Investor wants to make SPACs more popular in Germany

The concept is controversial and hotly debated, but popular: so-called shell companies. Now the investor Klaus Hommels wants to bring a SPAC to the German stock exchange and is targeting technology companies.

The German media have been talking about the business with so-called SPACs on American stock exchanges for weeks. Now the controversial concept is set to come to Germany: According to the Handelsblatt newspaper, well-known investor Klaus Hommels wants to bring a SPAC, also known as a shell company, to Deutsche Börse in the first quarter of the year under the name "Lakestar Spac 1". The volume is expected to be between 200 and 300 million euros.

SPACs, which stand for special purpose acquisition companies, are based on a sophisticated concept: millions of dollars are raised through an IPO. However, there is no company behind it, but an empty shell consisting only of investor funds. Once listed, the manager of the shell company goes in search of a real company with which to merge. In the best case scenario, investors make a lot of profit from this. If a suitable company is not found, the investors get their money back. A well-known person is therefore particularly important for the concept, on whose good intuition the investors rely. For companies, it offers a comparatively uncomplicated IPO.

According to Handelsblatt , Hommels wants to use his shell company to take over a European technology company, which could also involve a deal worth billions. It would be a successful premiere for the German market. Several top managers tried to set up a shell company back in 2008, but the merged company AEG Power Solutions failed. The withdrawal from the stock exchange followed in 2018.

Experts see the trend of SPACs arriving in Europe this year: Shell companies were already successfully established in Amsterdam and Paris at the end of 2020. The concept harbors many risks and is controversial. The mostly young companies that are to be taken over are not always ready for the stock market and there are repeated accusations that the founders of the shell companies are favored over the other investors. In the USA, this is apparently currently being investigated by the Securities and Exchange Commission.