Short-Term Speculative Funds Still a 'Playground' for SPAC Listings

Surged on IPO Day Then Returned Near Offering Price
Trillions Flow into SPAC IPO Subscriptions
Long-Term SPAC Investment Should Avoid First Trading Day

As funds flood into the initial public offering (IPO) market, there is a heated frenzy for subscription to special purpose acquisition company (SPAC) public offerings. SPACs, which generally have relatively small market capitalizations, tend to exhibit high volatility on their first day of listing and close trading near the offering price. Speculative funds aiming for short-term capital gains pour in, causing the trading value on the first day of listing to reach dozens of times the SPAC's market capitalization, but trading volume sharply declines from the following day.

According to the financial investment industry on the 24th, eight SPACs, including Daishin Balance No.17 SPAC, have been listed on the KOSDAQ market this year.

Daishin Balance No.17 SPAC, which was listed on January 24, rose to 6,500 KRW on its first day but closed at 2,140 KRW. The stock price fluctuated between 6% and 225% compared to the offering price on the first day. It showed a price trend where losses of over -60% could be recorded in just one day. The trading value on the first day was 482.6 billion KRW, which is 39.9 times the market capitalization of 12.1 billion KRW based on the offering price. The trading value sharply dropped to 7.7 billion KRW the next day, and the recent trading value is only 78 million KRW. The stock price slightly increased to 2,360 KRW compared to the closing price on the first day.

Daishin Balance No.17 SPAC conducted a public offering subscription for general investors over two days starting January 15. A deposit of 3.4 trillion KRW was attracted. Although the allocated quantity was only 1.375 million shares, the subscription volume reached 1.7052 billion shares.

The stock price and trading behavior of Hana No.31 SPAC, which was most recently listed, are not much different. Hana No.31 SPAC attracted 2.37 trillion KRW in deposits from general investors during its subscription. On the listing day, January 5, the stock price rose to 4,830 KRW but closed at 2,015 KRW. From the day after listing, trading volume sharply declined, and the stock price has been moving between 2,000 KRW and 2,100 KRW. The trading value decreased from 258.1 billion KRW on the first day to 95 million KRW on the 22nd.

A financial investment industry official explained, "Due to high volatility on the first day of listing, SPACs often show returns exceeding 100% compared to the offering price," adding, "The competition rate increases as investors pay the maximum deposit to receive even one more share of the public offering."

Hana No.32 SPAC, which conducted a public offering subscription for general investors over two days from the 18th to the 19th, attracted deposits totaling 3.58 trillion KRW. Considering the allocated quantity was 1.5 million shares, it is not easy to receive even 100 shares of the public offering. The profit in hand on the first day of listing when receiving 100 shares is around 200,000 KRW at most. Given the recent IPO market situation, the probability of loss is low.

Investors who receive public offering shares can make a profit even if it is a small amount. However, general investors who enter the market after seeing the stock price surge due to speculative funds on the first day of listing are likely to incur losses. A financial investment industry official advised, "Until the merger company is decided, the value of a SPAC, which is no different from a deposit, rarely deviates significantly from the level of cash held," and recommended, "It is advantageous to avoid investing in SPACs on the first day of listing."

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