"When investing in a SPAC (special purpose acquisition company), you should invest with surplus funds for more than three years. You must not forget that a merged SPAC can fall like a stock. You need to carefully assess the value of the corporations that merge with a SPAC. SPACs also require diversification. It is desirable to hold multiple SPACs."
Vice President Jo Jae-young of WellsEdu said in a recent interview, "The advantages of SPACs are safety, liquidity, profitability, and convenience," adding, "SPACs are a suitable investment method for novice investors. SPACs are something that those who know like very much, but those who do not know know nothing about as an investment destination." Jo Jae-young, vice president of WellsEdu, a financial education consulting firm, is a financial expert who worked for 20 years as a private banker (PB) at NH Investment & Securities and Woori Investment & Securities. He said, "Because a SPAC is a paper company whose purpose is to merge with unlisted corporations, you cannot judge the value of the SPAC itself," but added, "I recommend subscribing to SPACs from securities firms with a high success rate of mergers relative to the number of SPAC listings." The following is a Q&A.
Please explain what a SPAC is.
"SPAC stands for Special Purpose Acquisition Company, a special purpose company for the purpose of mergers. It is a kind of paper company that streamlines the existing initial public offering (IPO) process to help unlisted corporations go public quickly. Generally, corporations list through a public offering process, but if an unlisted corporation merges with an already listed SPAC, it can go public quickly and easily. As of Sept. 18, 78 SPACs are listed on the domestic stock market. If I am an unlisted corporation that wants to go public, I can naturally become a listed company by merging with one of the 78 SPACs already listed."
From an investor's perspective, what are the advantages of SPACs compared with IPO shares?
"The first advantage of investing in SPACs is safety. Even if a SPAC fails to merge, investors can receive their principal and interest within three years. Safety is far higher compared with general stock investments, including IPO shares. Because SPACs are listed on the Kosdaq, they can be bought and sold at any time. That means ample liquidity. If you hold a SPAC and it merges with an unlisted corporation, you can expect significant gains from a share price rise. Conversely, if you oppose the merger, you can sell at a price higher than the market price through the appraisal right (put option). Unlike IPOs, which have complicated procedures such as lock-up commitments (a promise not to sell the allocated IPO shares for a certain period), institutional allocation, and book-building competition, SPACs do not have these procedures, so access for investors is good. In particular, in typical IPO subscriptions, the competition is high and it is not easy to receive an allocation, but SPACs have relatively low competition compared with IPOs, making it relatively easy to secure shares."
How do you select SPACs with high investment value?
"Because a SPAC is a paper company whose purpose is to merge with unlisted corporations, you cannot judge the value of the SPAC itself. However, it is worth considering the approach of subscribing to SPACs from securities firms with a high merger success rate relative to the number of SPAC listings. This is because the probability of a successful merger may be higher than other SPACs."
What are the potential risks of SPAC investing?
"Getting your principal and interest back is limited to when a merger fails over three years, so it is better not to invest funds you will need within three years in SPACs. If it merges with an unlisted corporation and is converted into the merged company's stock, from that point on you are exposed to the same investment risks as ordinary stocks. That means the price can fall at any time and you may incur losses. Therefore, timing the sale is very important for SPACs. If you are not confident about the corporations merging with the SPAC you hold, it is better to sell before the merger or exercise the appraisal right. You also must not forget that even though it is listed on the stock market, liquidity is meaningless if there is no buyer willing to purchase at your desired selling price."
What are the characteristics of corporations that go public through a merger with a SPAC?
"Corporations that want to raise capital stably and quickly tend to consider going public through a SPAC merger. A merger between a SPAC and an unlisted corporation can be concluded only when the interests of the SPAC, which seeks listing gains by merging with a blue-chip corporation, align with the interests of the unlisted corporation, which seeks to raise capital through a quick listing."
Who is SPAC investing suitable for?
"SPACs are a suitable investment method for novice investors. Even in the worst case where the merger does not go through, you can secure your principal and interest once three years have passed. Because even the principal plus returns are ensured, many retirees invest heavily in SPACs. In fact, in May 2025, 'Hana Financial No. 25 SPAC' was liquidated because it did not merge, and the return at that time was about 10%. Even without a merger, it provided a return higher than deposit interest. For this reason, SPACs are something that those who know like very much, but those who do not know know nothing about as an investment destination."
What regulations or institutional improvements are needed to revitalize the domestic SPAC market?
"The Financial Supervisory Service pointed out in Dec. 2023 that there was a large gap between the estimated performance of corporations listed through SPAC mergers and their actual performance. An analysis of 139 corporations that went public through SPAC mergers from 2010 to Aug. 2023 showed that, on average, sales were only 18% of estimates and operating profit only 59% of estimates. The Financial Supervisory Service cited as reasons for this gap that corporations were overly optimistic about future business conditions, inflating corporate value, and that external evaluators such as securities firms and accounting firms, which should have prevented this, prioritized merger success and business engagements, neglecting investor protection. This shows that, rather than being an inherent problem with SPACs, thorough verification and analysis of the unlisted corporations seeking to merge with SPACs is important."
What advice should investors considering SPACs remember?
"You can sum up the points to note in SPAC investing in four ways. First, you must not forget that your funds may be tied up for up to three years when you invest in a SPAC. You should invest with surplus funds that you can commit for more than three years. Second, a SPAC that has completed a merger is no longer a SPAC. You must understand that it becomes a stock for which SPAC advantages such as principal protection disappear. Third, you should pay close attention to the unlisted corporations that are merging with the SPACs you hold. You need an active review of whether the share price will rise or fall after the merger. Lastly, diversification is essential even with SPACs. Rather than investing in a single SPAC, you should diversify across multiple SPACs to reduce risk."
Plus point
Surviving merger and disappearing merger, two types of "SPAC mergers"
There are two ways to merge a SPAC with an unlisted corporation: a surviving merger and a disappearing merger. In a surviving merger, the listed SPAC remains as is, and the unlisted corporation is absorbed into the SPAC and disappears. This method has the advantage of maintaining the SPAC's listed entity, but it has the disadvantage that, as the unlisted corporation's legal entity disappears, complicated administrative procedures such as business registration changes and expense arise. Until 2021 in Korea, only surviving mergers were possible. That is because the very introduction of SPACs is to acquire unlisted corporations through fundraising, and maintaining the SPAC's legal entity was deemed suitable for investor protection and oversight. The disappearing merger introduced in Korea in 2022 is a method in which the unlisted corporation survives and the SPAC is absorbed and disappears. This system can maintain continuity of the unlisted corporation's legal entity, operating history, and financial statements. Even after the merger, it guarantees the stability of the existing business and greatly reduces administrative procedures and expense. Thanks to this efficiency, disappearing mergers quickly became the mainstream for SPAC mergers. For unlisted corporations, it allows for a swift listing without cumbersome procedures and stable capital raising, and in the corporate valuation process their existing operating history can be recognized. Although there was controversy early on about whether SPAC shareholders had an appraisal right under the disappearing merger method, revisions to the listing rules by the Financial Services Commission and the Korea Exchange removed the controversy. As a result, the disappearing merger is being evaluated as a reasonable system that helps corporations list efficiently and provides clear information to investors, driving the growth of the domestic SPAC market.