Going public through mergers with special purpose acquisition companies

In this study, we find that private operating firms with larger controlling shareholders' ownership merge with special purpose acquisition companies (SPACs) rather than take the conventional initial public offering (IPO) route to go public in Korea. This finding indicates that compared to U.S....

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Bibliographic Details
Published in:International review of finance 2021-09, Vol.21 (3), p.742-768
Main Authors: Kim, Hyunseok, Ko, Jayoung, Jun, Chulhee, Song, Kyojik “Roy”
Format: Article
Language:English
Subjects:
Acquisitions & mergers
controlling shareholders
going public
Initial public offerings
merger
Special purpose acquisition companies
special purpose acquisition company
Stockholders
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Summary:In this study, we find that private operating firms with larger controlling shareholders' ownership merge with special purpose acquisition companies (SPACs) rather than take the conventional initial public offering (IPO) route to go public in Korea. This finding indicates that compared to U.S. SPACs, the controlling shareholders' motive to avoid their ownership dilution makes SPAC mergers popular in Korea. In addition, we document that the merged firms do not reveal difference in stock and operating performance over the long run compared to conventional IPO firms. However, SPAC mergers incur higher direct cost and do not generate marketing benefits for the listing firms.
ISSN:1369-412X
1468-2443
DOI:10.1111/irfi.12297