Direct Selling Acquisition Corp. (DSAQ) Stock

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Contributor, Benzinga
October 4, 2021
$11.15
0[0.00%]
Last update: 7:00PM (Delayed 15-Minutes)
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Open-Close-Vol / Avg.0 / 20.566KMkt Cap94.466MDay Range- - -52 Wk Range10.480 - 11.500

Prior to the COVID-19 pandemic, if you were like most people, you dreaded the unexpected knock on the door. From newspaper subscription salespeople to solar energy specialists to those curious about your spiritual beliefs, the world seemingly had no shortage of unsolicited marketing pitches. Therefore, if one benefit materialized from the otherwise terrible pandemic, it was the silence at the doorsteps.

But with the vaccination rollout along with a general acclimatization toward the global health crisis, communities everywhere are making gradual steps toward their normal pre-pandemic statuses. Under most contexts, this dynamic is for the better. As data compiled by Statista.com demonstrates, Americans are overwhelmingly ready to reclaim their lives. Naturally, such enthusiasm should boost ongoing economic recovery efforts.

However, this transition also implies a return of the not-so-pleasant aspects of daily life, such as those direct-selling initiatives. Nevertheless, this economic segment represents an important cog in the broader retail infrastructure, an attribute that the upcoming initial public offering (IPO) of Direct Selling Acquisition Corp. can potentially advantage.

When Is the DSAQ IPO Date?

On Sept. 23, 2021, Direct Selling Acquisition announced the terms of its public market offering, which involves the distribution of 20 million shares priced at $10 per unit. One day later, the equity unit made its debut on the IPO calendar, with shares trading on the New York Stock Exchange under the ticker symbol DSAQ.

As expected on Sept. 28, Direct Selling announced the closure of its offering. BTIG, LLC provided the sole bookrunning services for the deal, while I-Bankers Securities provided co-managing services. Heading into the opening volley of the Oct. 4 session, DSAQ stock gained just under 1% from the initial offering price.

Despite Direct Selling’s IPO occurring more than a week ago, prospective investors still have an enticing opportunity to get involved on the ground floor. That’s because Direct Selling’s founding team structured the organization as a special purpose acquisition company (SPAC). Also known as a blank-check firm or shell company, a SPAC has no underlying business or operations.

Instead, its main purpose is to launch its own IPO for the express aim of merging with a private enterprise featuring a viable and hopefully lucrative business. In this case, DSAQ seeks a combination with a domestically based firm in the direct-selling industry. Typically, a SPAC has approximately 2 years to identify a merger target. Once the shell company’s shareholders approve the deal, it combines with the target enterprise, resulting in a backdoor method to going public.

For both the SPAC and the acquired company, the deal represents a symbiotic relationship. The latter provides the business while the former offers access to the capital market. But is such an arrangement helpful to the retail investor?

Before you hit the buy button on DSAQ stock, you should realize that SPACs have their pros and cons. On one hand, shell companies broker deals that otherwise may never materialize since going public via the traditional route requires an extensive (and expensive) vetting process. But on the other hand, Harvard Law School warns that the architecture of the SPAC-based business combination results in dilutive risks post-merger.

On balance, it’s fair to point out that SPACs have so far in 2021 underperformed benchmark indices. At the same time, each proposed business combination should be assessed on its own merits.

Direct Selling Acquisition Corp. Financial History

As a shell company, Direct Selling has no operations and therefore no financial history. Only when the firm identifies a merger target can investors determine a more accurate analysis of the underlying fundamentals. Until that date, shareholders of DSAQ stock must put their trust in Direct Selling’s sponsors to secure a business combination.

Frequently, journalists covering SPACs refer to such vehicles as blind bets — and they very much are. Outside the terms of the SPAC’s IPO deal, you don’t know much as a stakeholder. True, every organization that goes public files a prospectus with the U.S. Securities and Exchange Commission (SEC). In this document, sponsors often identify preferred industries or businesses.

But here’s the rub: a shell company is not obligated to follow through with its stated intentions. Therefore, while Direct Selling declared its objectives to find a suitable business combination within the direct-selling (also known as multi-level marketing) industry, it could decide on a whim to merge with a completely disparate company.

Can retail investors get any protection from transmitting order signals into the great beyond? It turns out you can, although important caveats exist.

