GigCapital5 (GIA) Stock

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Contributor, Benzinga
October 4, 2021
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While you will find few rational individuals that enjoyed the terrible sacrifices that world citizens had to endure amid the COVID-19 pandemic, the reality is that not every facet of the crisis was negative. For a brief moment in Washington, for instance, the otherwise warring 2-party system came together to forward various initiatives, such as stimulus checks and the vaccination rollout.

Other sectors also adapted to the new normal, setting the groundwork for innovative solutions. With the SARS-CoV-2 virus forcing millions of white-collar employees to work from home, the technology, media and telecommunications (TMT) industry encountered its greatest challenge yet. However, through remarkable ingenuity, the broader tech complex facilitated the unprecedented task of getting Americans back to work — even if they weren’t there physically.

Today, society may be on the verge of another massive wave: the collective return to the office. Because of the various logistics capacities required to facilitate this kinesis, the TMT market could once again benefit from a demand surge. This dynamic favorably supports the case of TMT-focused GigCapital5 (NYSE: GIA), which recently launched its initial public offering (IPO).

When Is the GigCapital5 IPO Date?

On Sept. 23, 2021, GigCapital5 announced the pricing of its public market offering involving 20 million shares priced at $10 per unit. One day later, the equity unit inked its debut on the IPO calendar, trading on the New York Stock Exchange under the ticker symbol GIA.

On Sept. 28, GigCapital5 announced the closing of the deal. Providing joint bookrunning services for the IPO were Wells Fargo (NYSE: WFC) and William Blair.

In many cases — and particularly for hyped debuts — acquiring new issues after they’ve made their public entrance results in acquisitions with a hefty premium. However, as a private-to-public equity (PPE) firm, better known as a special purpose acquisition company (SPAC), those who purchase GIA stock now are still very much on the ground floor.

As you may be aware, a SPAC has no underlying business or operations, which is why many journalists refer to it as a shell company or blank-check firm. Its only purpose is to initiate its own IPO to search, identify and merge with a viable private enterprise. Following this business combination, the SPAC assumes the identity of the merger target, including changing its ticker to reflect the enterprise’s brand.

For the combining entities, the combination is a symbiotic one: the merger target brings to the table a (hopefully) lucrative business while the SPAC provides an easier path to access the capital market. In addition, retail investors benefit, too, in that they can acquire equity in an organization that might not otherwise meet the rigorous and costly vetting process of traditional IPOs.

On paper, SPACs like GIA stock sound like a no-lose proposition. While you could make significant profits from this opportunity, you must realize that there’s no such thing as a free lunch — and if there were, it wouldn’t come from Wall Street.

Prospective buyers of GIA stock should first consult the Securities and Exchange Commission’s warnings about IPOs via the blank-check route. In short, always be skeptical about an enterprise seeking a quicker route to the public market.

GigCapital5 Financial History

As a SPAC and PPE, GigCapital5 does not directly offer prospective shareholders a stake in an actual business. Instead, it offers them the possibility of riding a hot hand, similar to excited observers crowding over a craps table.

And what exactly materializes from this hot hand if it makes good on delivery? Should GigCapital5’s sponsors find an attractive opportunity, shares of GIA stock could skyrocket. Further, the sectors that the SPAC is focusing on per its IPO prospectus — TMT, aerospace and defense, advanced medical equipment, intelligent automation and sustainable industries — make for enticing possibilities.

Adding to the mix is that GigCapital5 represents the 6th SPAC that GigCapital Global — a leading PPE business initiative — brokered. Combined with underwriting services from 2 major financial institutions, GIA stock benefits from the right “paper” attributes.

Ultimately, though, the market is the final arbiter regarding valuation. If you subscribe to the theory that the present free market price embodies the culmination of all publicly available news regarding the asset in question, then GIA stock may be worth considering with funds earmarked for speculation.

On Oct. 4, 2021, GIA trades hands at $10.23 or a 2.3% premium over its $10 initial offering price. In some ways, you can interpret this metric as the free market assigning a non-zero probability that GigCapital5 will find a viable merger target. That’s because if the SPAC fails to enter a business combination within the allotted time, investors can get their money back.

