Hawks Acquisition Corp. Stock

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Contributor, Benzinga
October 11, 2021
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Beyond the sheer number of people who succumbed to COVID-19, another statistic laid bare the brutal reality of this unprecedented crisis: the sharp decline in employment. In April 2020, this metric dropped to 133.4 million, a staggering 16% free fall from January. Even more startling, the employment level hadn’t dropped that low since June 1999.

Of course, the population of the U.S. at the time was approximately 279 million, conspicuously fewer than the nearly 330 million people living in the nation today. On an apples-to-apples comparison, the devastation to the labor force was unlike anything witnessed in modern history.

Still, through collective perseverance and extraordinary measures from federal and state government agencies, the domestic economy sparked a gradual though tenuous recovery. Several months into the Biden administration, all seemed to break well until the Department of Labor released its September jobs report. Unfortunately, the 194,000 jobs added fell short of the consensus 500,000 forecast.

Economic weakness might be the name of the game now that government stimulus checks have dried up. However, bad news is potentially good news for the distressed-debt-focused initial public offering (IPO) of Hawks Acquisition Corp. (NYSE: HWKZ).

When is the Hawks Acquisition Corp. IPO?

One of the more intriguing public market debuts of this year, Hawks Acquisition Corp — as you might guess — is a special purpose acquisition company (SPAC). Rather than developing a business of its own, a SPAC’s sole mission is to launch an IPO to ultimately merge with a privately held enterprise. Once the business combination is complete, the SPAC loses its often-quirky name and assumes the identity of the merger candidate.

In this manner, SPAC-based IPOs represent a symbiotic relationship. The SPAC — also called a blank-check firm or shell company — provides access to the capital market. The merger candidate brings to the table the actual business. Because such business combinations are an easier, faster way to reach public investors rather than through the traditional IPO process, they’ve become extremely popular financial vehicles.

In this case, Hawks Acquisition inked its debut on the IPO calendar on Oct. 8.

What draws the eyes of prospective buyers of Hawks’ equity unit is that shares opened the Oct. 8 session at $9.88, reaching an intraday high of only $0.01 improvement. At the closing bell, HWKZ entered the 2nd weekend of October 1.4% below its initial offering price of $10. While this pricing could change at a moment’s notice, it suggests that the market doesn’t have the greatest confidence in Hawks’ ability to find a viable merger candidate.

Frankly, those interested in HWKZ should recognize the skepticism. With the underlying SPAC focused on the distressed debt market, plenty of factors can go awry. Primarily, investing in businesses that gamble on companies with highly leveraged balance sheets or have privately emerged from bankruptcy court protection is a wildly risky venture. Such troubled entities can find air pockets thanks to the cash infusion — only to go under later.

On the more positive end of the spectrum, HWKZ represents the beauty of SPACs. Without this vehicle, regular retail investors would not have the opportunity to bet on alternative investments like distressed debt markets which the Securities and Exchange Commission (SEC) doesn’t regulate. If you are the adventurous type, Hawks Acquisition can potentially provide excitement.

Hawks Acquisition Corp. Financial History

As a blank-check firm, potential stakeholders of HWKZ cannot depend on any financial history other than its IPO details, which involved the distribution of 20 million shares at an initial offering price of $10 per unit. Hawks Sponsor LLC sponsors Hawks Acquisition, while BTIG LLC and Mizuho Financial Group (NYSE: MFG) provided joint bookrunning services.

For those who are truly interested in HWKZ, buying shares below $10 could turn out to be a shrewd, risk-managed maneuver. Per the SEC, you are “entitled to your pro rata share of the trust account and not the price at which you bought the SPAC shares on the market.” Typically, this works against you because much-hyped SPACs carry a premium against their initial offering price.

However, if you can snag HWKZ below $10, you will be entitled to the original offering price — and not your market price — if the SPAC fails to find a merger target. By acquiring at the price of $9.86, you may benefit from a risk-free yield of 1.4% in case of failure.

Still, nothing in life is truly risk-free. Because SPACs have about 2 years to find a merger target, a 1.4% yield over that period is a lowly pittance. No guarantee exists that Hawks Acquisition will combine with a distressed-debt entity because SPACs are not beholden to their stated merger intentions.

Nevertheless, interest is rising for HWKZ because of the tremendous rewards on tap if bottom-feeding investors get it right. For instance, an FT.com article in late August of this year stated that hedge funds profiteering off fiscally troubled businesses have enjoyed a bonanza because of government stimulus lifting the price of debt that were initially flirting with default.

Should Hawks find a good company that simply found itself trapped under the shock tidal wave of COVID-19, it could garner tremendous returns. But investors will also want to measure the pulse of society as current mores frown upon such cynicism.

Hawks Acquisition Corp. Potential

A key factor bolstering the narrative for HWKZ is that the underlying focus — distressed debt — represents the antithesis of traditional long-sided investments; that is, people acquire equity in the hopes that its valuation rises.

But with debt investing, the backdrop is incredibly cynical. As Harvard Business School Online marketing coordinator Catherine Cote explains, “Distressed debt investments are rarely made with a company’s owners or management in mind. If you’re investing in a financially distressed company’s debt, chances are you hope to replace the current management during restructuring or be paid out if the company declares bankruptcy. In either situation, investors likely have a negative—or even hostile—relationship with owners or management.”

Nevertheless, Cote also details the temptation of distressed debt investments. “If you’ve correctly assessed an opportunity, strategically purchased a controlling share of debt, and the restructuring process has been triggered, you can influence the restructuring process and become an equity or debt holder in the revamped company, setting you up for a return on your initial investment down the line.”

Finally, while distressed debt can generate robust gains, monetary policy shifts can also turn this game on its heels. Therefore, you should allocate only a small portion of your capital toward such speculation.

How to Buy Hawks Acquisition IPO Stock

Another aspect that attracts retail buyers to SPACs is that they trade just like any other stock, so interested investors can acquire shares at any time during the shell company’s journey — from pre-merger announcement to post-business combination. If you already know how to buy stocks, you’re at an advantage. If not, just follow the steps below.

Step 1: Pick a brokerage.

While any reputable brokerage will allow you to buy SPAC shares, you should narrow your list of best brokers to institutions that provide you comprehensive access to multiple investment vehicles as you develop your craft.

Step 2: Decide how many shares you want.

Because IPOs can truly go anywhere, it’s best to wager with a balanced share count to mitigate downside exposure.

Step 3: Choose your order type.

Before placing your 1st order, understand these market concepts.

  • Bid: The best offer a buyer makes for a stock.
  • Ask: The lowest acceptable price a seller will take.
  • 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 also 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.

HWKZ Restrictions for Retail Investors

Before participating in an IPO, review the Financial Industry Regulatory Authority (FINRA) rules on restricted persons to avoid running afoul of securities regulations.

HWKZ Pre-IPO

In traditional IPOs, underwriters offer new issues at their original asking price only to their choicest clients, typically institutional investors. Retail buyers must wait until shares hit the open market before participating, which may incur a premium penalty called an IPO pop. However, companies like ClickIPO Securities LLC have democratized the traditional offering process by distributing pre-IPO shares of select companies to its members.

Profiting Off the Negativity

In most cases, investors acquire equity stakes in assets and businesses for their upside potential. With Hawks Acquisition’s focus on distressed entities, though, the concept entails a vulturous proposition. Still, the bad boy charm of HWKZ will inevitably attract some buyers, making this a curious opportunity.

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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.