Contributor, Benzinga
January 25, 2022
$1.7092
-0.0008[-0.05%]
Last update: 7:59AM (Delayed 15-Minutes)
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Vol / Avg.66.154K / 200.726KMkt Cap112.214M
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If the physical laws of the universe facilitated a direct proportionality between work and production, merely the increase in effort would yield all manner of positive outcomes. Essentially, this concept is the allure of the self-help industry. From “10X”-ing your income to your professional networks to personal relationships, the missing ingredient — according to purportedly esteemed gurus — is merely initiative.

However, as various medical and academic institutions have countered, an extreme focus toward the hyper-acceleration of work — the so-called “hustle culture” — creates a condition known as toxic positivity. Characterized by the dismissal of all negativity (even critical feedback), toxic positivity allures young people precisely because the principle takes a key truth and twists it: yes, success requires effort, yet that is not enough.

Nowhere could this dynamic be more relevant than the proliferation of digital advertising campaigns. Initially, the advent of the internet age allowed businesses to reach out to potential customers with unprecedented ease. However, the competition quickly caught on, leading to what MarTech.org labeled a web overload. Though the internet and social media facilitate access to consumers, even digitalization is not exempt from the law of diminishing returns.

However, System1 Inc, Inc. may provide a desperately sought-after reset for the industry, promoting positive outcomes for clients and advertisers alike.

What is System1?

Founded in 2013, System1 is a leading omnichannel customer acquisition platform, promoting targeted digital advertising to potential customers. Undergirding the technology firm is a proprietary end-to-end responsive acquisition marketing platform (RAMP) that leverages a multi-dimensional approach to serve intent-driven internet/social media users. Rather than bombard customers with disparate products and services, System1’s RAMP operates at the intersection of time and space, delivering relevant advertising when the consumer is most attuned to persuasion.

The tech firm will enter the public market via a reverse merger with Trebia Acquisition Corp. (NYSE: TREB), a special purpose acquisition company (SPAC) that earlier launched an initial public offering (IPO) to raise funds in support of a future business combination. Upon completion of the merger, Trebia will be absorbed into System1 Inc, Inc.

When is the System1 IPO Date?

System1 will entered the IPO calendar on Jan. 25, 2022. Shares trade on the New York Stock Exchange under the ticker symbol SST. However, because System1 does not represent a traditional new listing, the matter is somewhat nuanced.

Technically speaking, the underlying IPO occurred in the late summer of 2020, when shares of the Trebia SPAC became available for public (retail) investment. Also known as blank-check firms or shell companies, SPACs feature no underlying business. Instead, they list as publicly traded entities to attract investors hoping to score a deal on a ground-floor opportunity.

As such, Bloomberg Businessweek ungenerously labeled SPACs as the poor man’s private-equity funds. Nevertheless, you can extract many hard truths from the description. While these shell companies sometimes deliver promising under-the-radar enterprises that might not otherwise see the light of day, SPAC participants are left in the dark regarding likely merger candidates until management discloses its intentions.

As a result, many investors narrow their list of promising blank-check firms to those led by sponsors with a track record of closing deals. That was exactly the case with Trebia, which is affiliated with William P. Foley, II, a famous American investor with a long and distinguished history in engineering, law, finance and military service.

Naturally, interest was high for Trebia before the announcement of the System1 deal. Still, the finalized deal presents an ambiguous circumstance for SST stock due to timing. Though the market closed in the black just prior to its debut under the System1 brand name, investors have been incredibly jittery. On a year-to-date basis, the benchmark S&P 500 index is down 21%, not the start Wall Street was seeking.

Primarily, the challenge for SST stock is the broader rotation out of risk-on assets. With the Federal Reserve signaling its intent to tighten the monetary supply through hawkish policies, borrowing costs will logically increase. Such an ecosystem favors established and stable companies, not aspirational tech-based IPOs.

In addition, lingering uncertainties about a brewing conflict in eastern Europe poses substantial geopolitical and economic threats. According to a CNN report, up to 8,500 U.S. troops are on high alert for possible deployment to the region, setting up the return of a Cold War showdown.

System1 Financial History

Although financial details about System1 are slim since the disclosures regarding the underlying market debut focus on Trebia — which as a SPAC has no operations — the concurrent mergers involved with this IPO present expansionary opportunities for the targeted advertising platform.

Per the SPAC’s merger announcement last year, management noted that System1 would also be combining with Protected.net, a leading developer of security and privacy subscription products with over 2 million paying subscribers. Further, the press release stated that the “acquisition enables System1 to grow its privacy-focused products and further diversify its business model. The combined business is ideally positioned for the privacy-centric future of digital marketing.”

Another factor that bolsters the financial thesis for SST stock is that System1’s business is “vertical-agnostic.” Rather than focusing on certain niche segments within an industry, System1 is “instead diversified across a large spectrum of high value advertising verticals.” As well, the tech firm uses its proprietary RAMP not only to facilitate customer acquisitions for its advertising partners but also to acquire consumers for its own subscription products.

The press release mentioned that the RAMP enabled System1 to scale its business to a projected $120 million of billings-based adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) in 2021.

Though SST stock appears promising, one of the issues that it will undoubtedly face is the reputational damage rendered to the manner in which it entered the public arena. Over the trailing year, SPACs post-business combinations have conspicuously underperformed benchmark indices. Indeed, some much-hyped SPACs have sunk well below their initial offering price (typically $10).

However, as The Wall Street Journal pointed out in December last year, the global advertising market is “continuing to expand much more quickly than forecasters earlier predicted.” Encouragingly, digital advertising is “accelerating especially quickly,” with the subsegment to “account for 64.4% of total advertising in 2021.” That’s up from 60.5% in 2020 and 52.1% in 2019.

Finally, System1 could very much appeal to the new generation of sophisticated internet users, who have grown tired of hackneyed advertising gimmicks such as redundant tracking scripts, an overflow of social media buttons and widgets and dynamic content elements that tend to damage conversion rates.

Instead, System1 is about giving people what they want, when they want it — perfect for a jaded user base.

System1 Potential

Although effective targeted digital advertising represents the holy grail of e-commerce, System1 must be relentlessly active in capturing the pulse of its audience. Otherwise, a competitive usurpation is only a mouse click away.

More critically, though, is the brewing concern of internet privacy and how corporations advantage and exploit users’ data. According to a 2019 Pew Research Center report, a majority of Americans have expressed concerns about the lack of control over their digital footprint on matters unrelated to education and national security.

Since privacy issues cut across demographic categories such as age, System1 may risk succumbing to narrative-based threats unless it reassures the investing public about its commitment to internet privacy.

How to Buy System1 IPO (SST) Stock

Interested investors of SST must acquire shares at the open, necessitating knowledge in how to buy stocks. Below is a quick refresher.

Step 1: Pick a brokerage.

With the best brokers competing on similar incentives, you should direct your focus to platforms that suit your needs.

Step 2: Decide how many shares you want.

IPOs are risky because of multiple unknown variables. To mitigate some of the danger, 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:

  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).

SST 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.

SST Pre-IPO

Unfortunately, no pre-IPO opportunity is available for SST stock.

The Classic Catch-22

While targeted digital advertising appeals on a surface level to jaded internet users, it also presents an uncomfortable dichotomy. To provide relevant information requires the very data footprint that most Americans would rather not give up. How System1 navigates this Catch-22 may very well impact the future viability of SST stock.

Frequently Asked Questions

Q

What does System1 name come from?

A

According to their website, System 1 refers to the system 1 mode of thought. System 1 is fast, automatic, and frequent; compared to System 2 which is slower, more effortful, and infrequent.

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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.