize profits.

Corporate listings through SPACs increase when the stock market is unstable. The SPAC public offering price (2,000 KRW) has a fixed lower bound, so it is less affected by market fluctuations compared to direct listings that confirm the public offering price through demand forecasting. Large-scale fundraising is possible like direct listings.

They are considered good investment options even in a bear market. It is rare for the stock price to fall below the public offering price, and if merged with a quality company, it gains upward momentum. It is also a stock that guarantees principal in the stock market.

If a merger target is not found within three years and the SPAC dissolves, it must provide shareholders not only the principal but also three years’ worth of interest. Until a merger target is found, about 90% of the investment funds are deposited with Korea Securities Finance. The interest rate on this deposit is adjusted annually. If opposed to the merger, shareholders can exercise their right to request stock purchase.

Because of these advantages, as the general IPO market froze this year due to sluggish stock markets and volatility, the simpler SPAC listing procedure experienced a boom. However, in the fourth quarter, even SPAC listings have become difficult. There is an assessment that the caution against overvaluation of companies aiming to enter the stock market has spread to SPAC listings as well.

An IPO executive at securities firm A said, "In the case of SPAC listings, demand is usually met, but this year there are too many SPACs, so mergers are not going well," adding, "Investors seem to have judged that there is no reason to lock money in SPACs and wait amid high interest rates." He evaluated, "There are even cases where the public offering price of 2,000 KRW is broken, indicating a complete market slump."

Meanwhile, in this year's public offering market, 13 companies withdrew their listings amid controversies over overvaluation.

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