Financial Knowledge

Mezzanine, Pre-IPO & SPACs

This section explains how investment instruments other than IPO shares work, including the conversion price, refixing and call option rules and disclosures for listed companies' mezzanine securities (CBs, BWs and EBs), how pre-IPO investments are structured and locked up after listing, and how SPAC escrow funds and mergers work. It is general information, not a recommendation of any product, and because the rules change frequently, be sure to check the issuance disclosures and securities registration statement of the individual security and the latest laws and regulations.

La versione italiana di questa pagina è in preparazione. Fino ad allora il testo è mostrato in inglese.

52 questions · Last updated

  1. 01What exactly are mezzanine securities?
  2. 02Why do companies and investors use mezzanine financing?
  3. 03How are mezzanine securities valued?
  4. 04How do the coupon rate and the yield-to-maturity rate of a convertible bond differ?
  5. 05How is the conversion price of a listed company's convertible bond determined?
  6. 06How far can the conversion price be lowered when the share price falls?
  7. 07What happens if the share price rises again after the conversion price has been refixed downward?
  8. 08How does the conversion price change when there is a rights issue, a stock dividend or a capital reduction?
  9. 09What is the call option (right to demand sale) on a convertible bond, and what limits apply?
  10. 10How were convertible bond disclosures and rules strengthened at the end of 2024?
  11. 11If a bond has an early redemption right (put option), is the principal guaranteed?
  12. 12What is an 'acceleration event' (loss of the benefit of term) in a mezzanine contract?
  13. 13What is the difference between detachable and non-detachable BWs?
  14. 14Do I have to pay separately when exercising the warrant of a BW?
  15. 15Can a company issue convertible bonds only to specific investors?
  16. 16Why do privately placed convertible bonds of listed companies carry a 1-year resale restriction?
  17. 17Can a listed company in a management control dispute issue privately placed convertible bonds?
  18. 18Why are most listed companies' convertible bonds issued by private placement?
  19. 19When and where can I find out that a listed company is issuing convertible bonds?
  20. 20What is 'payment in kind', where convertible bonds are paid for with assets instead of cash?
  21. 21What kinds of cases have there been of privately placed convertible bonds being abused for unfair trading?
  22. 22Why is a large amount of outstanding convertible bonds said to weigh on the share price?
  23. 23How are the shares to be delivered under an exchangeable bond secured and held?
  24. 24Can a company issue exchangeable bonds that are exchangeable into its own treasury shares?
  25. 25How do mezzanine securities of listed and unlisted companies differ?
  26. 26How are the maturity and investor eligibility of private funds investing in mezzanine securities determined?
  27. 27How is pre-IPO investment usually made?
  28. 28What is required for an unlisted company to issue new shares to specific investors?
  29. 29When can shares acquired pre-IPO be sold after listing?
  30. 30Are venture capital firms and professional investors that invested before a KOSDAQ listing also subject to mandatory holding?
  31. 31What are redeemable convertible preferred shares (RCPS), and why are they widely used in pre-IPO investment?
  32. 32How are redeemable convertible preferred shares handled ahead of a listing?
  33. 33How do convertible bonds issued by a company preparing to list affect the listing review and the share price after listing?
  34. 34After passing the preliminary listing review, by when must a company list?
  35. 35How does the pre-IPO investment price relate to the IPO offer price?
  36. 36How do pre-IPO investors usually recover their investment?
  37. 37What rules apply when an unlisted company gathers many pre-IPO investors?
  38. 38How are unlisted shares held by a fund valued?
  39. 39What stages does a SPAC investment go through from listing to merger?
  40. 40From when are a SPAC's listing deadline and merger deadline counted?
  41. 41How much of a SPAC must the securities firm that set it up hold, and when can it sell?
  42. 42Where are a SPAC's escrowed funds held, and when can they be withdrawn?
  43. 43What happens if a SPAC's deadline approaches with no merger in sight?
  44. 44How can a shareholder who opposes a SPAC merger get their money back?
  45. 45Can a SPAC's pre-offering shareholders (such as promoters) vote on the merger or exercise appraisal rights?
  46. 46Does trading in a SPAC's shares stop when it announces a merger?
  47. 47What is the difference between a 'SPAC-surviving merger' and a 'SPAC-dissolving merger'?
  48. 48How is the merger ratio between a SPAC and an unlisted company determined?
  49. 49Which companies can a SPAC not merge with?
  50. 50Can a loss-making company list through a SPAC merger?
  51. 51What should I watch out for when buying listed SPAC shares on the exchange?
  52. 52What is post-IPO investment, and what should I check for recently listed companies?

General financial information, not investment advice. Rules and tax rates change; please check the latest guidance from the source institution.