The financial investment industry has seen little market revitalization six months after the easing of mandatory holding commitment regulations for Special Purpose Acquisition Companies (SPACs). Industry experts are calling for further regulatory improvements due to ongoing structural issues, including prolonged merger reviews and weak investment demand.
According to the Korea Financial Investment Association, it has been six months since the criteria requiring a certain percentage of shares allocated to institutional investors in SPAC initial public offerings (IPOs) to be prioritized for mandatory holding commitment institutions was abolished. This change aimed to increase flexibility in institutional allocations and reduce the burden on securities firms managing SPAC listings to stimulate the market.
However, the effects of this regulatory change have yet to be clearly observed. From April to September of this year, the number of SPAC listings increased by just one compared to the same period last year, while the expected amount raised through public offerings rose by 32.6%. In contrast, when compared to the same period in 2024, the number of listings decreased by 55.0%, and the expected amount raised fell by 44.7%.
An industry insider noted, "While the removal of the mandatory holding commitment prioritization has increased flexibility in institutional allocations and somewhat alleviated the burden during the public offering process, fundamental factors such as merger reviews and investment demand remain unchanged, resulting in minimal perceived benefits from the regulatory improvements so far."
There is a consensus in the industry that additional measures are necessary to invigorate the SPAC market, particularly regarding the duration of merger reviews. The average review period for SPAC mergers is approximately 110 days, which is not significantly different from the review process for regular KOSDAQ listings. This has diminished the advantage of SPACs being able to enter the market relatively quickly through mergers.
As the supply of new SPACs increases, many are facing deadlines to find merger targets. Currently, SPACs have a three-year lifespan, and if they do not complete a merger within that time frame, they face delisting and dissolution. If a large number of SPACs that previously listed reach their expiration dates simultaneously, competition for merger targets is likely to intensify.
The tightening of listing reviews has also been identified as a contributing factor to the market downturn. An industry representative stated, "The increased rigor of listing reviews has made it more challenging for mergers to succeed, which has compounded the market's stagnation."
In response, some industry voices are advocating for broader allowances for PIPE (Private Investment in Public Equity) transactions for SPACs. PIPE transactions involve publicly listed companies raising funds by issuing new shares to institutional investors and other professional investors through private placements.
Under current regulations, private placements for domestic SPACs are tied to special resolutions at shareholder meetings, making them difficult to utilize effectively. There are calls to relax these rules to allow for board resolutions alone, enabling more flexible funding during the merger process.
According to the Korea Financial Investment Association, it has been six months since the criteria requiring a certain percentage of shares allocated to institutional investors in SPAC initial public offerings (IPOs) to be prioritized for mandatory holding commitment institutions was abolished. This change aimed to increase flexibility in institutional allocations and reduce the burden on securities firms managing SPAC listings to stimulate the market.
However, the effects of this regulatory change have yet to be clearly observed. From April to September of this year, the number of SPAC listings increased by just one compared to the same period last year, while the expected amount raised through public offerings rose by 32.6%. In contrast, when compared to the same period in 2024, the number of listings decreased by 55.0%, and the expected amount raised fell by 44.7%.
An industry insider noted, "While the removal of the mandatory holding commitment prioritization has increased flexibility in institutional allocations and somewhat alleviated the burden during the public offering process, fundamental factors such as merger reviews and investment demand remain unchanged, resulting in minimal perceived benefits from the regulatory improvements so far."
There is a consensus in the industry that additional measures are necessary to invigorate the SPAC market, particularly regarding the duration of merger reviews. The average review period for SPAC mergers is approximately 110 days, which is not significantly different from the review process for regular KOSDAQ listings. This has diminished the advantage of SPACs being able to enter the market relatively quickly through mergers.
As the supply of new SPACs increases, many are facing deadlines to find merger targets. Currently, SPACs have a three-year lifespan, and if they do not complete a merger within that time frame, they face delisting and dissolution. If a large number of SPACs that previously listed reach their expiration dates simultaneously, competition for merger targets is likely to intensify.
The tightening of listing reviews has also been identified as a contributing factor to the market downturn. An industry representative stated, "The increased rigor of listing reviews has made it more challenging for mergers to succeed, which has compounded the market's stagnation."
In response, some industry voices are advocating for broader allowances for PIPE (Private Investment in Public Equity) transactions for SPACs. PIPE transactions involve publicly listed companies raising funds by issuing new shares to institutional investors and other professional investors through private placements.
Under current regulations, private placements for domestic SPACs are tied to special resolutions at shareholder meetings, making them difficult to utilize effectively. There are calls to relax these rules to allow for board resolutions alone, enabling more flexible funding during the merger process.
* This article has been translated by AI.
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