[Spec Boom] 160 Appearances This Year Alone... "Growth Speed Is Excessively Fast" Warning Sound

Less Than Two Months to Raise 55 Trillion
Experts Warn "Overheating Concerns"

[Asia Economy Reporter Kwon Jae-hee]The SPAC (Special Purpose Acquisition Company) craze that swept Wall Street last year has continued as a frenzy from the beginning of this year, raising warnings that the growth speed of SPACs is excessively fast. A SPAC is a type of paper company aimed at mergers and acquisitions (M&A), offering the advantage of investing ahead in promising companies, but concerns are also being raised that SPACs are overheated.

A SPAC is an abbreviation for ‘Special Purpose Acquisition Company,’ a paper company established with the purpose of acquiring unlisted companies within a certain period (2-3 years). It raises funds from general investors like a public fund, lists on the stock market, and is traded. SPACs are easier to enter than general IPO public subscriptions and take less time to list, so they have recently been used as a major channel for IPOs in the U.S. The IPO craze through SPACs has continued as the number of companies wanting a quick listing increased due to market volatility caused by the COVID-19 pandemic last year.

Last year, there were 248 IPOs through SPACs on the U.S. stock market, 4.2 times more than the previous year, and the amount raised was $83.4 billion, 6.1 times more during the same period, setting an all-time high. Representative companies that entered the stock market through SPACs last year include hydrogen truck maker Nikola, battery manufacturer QuantumScape, online real estate brokerage platform Opendoor, and space tourism company Virgin Galactic.

This year, the SPAC craze is expected to intensify further. According to SPAC Research, in less than two months this year, a total of 160 companies (as of February 19) have entered the stock market through SPACs, raising a total of $50.1 billion.

U.S. shared office company WeWork, portable ultrasound device startup Butterfly Network, gene analysis startup Twenty-Three and Me, and U.S. electric vehicle company Lucid Motors, considered a rival to Tesla, are known to be likely to go public via SPAC this year.

However, concerns about SPAC overheating have also been raised. The case of Nikola is representative. Nikola, which listed on the U.S. stock market through a SPAC merger in June last year, surged to $80, eight times its IPO price ($10), but plummeted to the $20 range after fraud allegations surfaced.

Experts have also expressed concerns about overheating in SPAC investments.

David Solomon, CEO of Goldman Sachs, said, "The growth speed of SPACs is excessively fast," and predicted, "The SPAC market boom will not continue beyond 2021."

Former Goldman Sachs CEO Lloyd Blankfein also stated, "SPACs help companies go public, but one of the two steps required for an IPO is skipped," adding, "SPACs avoid the strict supervision necessary in the normal IPO process."