One of the crown jewels of global investing, the Asian market has represented a viable upside opportunity for investors willing to extend their horizons beyond the borders of the U.S. In particular, China-based publicly traded companies facilitated tremendous profitability for early believers. And some analysts still put their trust in the growth narrative.
For starters, the Asian market demographic is massive, featuring a population just under 4.7 billion people. At the present juncture, this statistic means that almost 60% of earthlings reside on the eastern hemisphere, logically presenting significant consumer evangelism opportunities. Just as importantly, nearly 51% of the population lives in urban centers, promoting easier integration of connectivity technologies.
Indeed, that’s exactly what’s happening, particularly in Southeast Asia. Per Benzinga’s coverage of the initial public offering (IPO) for Grab Holdings (NASDAQ: GRAB), investors have been looking to the region for its “robust mix of economic growth, rising internet penetration and an extremely favorable population pyramid.” Therefore, this hemispherical spectrum covers the entire range of investment prospects, from emerging markets to mature economies.
Still, Asia has also generated not-so-encouraging news on the geopolitical front, which means that anyone interested in the regionally focused IPO of Alpha Star Acquisition Corp. should conduct due diligence. Here are some factors to consider.
When Is the Alpha Star Acquisition IPO Date?
Amid a flurry of IPO activity in the final month of 2021, Alpha Star Acquisition will likely encounter plenty of competition for investor dollars. Nevertheless, the company does have the advantage of striking first for the week, entering the IPO calendar on Dec. 13.
Per its prospectus with the U.S. Securities and Exchange Commission (SEC), Alpha Star plans to raise $100 million through the distribution of 10 million shares priced at $10 a pop. Each unit consists of “one share of common stock, one right to receive one-tenth of a share upon the completion of an initial business combination and one warrant to purchase one-half of a share, exercisable at $11.50.”
At the terms of the deal above, Alpha Star will command a market value of $128 million. Ladenburg Thalmann represents the sole bookrunner for the IPO. Further, the underwriter has an overallotment option available to purchase an additional 1.5 million shares at the initial offering price.
Shares will trade on the Nasdaq Global Stock Market under the ticker symbol ALSAU.
As you might ascertain from the corporation’s name, Alpha Star Acquisition is a special purpose acquisition company (SPAC). Unlike most other publicly traded entities, Alpha Star does not have an underlying business. Instead, its purpose is to launch an IPO to raise funds to support a merger with a viable enterprise. Typically, these blank-check firms or shell companies have about two years to identify a merger target and complete a business combination.
In this case, Alpha Star intends “to focus on businesses that have a connection to the Asian market.” Its prospectus notes that the executives behind the SPAC have decades of experience with mergers and acquisitions in Asia. With their connection to the regional market, they should have an advantage in finding an appropriate enterprise.
Nevertheless, a SPAC is not bound to its stated intentions, which are only a framework that could shift quite dramatically. As well, post-merger business combinations have underperformed the benchmark index so far this year, imposing general concerns about ALSAU stock.
Moreover, Harvard Law School warned potential buyers of SPACs, noting the investment vehicle’s circuitous road to the public market, during which time issuance of shares, warrants and rights could end up diluting equity in the eventual business combination.
Alpha Star Acquisition Financial History
As a SPAC, it’s basically impossible to provide financial history for Alpha Star Acquisition, other than its IPO terms of an intended $100 million raise. In fact, one of the legal sticking points about SPAC-based IPOs is that upon launching a shell company, the sponsors must engage in a good-faith effort to find a viable merger target.
In other words, no prior agreements to merge should exist for a SPAC when it launches its IPO. Otherwise, this breach of protocol constitutes a violation of securities law, which is at the heart of the matter regarding Digital World Acquisition Corp. (NASDAQ: DWAC). As you know, DWAC aims to take Trump Media & Technology public.
Despite the lack of information — which is central to the legal structure of SPACs — prospective buyers of ALSAU stock can parse the fine print to find potential ideas regarding intended targets. Primarily, SPAC investors should read the profiles of the shell company’s executives.
Here, all Alpha’s top movers and shakers command significant experience in financial services and equity and asset management. As the SPAC’s prospectus implied, most of the executives have either been educated in Asian (mainly Chinese) universities or interfaced with Asian companies.
