Though special purpose acquisition companies (SPACs) have generated considerable buzz over the trailing year, they’ve also contributed their fair share of controversy and disappointments. Not surprisingly, many investors view the darker side of the SPAC spectrum with skepticism. But the narrative for this special financial vehicle shouldn’t end there as it has an ace up its sleeve.
Unlike a traditional initial public offering (IPO), SPACs essentially put everyone on the ground floor prior to their merger announcement. What you are betting on with an entity like TradeUP Acquisition is people, people, people; that is, can the SPAC find a viable merger target and gain shareholder and regulatory approval for the business combination?
If the answer is yes, early bird stakeholders have a tremendous opportunity for big profits. Better yet, TradeUP offers an enticing supporting framework.
When Is the TradeUP Acquisition IPO Date?
On July 14, 2021, TradeUP Acquisition slotted its first appearance on the IPO calendar by announcing the pricing of its public market debut of 4 million shares at a price of $10 per unit. On the following day, shares began trading on the Nasdaq Capital Market under the ticker symbol UPTD.
Later, on Sep. 3, management announced that in 4 days, stakeholders of the SPAC units distributed in the July offering “may elect to separately trade the shares of common stock and warrants included in the units.” Separated common stock and warrants will maintain the tickers UPTD and UPTDW, respectively, whereas unseparated units will trade under the ticker UPTDU.
U.S. Tiger Securities, a global online broker-dealer registered with the U.S. Securities and Exchange Commission (SEC) and owned by UP Fintech (NASDAQ: TIGR), acted as the lead bookrunner for the SPAC’s IPO. EF Hutton and R.F. Lafferty & Co. provided joint bookrunning management services.
To better understand the potential upside of TradeUP, this organization does not have underlying operations. Instead, it’s a shell company or what many analysts refer to as a blank-check firm. Rather than starting a business of its own, a SPAC searches for a privately held enterprise with a promising venture. Once identified and approved, the SPAC merges with the target company.
It’s most helpful to think of SPACs as entering a symbiotic relationship with a private company. The former wants an operational venture and the latter wants to go public. Through their business combination, the 2 parties fulfill their ambitions.
But where does that leave you, the retail investor? Currently, TradeUP is still searching for a merger candidate, preferably in the technology sector per its filings with the SEC. Should the SPAC find an attractive target, the price of UPTD stock could skyrocket. Thus, speculators could buy shares before the merger announcement, possibly getting a leg up on the market.
TradeUP Acquisition Financial History
According to TradeUP’s IPO prospectus, the proceeds it receives from the offering, “$40,800,000 or $46,920,000 if the underwriters’ over-allotment option is exercised in full ($10.20 per unit) will be deposited into a U.S.-based trust account.” This figure is significant because of Nasdaq rules regarding the size of enterprises SPACs can acquire.
In short, a shell company can combine with 1 or more target enterprises, as long as their combined fair market value is equal to at minimum 80% of the balance found in the SPAC’s trust account (minus any deferred underwriting commissions and taxes to be paid on interest earned). Given that the target organization doesn’t want to excessively devalue its business, TradeUP will likely narrow its choices among smaller-capitalization firms.
Because of this backdrop, TradeUP might seek a merger target in the biotech or medical equipment, solutions or education industry. While the SPAC’s corporate statement indicates that it “will not be limited to a particular industry or geographic region” in its search for a business combination target, its potential areas of interest such as semiconductors may be too capital intensive. Further, the uncertainties of that segment in particular make it a tough choice for a merger proposition.
However, a biotech firm or a software company dedicated to improving segments of healthcare infrastructural efficiencies could offer a more realistic proposition. Primarily, TradeUP’s executive leadership features several individuals with prior experience in the medical and software tech fields. Mainly, co-CEO Jianwei Li led investments in artificial intelligence whereas head executive counterpart Weiguang “James” Yang spearheaded several medical educational initiatives and has an academic background in clinical medical science (traumatic surgery).
Additionally, James J. Long, TradeUP’s independent director also currently serves as chairman and CEO of MDLand International Corp., which provides “cloud-based technology solutions to medical practices and healthcare organizations.” With so much executive experience tied to the broader healthcare industry, it’s a reasonable bet that TradeUP is eyeballing this sector.
