As investors ring in the new year, it’s hard to imagine that Americans are on the cusp of the two-year anniversary since the COVID-19 pandemic completely upturned social paradigms. At that moment, few could have imagined that the U.S. benchmark indices would eventually rocket higher to blistering records. After all, this was a period when oil contracts dipped into negative territory for the first time.
However, it wasn’t just blind speculation that bolstered sentiment. The national gross domestic product (GDP), which had dipped to $19.5 trillion on an annualized basis in the second quarter of 2020 against a pre-pandemic high of $21.7 trillion in Q4 2019, eventually shot up to $23.2 trillion for the most recent reading (Q3 2021). Still, it may be premature for investors to comfortably celebrate the optimistic print.
As the Bureau of Labor Statistics noted, the employment level for November 2021 was 155.2 million workers, a gargantuan improvement from the COVID-19 lows but still a conspicuous 2.2% below peak pre-pandemic figures. Therefore, productivity (GDP) increased yet the worker base (employment level) decreased, representing a classic case of deflation; that is, fewer people are chasing after more goods.
Given this unusual dynamic amid searing consumer prices, investors may consider shifting some risk capital to emerging-market-focused Cartica Acquisition Corp.
When Is the Cartica Acquisition IPO Date?
Despite the granular details of the U.S. economy not aligning with the common narrative of sweltering inflation crimping recovery efforts, investor sentiment for adventurous asset classes appears to be robust. For instance, the initial public offering (IPO) — the first time an enterprise releases its equity shares to the public — was one of the hottest topics of 2021.
From early indications, 2022 looks to replicate the enthusiasm with a number of companies filing for public market access in the back half of the first week of the year. Cartica Acquisition Corp, which focuses on a reverse merger with a technology firm based in India, announced the pricing of its $200 million deal at $10 per share.
Each unit consists of one Class A common stock and one-half of one redeemable warrant, exercisable at $11.50 per share. Under the terms mentioned above, Cartica commands a market value of $250 million. It made its debut on the IPO calendar on Jan. 5. Shares trade on the Nasdaq exchange under the ticker symbol CITEU.
Initially, Cartica filed for its IPO confidentially with the U.S. Securities and Exchange Commission (SEC) on March 4, 2021. JPMorgan Chase & Co. (NYSE: JPM) represents the sole bookrunner for the offering.
As you might ascertain from the corporate branding, Cartica is a special purpose acquisition company (SPAC). Also known as a shell company or blank-check firm, a SPAC has no underlying operations. Instead, its purpose is to raise funds through an IPO to support a merger (business combination) with a viable private enterprise.
In theory, a SPAC is beneficial for both the enterprises directly involved in the underlying deals and the retail investors to whom it markets its sales pitch. For the former category, the advantages are plainly obvious. Under the traditional approach to the public market, IPO hopefuls must endure a rigorous vetting process — and frankly, many organizations can’t cut the mustard.
For the latter, SPACs facilitate a ground-floor opportunity that spiritually mimics private-equity raises, funding rounds that usually box out non-accredited or non-institutional investors. Cynically, private buyers also have an opportunity to vote with their wallet whether an investment is appropriate or not, removing some influence from regulatory agencies.
Still, SPAC post-business combinations have underperformed domestic benchmark indices, organically emphasizing the dangers of this IPO category. As Harvard Law School warned, participants must be aware of the shell company’s circuitous road to the public arena, invariably sparking dilution concerns. Thus, conduct your due diligence on Cartica and SPACs in general before buying CITEU stock.
Cartica Acquisition Financial History
Because SPACs are basically publicly traded bank deposits, Cartica Acquisition has no financial history other than the money it will raise in its IPO, which is expected to close on Jan. 7. Funds raised through the distribution of CITEU stock will enter a trust account. From there, the blank-check firm will attempt to secure a merger. If successful, CITEU shareholders will enjoy proportional ownership of the eventual business combination.
However, if the SPAC fails to find a merger target within the prescribed time period (18 months to 24 months, per Cartica’s prospectus), shareholders can redeem their equity at the initial offering price ($10). Also, if shareholders disagree with a proposed business combination, they can exit their holdings at that price.
You should be aware that according to data from Dealogic, SPAC redemption rates have been around 50% through November 2021, substantially higher than the 20% redemption during 2020. That so many investors would rather absorb the opportunity cost of share redemption rather than move through with a proposed merger presents a sobering lesson regarding these blank-check firms.
Nevertheless, you must assess each opportunity by its own merits, and CITEU stock is compelling because of its focus on the India technology market. To be clear, no guarantee exists that Cartica will move into this sector. But if it does, the SPAC may benefit from a massive total addressable market.
For instance, India’s information technology (IT) and business service industry generated approximately $6.96 billion in revenue in the first half of 2021, a 6.4% year-over-year increase. Further, experts in the field project that by the end of this year, total IT spending in the nation will jump to $98.5 billion, a nearly 6% increase from estimated spending in 2021.
Just as importantly, other countries and private enterprises recognize India’s potential as an economic powerhouse in the years and decades ahead. According to India Brand Equity Foundation, “Japanese investments in the Indian IT sector grew 4X between 2016 and 2020. Investments stood at US$ 9.2 billion in the review period.”
Moreover, the world’s leading blue-chip firms like Microsoft Corporation (NASDAQ: MSFT) and SAP (NYSE: SAP) have invested heavily in Indian education and infrastructure, suggesting a future workforce that is literate in the language of business and innovation. Therefore, Cartica may have a higher probability in securing a compelling deal than some competing SPACs.
Cartica Acquisition Potential
What primarily separates CITEU stock from many other blank-check firms is the underlying focus market’s upside potential. While the benchmark equity indices for the U.S. and India posted similar figures over the trailing year, the latter commands much more growth potential due to its developmental profile. In other words, there are plenty of ways for India to improve whereas the U.S. is essentially maxed out.
And as American businesses find it challenging to recruit workers — evidenced by the relatively low employment level — they may increasingly look abroad for capable help. Again, thanks to the educational and infrastructural resources that multinational firms contributed to India, the country could experience a global employment boon.
Still, India, like other emerging nations, features a range of challenges, such as gender inequality, a widening wealth gap and human rights concerns. If disparities continue, these dynamics may clash with the global shift toward social equity.
Finally, SPACs can be volatile and subject to damaging scrutiny. Therefore, careful money management is a must.
How to Buy Cartica Acquisition IPO (CITEU) Stock
Interested buyers of Cartica must acquire shares at the open, necessitating knowing how to buy stocks. Below is a quick refresher.
Step 1: Pick a brokerage.
With the best brokers competing on similar terms and access, take the time to consider which platform ideally fits your needs.
Step 2: Decide how many shares you want.
IPOs tend to be risky because of multiple unknown variables. Therefore, choose a balanced share count.
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).
CITEU 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 can’t acquire CITEU stock on a pre-IPO basis, for those seeking to buy select new listings at their initial offering price, consider opening an account with SoFi Invest.
Addressable But Is it Viable?
With the U.S. economy being a mature one, emerging markets like India present a massive addressable opportunity. However, no opportunity is without risks. In addition, SPACs have been all over the map, presenting an interesting situation for CITEU stock.
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.