Long-term Performance of Going Public through SPACs

Abstract

Despite a surge in the merger of companies listed on the KOSDAQ market with special purpose acquisition companies (SPACs), limited domestic studies have systematically compared the listing through SPAC mergers and the general IPO. This study analyzes the impact of such companies going public after merging with SPACs as well as their performance by comparing them with the conventional IPOs. First, the firms listed through SPAC mergers are smaller and have a higher proportion of non-manufacturing industries than the conventional IPOs. Second, the operational and stock price performance of the firms listed through SPACs are not inferior to that of the conventional IPOs. Finally, a higher share allocation to institutional investors and subscription rates, for the shares recorded at the time of the SPAC listing, are related to the stock price performance observed after SPAC mergers. According to the empirical results of this study, going public by merging with SPACs provides early listing opportunities to small-and medium-sized companies; they do not experience a deterioration in their financial performance after being listed. The listing of SPACs creates a different and valuable path to enter the KOSDAQ market for such companies as compared to the conventional IPOs.