TradeUP Acquisition Potential
Should TradeUP enter the healthcare solutions space via a business combination, the projected numbers suggest that it could be a lucrative merger. According to information from MarketsandMarkets, the global care management solutions market might reach a valuation of $21.6 billion by 2026. That compares very favorably to estimates for this year, which stand at $12.6 billion. Mathematically, this rise represents a compound annual growth rate of 11.4%.
Further, a study published in the Annals of Internal Medicine reported that in 2017, healthcare bureaucracy cost Americans $812 billion in 2017. This represented more than one-third (34.2%) of total expenditures for doctor visits, hospitals, long-term care and health insurance. The study estimated that cutting U.S. administrative costs to Canadian levels would have saved more than $600 billion in 2017.
At the same time, prospective buyers of UPTD stock will want to keep a healthy dose of perspective. For one thing, no guarantee exists that TradeUP will pursue a U.S.-based healthcare company — or even anything remotely related to the industry at all. Thus, whatever analysis you put in here could go up in smoke.
Finally, as Bloomberg Law noted in June 2021, post-merger SPAC performances have been mostly negative for the year, which obviously presents an awfully problematic ecosystem.
How to Buy TradeUP Acquisition IPO (UPTD) Stock
Under a typical IPO paradigm, financial institutions underwrite or purchase the initial batch of shares that an enterprise going public creates. In turn, underwriters provide first crack at the new issues to their choicest clients — almost always institutional investors. Unfortunately, such primary market transactions leave out public buyers.
On the other end, SPACs flip this narrative on its head, allowing anybody to buy shares of its IPO at the pre-merger-announcement level. True, going this route carries tremendous risks. However, you also have the benefit of buying shares “blind” in the hopes that the SPAC sponsors end up selecting a worthwhile target enterprise.
Plus, SPACs trade like regular securities, so you can start right away if you know how to buy stocks. If you don’t, just follow the steps below.
Step 1: Pick a brokerage.
Another aspect of SPACs worth considering is that any reputable brokerage will provide access to them. Therefore, you can narrow your search of best brokers to platforms with attributes that you care most about, possibly interface intuitiveness or enhanced mobility options.
Step 2: Decide how many shares you want.
By nature, IPOs are unpredictable and that goes for SPAC mergers as well. Therefore, choose a balanced share count that facilitates ample rewards but also mitigates downside exposure.
Step 3: Choose your order type.
Before placing your first trade, familiarize yourself with these market concepts.
- Bid: Basically, the bid is the rate you sell stock to the broker.
- Ask: The ask is the broker’s charging price if you’re buying a certain equity unit.
- Spread: The contrast between the price bid and price asked, the spread also denotes market liquidity and risk. Narrower spreads imply higher liquidity and lower risk due to ample participation, while wider spreads entail higher risk due to lower volume.
- Limit order: Trade requests at a predetermined price, limit orders offer full control but no execution guarantees.
- Market order: On the other hand, market orders guarantee fulfillment but only at the current rate, which usually fluctuates.
- Stop-loss order: A defensive tool, 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, affording control and exiting transparency. 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:
- Select your action type (buy or sell).
- Enter the shares you want to acquire (or sell).
- Hit the Buy (or Sell) button.
Follow the same sequence for limit orders (but include your execution price).
UPTD Restrictions for Retail Investors
Get in the practice of reviewing the Financial Industry Regulatory Authority (FINRA) rules on restricted persons before partaking in any market opportunity where you may have a conflict of interest. Due to harsh securities laws, when in doubt, don’t.
For those interested in traditional public market offerings, you should consider opening an account with ClickIPO, which buys select pre-IPO shares of companies with public ambitions for the end goal of distribution to members.
A SPAC a Day Keeps the Doctor Away
Amid the deluge of pre-merger SPACs, the potential ethos behind TradeUP Acquisition could spell huge returns for early-bird gamblers. Possibly, the SPAC could be seeking a biotech or healthcare business that might drive efficiencies so that medical professionals can save lives and keep away from soul-draining paperwork. But this is also a huge guess, making UPTD stock quite speculative.