For an enterprise to succeed, it must first recruit the best talent available — but that only represents half of the equation. To maintain a long-term path of success, a business must give incentives to its core talent with various perks and benefits that go beyond the paycheck. But because of the complexities of doling out such services, human resource (HR) management has become a multibillion-dollar industry.
Add the COVID-19 pandemic to the mix and you can see why Alight, a cloud-based HR solutions provider, garnered tremendous attention.
Alight Financial History
Because Alight is going public via the SPAC route, not much current financial information is available. However, from the company’s filings with the Securities and Exchange Commission regarding its first attempt at an IPO, management disclosed that it acquired 3,000 enterprise-level clients over its over 25-year operating history (as of its 2019 prospectus). Further, 66 of its clients are Fortune 100 companies, while 240 hail from the Fortune 500 designation.
Just as significantly, Alight enjoys over a 97% solutions revenue retention rate in each of the last 7 years. This statistic strongly suggests that the vast majority of new clients that try Alight’s various services are impressed enough to stick around. In fact, Alight’s first IPO prospectus notes that the average tenure among the company’s top 20 HR solutions clients is 15 years.
Alight boasts that through its comprehensive network of programs and services, it positively impacts 22 million workers and their 18 million family members. This tally translates to 340 million benefits and HR transactions processed in 2017. As of the latest available data, Alight generates annual revenue of $2.38 billion. Just before the closing of the SPAC deal, Alight shares commanded a market capitalization of $1.26 billion.
Finally, the HR specialist has a limited history in terms of raising capital in the private funding space. Over 3 rounds from December 2013 to June 2018, Alight raised a fairly modest total of $59.2 million. You’ll want to keep this figure in mind as you assess the premium for ALIT stock.
Although some executives may be tempted to cut an enterprise’s HR budget, it would be wise to not broach the subject if possible. As mentioned earlier, the underlying industry is massive, with some expert analysts pegging the HR and benefits administration market in the U.S. at a value of $67 billion. It’s not an unreasonable assessment, considering how important benefits are to retaining talented employees.
More importantly, having a robust and competent HR infrastructure is crucial to operational success. That’s because HR plays an instrumental role in not only establishing a corporate culture but refining it to suit contemporary social norms. For instance, data from the Pew Research Center shows that millennials represent the largest workforce in this country. Because they have different needs and expectations relative to prior generations, companies that lack an appropriate culture may turn away valuable job candidates.
Before you jump aboard the ALIT narrative, however, it’s important to note the potentially volatile and hit-or-miss nature of SPACs. As Reuters pointed out in early May, its analysis of over 100 SPACs of 2021 trailed the returns of the S&P 500 by a median of 15 percentage points. Therefore, you shouldn’t buy ALIT stock without at least acknowledging its downside risk.
At the same time, many of the above disappointing SPACs have turned in a surprisingly hearty comeback performance between the second half of May through early July. As well, the lingering impact of the pandemic — particularly as it relates to retaining and motivating employees — should provide Alight with exceptional relevancy.
How to Buy Alight (ALIT) Stock
Under a traditional public market debut, underwriters only have so many pre-IPO shares to work with. Therefore, they typically eschew regular retail buyers in favor of their choicest clients such as institutional investors.
From a personal buyer’s perspective, one of the main factors that distinguish SPAC-based IPOs is that anyone can wager on a blank-check company before it makes its merger target announcement. This circumstance allows retail investors to participate in an enterprise from the ground floor, although doing so is risky because you’re essentially flying blind.
But with ALIT stock having gone well past the merger announcement, you should buy shares at the open. While doing so comes with disadvantages, you can enjoy the benefit of surveying the land before making your move.
Plus, if you already know how to buy stocks, the process is simple. If you don’t, just follow the steps below.
Step 1: Pick a brokerage.
Back when the online brokerage landscape wasn’t nearly as sophisticated as it is today, picking your investing platform carried significant consequences. With consumer costs varying widely, you could theoretically end up in an undesirable situation.
Fortunately, though, the advancement of connectivity technologies such as mobile trading apps forced everyone to compete for your business. As a result, the industry standardized most financial incentives, such as commission-free trading. Therefore, you are free to choose your platforms based on your preferences.
Below is a list of best brokers to consider.
Step 2: Decide how many shares you want.
While a simple step on paper, your share count determines the risk-reward profile of a particular trade. The higher your share count, the more profitability you will accrue if your target stock moves higher. Conversely, a higher count can drain your portfolio’s value if the stock plummets. Therefore, take a moment to find a number that you’re comfortable with.
Step 3: Choose your order type.
Before hitting the Buy button, familiarize yourself with these concepts.
- Bid: The bid is the highest price a buyer will extend. It is always lower than the ask.
- Ask: The ask is the lowest price that a seller will accept. It is always higher than the bid.
- Spread: The bid and ask difference, the spread also indicates market liquidity and risk. Tighter spreads suggest higher liquidity and reduced risk due to buyer availability for sellers. Conversely, wider spreads suggest lower liquidity and greater risk.
- Limit order: Use a limit order to trade stock at a specific price. The market doesn’t guarantee fulfillment.
- Market order: Use market orders to buy shares at the current rate. Buy orders execute on the ask and sell orders on the bid.
- Stop-loss order: A protective measure, a stop-loss order exits your position at a predetermined (requested) price or the next available price, whichever comes first. Beware of gap-down sessions, which may cause your stop-loss order to fill well below your requested price.
- Stop-limit order: For full transparency, use a stop-limit order to facilitate automated exits only at the predetermined price. However, there is no fulfillment guarantee.
Step 4: Execute your trade.
To execute a market order, follow these steps:
- Select action type (buy or sell).
- Enter the shares you want to acquire (or sell).
- Hit the Buy (or Sell) button.
Use the same steps for a limit order, except that you must also enter your desired execution price.
Delivering HR for a New Paradigm
Prior to the pandemic, HR solutions providers played a critical role in the administration of employee affairs. They have also helped establish corporate culture, which can be instrumental in retaining key talent.
These and other attributes will be even more valuable in the post-COVID era. Retention concerns will increase in scope as corporations fight for the best job candidates. Given these upcoming changes, Alight finds itself in an extraordinarily relevant market.
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.