However, this redemption value is set at the initial offering price. Therefore, in addition to assuming an opportunity cost (since investors are tying up their money for however long the SPAC takes to fulfill its mission), IPO participants will absorb a 2.3% hit in case of failure.

Nevertheless, buying an under-redemption-value SPAC is not necessarily always ideal because the market assumes a low probability of business-combination success. Thus, it’s important to take measured risks with shell companies because of the various ambiguities involved.

GigCapital5 Potential

Prior to making a firm decision on GIA stock, you should recognize that SPACs are truly hit-or-miss affairs. So far this year, IPOs from such business combinations have underperformed benchmark investment indices.

Worth mentioning is Harvard Law School’s warnings to retail investors: “The primary source of SPACs’ high cost and poor post-merger performance is dilution built into the circuitous 2-year route they take to bringing a company public. Along the way, SPACs give shares, warrants and rights to parties that do not contribute cash to the eventual merger.”

However, if you can handle these concerns through smart money management, GIA stock certainly carries upside potential. Should GigCapital5 merge with an organization in the TMT industry, multiple opportunities abound, particularly as the global economy recovers from the COVID-19 pandemic.

As Deloitte pointed out in its research, TMT-based enterprises will seek to leverage the pace of digitalization across all sectors, thereby using innovations such as artificial intelligence, cloud and big data to gain competitive advantages. Further, geopolitical tensions — mainly between the U.S. and China — should spark pioneering developments as governments plunk down investment dollars in their bid to dominate the industries of tomorrow.

Those interested in GIA stock only need to look at the U.S.-China trade war that resulted in the U.S. Commerce Department banning Huawei Technologies Co. — China’s telecom giant — to appreciate the ripple effect geopolitical tensions can impose. Thus, GigCapital5 isn’t just seeking a company in a relevant market but one that has significant national security undertones.

How to Buy GigCapital5 IPO (GIA) Stock

As a publicly traded entity, you can start acquiring GIA stock now, especially if you already know how to buy stocks. If you don’t, follow the steps below.

Step 1: Pick a brokerage.

While any reputable brokerage will allow you to buy SPACs, those interested in traditional public market debuts should narrow their list of best brokers to platforms that offer pre-IPO access (or new issues at their initial offering price) for select enterprises.

Step 2: Decide how many shares you want.

Every IPO will carry risk due to the unpredictable nature of new offerings. Therefore, you should run with a balanced share count to minimize downside risk.

Step 3: Choose your order type.

Before trading, familiarize yourself with these market concepts.

  • Bid: The buyer’s maximum offer, the bid is always lower than the ask.
  • Ask: The seller’s minimum acceptable price, the ask is always higher than the bid.
  • Spread: The difference between the price bid and the price asked, the spread also indicates market liquidity and risk. Tighter spreads indicate higher liquidity and lower risk due to a stronger demand profile, while wider spreads denote a low-volume market, entailing higher risk.
  • Limit order: A trade request to occur only at a specified price, limit orders provide transparency but no execution guarantees.
  • Market order: Conversely, market orders guarantee fulfillment but only at the prevailing rate, which may fluctuate significantly during order processing.
  • Stop-loss order: A defensive mechanism, a stop-loss order automatically exits your position at either a predetermined price or anything lower.
  • Stop-limit order: Stop-limit orders only execute at a predetermined price, which is the most transparent approach regarding automated exits. However, such orders carry the same non-fulfillment risk as limit orders.

Step 4: Execute your trade. 

To execute a market order, follow these steps:

  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).

GIA Restrictions for Retail Investors

Before betting on an IPO, review the Financial Industry Regulatory Authority (FINRA) rules on restricted persons. Anyone with privileged information should avoid participation.

GIA Pre-IPO

Recently, companies like ClickIPO have begun democratizing the rarified traditional public market offering process by distributing pre-IPO shares of select companies to their members. Interested investors should consider opening an account.

Dialing Up Some Profits

Gambling on a blind bet like a pre-merger SPAC is never easy. However, if you choose to make such a wager, it’s best to do so in a relevant market. With GigCapital5’s focus on the TMT industry, participants can have some assurances that intentions are well placed. Nevertheless, you should exercise due diligence with GIA 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.