The backlog of SPACs has worsened as additional SPACs (special purpose acquisition companies) are being listed even though listed SPACs have not found merger partners. It is positive in that investors have more choices, but some say side effects from indiscriminate SPAC listings should be guarded against.
According to the Korea Exchange (KRX) on the 13th, 25 new SPACs were listed last year. Compared with 2022–2024, when around 40 SPACs were listed annually, the scale itself has decreased. But the story changes considering that over the past three years only about 17 SPACs a year have succeeded in merging with unlisted corporations. Even though dozens of SPACs remain in the market due to failed or delayed mergers, additional listings have continued, creating a bottleneck with more coming in than going out.
A SPAC, a paper company set up by a securities firm for the purpose of acquiring or merging with an unlisted company, must find and merge with a promising unlisted corporation within three years. If it fails to achieve this objective, the SPAC is dissolved and delisted.
There are not a few cases where a single securities firm has listed 7–9 SPACs. Notably, Hana Securities currently has eight SPACs on the KOSDAQ market. The 25th to 27th SPACs listed in 2023 were liquidated after consecutive merger failures, and the 29th, also listed that year, is set to be dissolved soon due to a failed merger. Even so, Hana Securities went on to list the 30th through 35th SPACs in succession, and in Dec. last year added the 36th.
Mirae Asset Securities and KB Securities are no different. The SPACs listed by Mirae Asset Securities and KB Securities on the stock market number nine and seven, respectively. Although SPACs listed in 2023–2024 that still have not found merger targets are piling up, additional SPACs were listed last year as well. Shinhan Investment Securities and Kyobo Securities each have six SPACs listed.
Given that securities firms typically list two to three SPACs while seeking merger targets, the number of listed SPACs at these firms is seen as excessive. Judging by recent SPAC merger trends, these SPACs are expected to be liquidated more often than they succeed in mergers.
These securities firms say multiple SPAC listings reflect their intent to take an active role as listing underwriters. Because SPAC listings are relatively simpler in procedure than direct listings, securities firms with listed SPACs can present merger listings as an inducement to unlisted companies, the argument goes.
They also say that in searching for unlisted companies of various sizes, there is a need to pre-list several SPACs with different scales.
On the other hand, critics say a structural loophole—under which the risk borne by securities firms is limited even if a SPAC merger falls through—and the absence of a control tower within IB organizations are fueling indiscriminate listings.
First, the SPAC investment unit cost for securities firms is only about half that of retail investors. If the SPAC offering price is 2,000 won, the SPAC shares acquired by a securities firm at the time of establishment before listing are 1,000 won. This is thanks to incentives the government grants to securities firms that establish SPACs, in consideration of the firms bearing expenses during the establishment and listing process and the possibility of not recouping principal if liquidation occurs.
SPACs are considered a safe investment for retail investors because the offering price is guaranteed even if a merger fails. Put differently, if a SPAC merger fails, the securities firm bears that expense. However, factoring in the underwriting and advisory fees a securities firm earns at the time of a SPAC listing, analysts say liquidation expenses can be sufficiently offset.
A securities firm official said, "Because a securities firm receives underwriting and advisory fees the moment it lists a SPAC, the expenses it must bear are not large even if the SPAC merger fails," and added, "There are 'invisible expenses' to maintain related personnel and organizations, but since there is no separate SPAC-only team and the IB department manages both direct listings and SPAC operations together, in effect there are virtually no additional expenses."
Fundamentally, the lack of a control tower in IB departments and a structure in which each division competes is also cited as a factor triggering excessive SPAC listings. A securities firm official said, "The atmosphere varies by firm, but at some securities firms, each IB division is evaluated on its own performance and manages SPACs separately, so they add new SPACs even when existing ones are in place," and explained, "I need to find an unlisted company to attach to the SPAC my division raised for it to count toward my performance, so we end up listing many SPACs."
The proliferation of SPACs is also drawing in investors aiming for "short-term trades." Recently, when a new SPAC appears on the stock market, there are frequent cases of abnormal price spikes and plunges. An industry official said, "The expenses from excessive SPAC listings are not trivial," and added, "Securities firms need to make self-corrective efforts."