Investor wants to make Spacs more popular in Germany

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

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

Spacs, which stands for special purpose acquisition companies, are based on a sophisticated concept: millions of dollars are raised through an IPO. Behind this, however, there is no company, but an empty shell consisting only of investors' money. Once listed, the manager of the shell company goes in search of a real company with which to merge. From this - in the best case - investors draw a lot of profit. If a suitable company cannot be found, the investors get their money back. For the concept, therefore, it is particularly important to have a well-known person 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, and a billion-dollar deal could be in the offing. It would be a successful premiere for the German market. Back in 2008, several top managers tried to set up a shell company, but the merged company AEG Power Solutions failed. In 2018, the withdrawal from the stock exchange followed.

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 holds many dangers and is controversial. The mostly young companies that are to be taken over are not always ready for the stock exchange and there are always accusations that the founders of the shell companies are favoured over the rest of the investors. In the US, the securities regulator is apparently currently investigating this.