Again, it’s entirely possible for Alpha to shift out of its intended geographical focus. But by doing so, the blank-check firm likely loses its core advantages and connections. Presumably, the team recognizes such actions would be deleterious to ALSAU stock, presenting some encouragement to interested IPO participants.
What’s more, the theme of energy — and especially the renewable variety — pops up when assessing Alpha’s executive experience. For instance, chairman and CEO Dr. Zhe Zhang provided asset management services for renewable energy and power generation assets. Additionally, Steven Markscheid also managed dealings with the renewable energy sector. Finally, Konstantin Sokolov, Alpha’s independent director, managed investment funds focusing on energy and real estate assets.
Taking this acumen to its logical conclusion, Alpha Star may seek a merger target with a company tied to the Asian renewable energy industry. If that’s the case, this segment represents a very large addressable market. According to Greenpeace Japan, the organization identified a “$205 billion opportunity for renewable energy finance in Southeast Asia in the next 10 years – 2.6 times bigger than the coal market of the past decade.”
And that’s just one part of the eastern hemisphere. According to the Center for Strategic & International Studies (CSIS), China is the “world’s largest producer of wind and solar energy,” while “Four of the world’s five biggest renewable energy deals were made by Chinese companies in 2016.”
Alpha Star Acquisition Potential
From these statistics, the potential for ALSAU stock is obvious — as long as Alpha Star moves in that direction. Of course, that’s no guarantee, so investors must always practice strict money management when engaging SPAC-based IPOs.
Still, the blank-check firm’s executive experience in renewable energy should make this sector in Asia generally (and China specifically) a logical destination point. From the same CSIS report mentioned earlier, “RAND Corporation estimated that air pollution in 2012 cost China $535 billion, or 6.5 percent of its gross domestic product, due to losses in labor productivity.” Thus, even China, despite recent geopolitical difficulties, is incentivized to play ball with the environmental, social, governance (ESG) trend.
However, the challenge with the Asia-Pacific zone is simmering tensions between China and its neighbors. Moreover, lack of transparency and suspected governmental corruption has long stymied foreign investment in China. Given that the country is simultaneously the largest market for clean energy and the world’s biggest population, ALSAU investors will enter an extremely complicated ecosystem.
How to Buy Alpha Star Acquisition IPO (ALSAU) Stock
With its IPO set to launch shortly, interested parties must acquire shares at the open, necessitating knowledge in how to buy stocks. If you need a refresher, follow the steps below.
Step 1: Pick a brokerage.
Representing intermediaries between investors and stock-issuing companies, most brokerages feature similar financial incentives. Therefore, narrow your list of best brokers to platforms that ideally suit your needs.
Step 2: Decide how many shares you want.
IPOs are risky, and SPACs only magnify the danger. Therefore, choose a balanced share count to help mitigate downside moves.
Step 3: Choose your order type.
Before trading, learn these market concepts.
- Bid: The buyer’s best offer for a stock.
- Ask: The seller’s lowest acceptable price.
- Spread: The difference between the bid-ask price, the spread indicates market risk as this is also the profit margin for market makers.
- Limit order: Buy or sell requests at a predetermined price, limit orders provide transparency but no execution guarantees.
- Market order: Market orders guarantee fulfillment but only at the current rate.
- Stop-loss order: Stop-loss orders automatically exit your position at either a predetermined price or anything lower.
- Stop-limit order: Stop-limit orders only leave positions at a specified price, but they also carry non-fulfillment risks.
Step 4: Execute your trade.
Follow these steps to execute a market order:
- Select your action type (buy or sell).
- Enter the shares you want to acquire (or sell).
- Hit the Buy (or Sell) button.
Follow the same sequence for limit orders (but include your execution price).
ALSAU Restrictions for Retail Investors
Review the Financial Industry Regulatory Authority (FINRA) rules on restricted persons before participating in an IPO. Don’t engage if you have privileged information.
While you cannot acquire ALSAU shares on a pre-IPO basis, those interested in future early bird opportunities should consider opening an account with SoFi Invest, which offers early access for select offerings.
A Green Prospect in a Hazy Market
With the Asian hemisphere increasingly leaning on renewable energy solutions, Alpha Star Acquisition offers much potential. However, such a merger is not guaranteed. Additionally, ALSAU stock is geographically exposed to one of the most complex markets available.
About Joshua Enomoto
His distinct writing style of distilling convoluted data into relatable and compelling narratives has earned him recognition among several investment-related publications.