Korea Exchange Conducts Special Surveillance on Volatile SPAC Stocks... Focused Analysis on Unfair Trading

[Asia Economy Reporter Gong Byung-sun] The Korea Exchange (KRX) has recently decided to conduct a planned surveillance on certain SPAC (Special Purpose Acquisition Company) related stocks that have shown sharp price fluctuations.

On the 3rd, the Market Surveillance Committee (MSC) of the Korea Exchange announced that it plans to carry out planned surveillance on SPAC-related stocks exhibiting unusual sharp price fluctuations to prevent investor damage. A SPAC refers to a Special Purpose Acquisition Company, which is a paper company established for the purpose of acquiring unlisted companies.

Recently, many SPACs have shown overheated price trends regardless of the confirmation of the merger target companies. Among these, several stocks recorded intraday price fluctuations hitting the upper or lower limit. In fact, as of the end of last month, there were 10 SPAC stocks that surged more than 50%.

The inspection targets are about 20 SPAC stocks whose prices and trading volumes have surged without clear reasons. The number of stocks may change depending on future price fluctuations.

The inspection items will focus on unfair trading practices such as insider trading, market manipulation, and fraudulent transactions related to the targeted SPAC stocks. In particular, the plan is to closely examine media that can influence many investors, such as stock reading services, pseudo-investment advisory firms, and stock cafes, for any unfair trading activities related to SPAC investments.

Meanwhile, if SPAC stock prices surge sharply in the short term and then fall rapidly or if the merger fails, investment losses may occur. This process can also lead to investor damage caused by unfair trading such as market manipulation.

The Exchange stated, “The MSC is conducting preliminary analysis of basic data such as trading data and disclosure materials of SPAC stocks showing overheated trends. If any suspicion of unfair trading is found during the analysis, a request for an in-depth investigation will be made, and supervisory and investigative agencies will be notified.”