[SPACs in Crisis] ① "Unable to Merge Even After Three Years"... SPAC Market Driven Toward Liquidation

SPAC Market Shaken by Preference for Direct Listings

Speculative Trading on the Rise, Fewer Successful Mergers

"Urgent Need to Restore SPACs as a Channel for Listing Innovative Companies"

Editor's Note
Special Purpose Acquisition Companies (SPACs) once attracted attention as a new listing pathway for unlisted companies and as a supplementary tool for the venture capital (VC) exit market. However, recently, concerns about a shrinking market have intensified as failed mergers and delistings have surged. On the other hand, some market observers argue that SPACs still serve as a gateway for small and medium-sized growth companies to go public. The Asia Business Daily is taking a three-part look at the current state of the SPAC market, the structure of the VC exit market, and the regulatory reform tasks that lie between investor protection and market revitalization.

"When the SPAC (Special Purpose Acquisition Company) system was first introduced, the review process was much simpler compared to direct listings, but now there is almost no difference."

This is a comment from the head of a mid-sized domestic venture capital (VC) firm who considered, but ultimately withdrew from, a SPAC promoter investment (participating as the largest shareholder at the establishment stage) this year. A SPAC is a paper company that goes public for the purpose of acquiring or merging with an unlisted company. If it fails to find a merger target within the typical three-year deadline, it enters into liquidation proceedings.

He said, "SPACs used to be seen as an alternative to direct listings, but now there are far fewer reasons to choose them," adding, "Many believe that companies are not properly valued compared to direct listings, especially in a bullish market. Since existing SPAC shareholders expect a certain level of returns, negotiations over the merger ratio and company valuation have also become much more difficult."

SPAC Market Shaken by the Shift Toward Direct Listings

Warning signs are flashing in the SPAC market, which was once highlighted as a backdoor listing route for unlisted companies and a supplementary channel for the VC exit market. The merger success rate is plunging and cases of delisting are quickly increasing, while speculative trading aimed at short-term price swings is actually rising.

According to the "Investment White Paper on the Korean SPAC Market" published by the Financial Supervisory Service in March, the SPAC merger success rate in 2025 dropped sharply to 38.5%, nearly a 30 percentage point decline from the previous year's 68.0%. In contrast, the number of SPACs delisted due to failed mergers rose to 24, three times higher than the previous year's 8. Particularly, the number of SPACs that have failed to find merger targets for an extended period is rapidly accumulating. As of the end of 2025, out of 78 SPACs searching for merger targets, 14 had been listed for more than 27 months.

Concerns have become reality this year. If a SPAC fails to submit a preliminary review application for merger and listing at least six months before the merger deadline, it is designated as an issue for management. Korea No. 13 SPAC (in May) and IBKS No. 23 SPAC (in June) were both newly added to this list. From the beginning of the year through this month, 17 SPACs have been delisted due to failed mergers, up from 12 in the same period last year. Meanwhile, only 4 SPACs succeeded in mergers in the same period, half the 8 seen the previous year. The trend of SPACs being pushed toward liquidation under the pressure of merger deadlines is becoming increasingly clear.

The market sees SPACs as having significantly weakened competitiveness compared to the past. Previously, SPACs were perceived as a relatively fast and flexible listing route compared to general IPOs, but now, the level of scrutiny from the exchange is said to be virtually the same. In fact, according to Heungkuk Securities, from 2020 to April this year, the average approval period for SPAC merger listing reviews was 110 days, nearly identical to the average for regular KOSDAQ IPOs (117 days). Since the review period for technology-based special listing on the KOSDAQ is relatively long, it can even be interpreted that the review for SPAC merger listings, which do not have such special provisions, is more stringent.

New SPAC listings are also on the decline. Last year, 25 new SPACs were listed, nearly half of the 45 in 2022. The share of SPACs in the overall IPO market is also trending downward.

Expansion of Speculative Trading... Merger Success Likelihood Falls Further

Short-term supply-demand-driven trading is increasing. The Financial Supervisory Service analyzed that SPAC stock prices have repeatedly surged to more than double their offering price (2,000 won) on the first day of listing. Last year, the average intraday high on SPAC listing days was 4,067 won, reaching 203% of the offering price.

Actual post-merger performance has been disappointing. According to the Financial Supervisory Service, the 14 SPACs that succeeded in mergers last year saw their stock prices drop by an average of 26.6% nine months after listing, with the decline tending to deepen over time. This year is showing a similar pattern. For example, KP Aviation Industry, which listed last month, plunged 60-70% from its base price in just over a month, and all five companies that entered KOSDAQ through SPAC mergers are currently trading below their listing base prices.

This content was produced with the assistance of AI translation services.