[Why&Next] Hot SPACs Again This Year, Increasing New Listings and Consecutive Merger Cancellations

15 New SPAC Listings This Year
More Than Same Period in 2022, the Record Year for SPAC Listings
Stricter Reviews Lead to Increasing SPAC Merger Cancellations

New listings of Special Purpose Acquisition Companies (SPACs) continue steadily this year. The number of new listings has already surpassed that of the same period last year. As funds flood the initial public offering (IPO) market, warmth is spreading to the SPAC market as well. Along with this, the number of SPAC merger cancellations has also been increasing this year due to stricter reviews. Accordingly, advice has emerged to check merger status more carefully when investing in SPACs.

According to the Korea Exchange on the 29th, 15 SPACs have been newly listed this year. This is an increase from 11 cases during the same period last year. The number of new listings on the KOSDAQ market this year is 35, with SPACs accounting for 40% of them. If the current trend continues, it is expected to surpass the record of 45 new SPAC listings set in 2022. During the same period in 2022, the number of new SPAC listings was 12.

SPACs awaiting listing are also lined up. Mirae Asset Vision SPAC No.4 received listing approval on the 27th and began trading on the 29th, and nine SPACs that passed preliminary listing reviews this year are currently preparing for listing. In addition, six SPACs that have submitted preliminary listing review applications are awaiting review.

The steady demand for SPAC merger listings is interpreted as sustaining the boom in new SPAC listings. Jo Daehyung, a researcher at DS Investment & Securities, said, "Demand for SPAC merger listings, mainly for small and mid-cap stocks, is steadily maintained, and accordingly, SPAC listings themselves continue. Small and mid-cap focused SPAC listings are expected to continue to play a major role in this year's IPO market."

While new SPAC listings are increasing, SPAC merger cancellations are also on the rise. Six SPACs have canceled mergers this year, with one of them delisted after cancellation. Eugene SPAC No.7 announced on the 17th that its merger with set-top box manufacturer KX Intech was canceled. Eugene SPAC No.7 explained, "During the preliminary listing review process for the merger on the Korea Exchange, the merger listing preliminary review was withdrawn due to internal circumstances of KX Intech." The two companies had decided to merge in August last year.

Daeshin Balance SPAC No.16 announced on the 3rd that its merger with Luritech, a manufacturer of inspection and assembly equipment for automotive cameras, was canceled. During the merger process, Luritech withdrew the preliminary listing review due to internal circumstances, leading to the termination of the merger contract. The two companies had decided to merge at the end of January this year.

Hanwha Plus SPAC No.2 announced the withdrawal of its merger with CNT Tech, a delivery order brokerage and accelerator business operator, at the end of last month. The merger was canceled after receiving a non-approval notice from the exchange during the preliminary listing review, which was a precondition in the merger agreement. Hana Financial SPAC No.25 canceled its merger with PIE, a manufacturer of secondary battery inspection and solutions, and NH SPAC No.25 also withdrew its merger with eBroadcasting, a database and online information provider, due to non-approval of the preliminary listing review.

NH SPAC No.20 canceled its merger with Creates, a golf launch monitor manufacturer, in February. Afterward, NH SPAC No.20 failed to find a merger target and was delisted at the end of April. SPACs have a lifespan of three years; if they do not request a preliminary listing review six months before expiration, they are designated as a management item, and if the reason for designation is not resolved within one month, they are delisted.

Stricter reviews appear to be affecting SPAC mergers. Following controversies over SPAC overvaluation, the Financial Supervisory Service has strengthened disclosures and plans to enhance the use of relative valuation so that SPAC investors can easily compare corporate values with similar companies. In SPAC merger listings, there is no institutional demand forecast process, and merger ratios are decided based on absolute corporate value without comparison groups. This has raised ongoing concerns about the potential inflation of corporate value. A securities industry official said, "As the authorities have announced improvements to the system regarding SPAC overvaluation controversies, the review process is inevitably becoming stricter. This seems to be a burden for companies aiming to enter the stock market through SPAC mergers, leading to an increase in companies dropping out midway."