Stocks to pool funds for a corporate buyout will return to the main Korean bourse after the last IPO in special purchase acquisition category in March 2010, raising interest if it can stir a similar boom in the local market as it had done in the United States.
NH Special Purpose Acquisition Company 19 is inviting institutional investors for a book building session on Thursday and Friday before public subscription on May 11 and 12. A total 40 million shares will be offered for a price of 2,000 won apiece to raise 80 billion won, the second-largest in Korea after an 87.5 billion won SPAC IPO by Daewoo Securities in March 2010.
SPAC is a shell company established to raise capital to purchase an unlisted company. Also known as a blank check company and goes public without normal IPO procedures must acquire a company within three years or liquidate.
Investors that take part in SPAC foundation, often brokerages, venture capitals, and new technology financial companies, are in charge of seeking companies for acquisition. Unlike other IPOs, SPAC holds book building session after setting offering volume. The total offering doesn’t change depending on participation from institutions such as pensions, mutual aid associations, and managers.
Korea allowed SPAC IPO in 2009 and it has taken root as an IPO path for companies that wish to minimize financing uncertainty.
Choi Jong-kyung, a researcher at Heungkuk Securities, said that about half of SPAC IPOs in Korea after 2010 have successfully sought mergers and that it could be an efficient tool for companies in growth stage as there is no funding volatility.
Until now, most of the SPACs headed to the secondary Kosdaq market as a majority of the offering were under 10 billion won.
According to Korea Exchange, a total 199 SPACs made debuts between 2009 and March this year, of which 196 or 98.5 percent were on Kosdaq. All of the three companies that were listed on the main Kospi failed to find an acquisition target, thus broke up.
NH SPAC 19 is gaining attention as it is the first SPAC IPO on Kospi market in 11 years. The emergence of a large-scale SPAC IPO comes on the back of growing interest towards SPAC IPOs among not only institutions but also retailers.
The SPAC IPO boom in the U.S. also spilled over to Korea.
According to U.S. research firm SPAC Research, SPAC offering totaled $99.9 billion this year as of April, surpassing last year’s total of $83.4 billion. Churchill Capital, an American SPAC, even made its name among one of the most-widely traded stocks by retail investors.
Nam Kang-wook, vice president at ACPC, a SPAC advising firm, said that large-scale SPAC IPO industry will expand given improved stock market system and increased investor interest.
A SPAC IPO among retail investors is considered as a rare investment that guarantees principal. Its stock price rarely goes below the offering price and a SPAC could gain momentum upon merger with a top-rank company. Shareholders of a SPAC are also guaranteed principal and three-year-worth interest if the special company breaks up after failing to find a merger target in three years.
By Kang Woo-seok and Lee Eun-joo
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