"Japan to Promote Allowing SPAC Formation from Next Year"

[Asia Economy Reporter Yujin Cho] The Japanese government is reportedly pushing forward with plans to allow the establishment of Special Purpose Acquisition Companies (SPACs), according to the Nihon Keizai Shimbun on the 30th.

According to the report, the Financial Services Agency, Ministry of Economy, Trade and Industry, and the Tokyo Stock Exchange are discussing measures to strengthen investor protection and oversight functions to permit SPAC establishment starting next year. The Japanese government plans to submit a proposal to the ministerial meeting next month to partially allow SPAC establishment to foster venture companies.

A SPAC raises funds through a public offering, lists on the stock market, and then merges with an unlisted company within a predetermined period. For unlisted companies, listing through a SPAC offers the advantage of reducing the listing procedures compared to a formal Initial Public Offering (IPO).

Last year, amid increased volatility due to the COVID-19 pandemic, the number of companies seeking rapid fundraising grew, fueling a SPAC listing boom in global markets including the United States and Europe.

The Japanese government expects that by allowing SPACs amid the heightened listing hurdles caused by the COVID-19 crisis, it can shorten the IPO process and time, and facilitate restructuring.

However, considering cases in the United States where SPACs have been misused as a means to avoid normal IPOs, resulting in stock price crashes and investor losses for companies listed via SPACs, the government plans to further strengthen investor protection and inspection requirements at the time of listing.