Per information from Harvard Law School, SPAC stakeholders can redeem their shares if the blank-check firm fails to identify and merge with an enterprise. This redemption occurs at the initial offering price, which may provide those truly interested in DSAQ stock with a compelling incentive.

Should the equity unit fall below its redemption price (for most SPACs, it’s $10, although this is not always the case), you technically may encounter a risk-free yield environment. For instance, if the market dropped DSAQ stock to $9.50, investors can purchase shares knowing that if Direct Selling fails to find a merger target, at worst, you can enjoy a 5.3% yield.

So, why doesn’t everybody seek out SPAC shares below their redemption point? Unless the discount is steep enough, many if not most investors don’t want to tie up capital for possibly up to 2 years for miniscule rewards. Hence, you must balance opportunity costs against the possible upside of a pre-merger-announcement SPAC.

Direct Selling Acquisition Corp. Potential

Having a tendency of putting people’s defenses up, the direct-selling industry doesn’t command the highest reputation among the public. That being said, it remains a powerful and generally cost-effective means for companies to hawk products or services.

In fact, ResearchAndMarkets.com’s analysis reports that the global direct-selling industry reached a valuation of $168.3 billion in 2020. By the end of this year, the sector could hit total revenue of $184.6 billion, representing a compound annual growth rate of 9.7%. Of course, much of this dramatic growth over a 1-year frame stems from the recovery of the COVID-19 crisis.

According to the latest data from the Centers for Disease Control and Prevention, over 67% of the U.S. population over the age of 18 are fully vaccinated. Therefore, the fear of interacting with the public — though still present in many circles — has diminished substantially from last year.

Further, direct selling or multi-level marketing enterprises can be wildly successful, such as Herbalife Nutrition (NYSE: HLF) or Amway. But in almost all cases, success in this highly emotional segment requires charismatic personalities with a nose for closing deals.

The benefit to prospective speculators of DSAQ stock is that they might have the right leadership under Dave Wentz, chairman and CEO of Direct Selling Acquisition. Wentz joined USANA Health Sciences (NYSE: USNA) — a multi-level marketing firm manufacturing nutritional supplements and beauty care products — at its founding in 1992, eventually climbing the ranks to become CEO in 2006.

Other Direct Selling Acquisition executives feature branding and marketing experience, primarily in the beauty care and supplements industry. Therefore, those who purchase DSAQ stock now have reasonable assurances that the underlying company will make good on its pursuit of a direct-selling enterprise.

How to Buy Direct Selling Acquisition Corp. IPO (DSAQ) Stock

While a SPAC may be a special investment vehicle, its equity units trade just like any other public security. Therefore, you can jump right in if you know how to buy stocks. If not, follow the steps below.

Step 1: Pick a brokerage.

Any reputable brokerage will allow you to acquire publicly traded SPACs. However, for those interested in building their repertoire of traditional new issues, a growing number of best brokers offer pre-IPO access (or shares at their initial offering price) for select opportunities.

Step 2: Decide how many shares you want.

Whether traditional or reverse merger, IPOs are risky because they’re unpredictable. As a result, you should consider approaching new issues with a balanced share count to mitigate downside exposure.

Step 3: Choose your order type.

Before placing your first order, learn these market concepts.

  • Bid: The buyer’s best offer.
  • Ask: The seller’s lowest acceptable price.
  • Spread: The difference between the bid-ask price, the spread denotes market risk as this is also the profit margin for market makers.
  • Limit order: Buy or sell requests at a specific 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 exit positions at a specified price, but they carry non-fulfillment risks.

Step 4: Execute your trade. 

Follow these steps to execute a market order:

  1. Select your action type (buy or sell).
  2. Enter the shares you want to acquire (or sell).
  3. Hit the Buy (or Sell) button.

Follow the same sequence for limit orders (but include your execution price).

DSAQ Restrictions for Retail Investors

Review the Financial Industry Regulatory Authority (FINRA) rules on restricted persons concerning potential conflicts of interest. It’s better to play by the rules first than beg for forgiveness later.

DSAQ Pre-IPO

Services like ClickIPO provide pre-IPO access for select enterprises, thereby democratizing the traditional IPO process.

An IPO to the Top of the Pyramid

Encountering the business end of a multi-level marketing pitch can be an unpleasant experience. Yet investing early in such an enterprise could potentially reward you due to the underlying tenaciousness. DSAQ stock provides exactly this type of opportunity if you’re willing to wager on a pre-merger SPAC.

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.