While the term innovation often conjures up modern technologies such as connected devices and cloud computing, one of the biggest developments in human history was the railroad. Invented in Great Britain in 1814, civil engineer George Stephenson successfully applied steam technology — a breakthrough in his day — to create the world’s first working locomotive. Eventually, he co-founded the Stephenson Works company, which provided the first engines to the U.S. when it began harnessing its locomotive ambitions.
During visits to England, American engineers marveled that railroad transportation dropped the cost of shipping (which primarily occurred by carriage at the time) to the tune of 60% to 70%. Because of the dramatic cost savings, cities like Baltimore, which had not invested in canals in the early 19th century, managed to be economically competitive through railroad infrastructure development projects.
Fast forward to the modern day and the same key incentive for railroad transportation — cost savings — drives continued investment in this sector. Indeed, railroads “are the most efficient transportation mode for moving goods on the earth’s surface.”
In particular, railroads are vital for the movement of heavy bulk commodities, which directly favors the initial public offering (IPO) of Integrated Rail and Resources Acquisition Corp.
When Is the Integrated Rail and Resources Acquisition Corp. IPO Date?
One of the larger new offerings from the prior week, Integrated Rail and Resources inked its debut on the IPO calendar on Nov. 12. The company priced its IPO 1 day earlier, with shares listed for trade on the New York Stock Exchange under the ticker symbol IRRXU.
In some cases, buying a new issue a day after the fact may not be the most ideal move, especially if significant hype follows the trade. But in this circumstance, IRRXU stock is not associated with an actual business. Instead, Integrated Rail and Resources is a special purpose acquisition company (SPAC), with a stated focus on the bulk commodities transportation industry.
Also labeled as blank-check firms or shell companies, a SPAC initiates its own IPO to seek out a private enterprise with which to merge. Should it find an appropriate target — SPACs typically have 2 years to complete a business combination — shareholders of the shell company must approve the deal. Once that hurdle has been met, the 2 entities merge, with the SPAC assuming the identity of the target firm.
Therefore, SPAC-based IPOs represent a symbiotic relationship. On 1 end of the spectrum, the blank-check firm by default offers a relatively easy road to the public market while on the other end, the private enterprise brings the actual business to the table. So, why all the controversy surrounding SPACs?
Primarily, such reverse mergers have not produced encouraging returns for investors post-business combination. As of the time of writing, post-merger SPACs on a year-to-date basis still lag the performance of benchmark indices. Further, the core reason why most SPACs overpromise and underdeliver is their dilutive nature.
As Harvard Law School warns, “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.”
Does this mean IRRXU stock is an unworthy investment? Frankly, it’s too early to judge since you must assess each opportunity on its own merit. Further, Integrated Rail and Resources potentially offers exposure to a relevant market segment. Still, you must be aware of the risks with SPACs.
Integrated Rail and Resources Acquisition Financial History
On Nov. 11, Integrated Rail and Resources Acquisition disclosed the terms of its IPO, which involved the distribution of 20 million shares at a price of $10 per unit. It’s important for prospective investors to recognize that each unit consists of 1 share of Class A common stock and 1/2 of 1 redeemable warrant.
Per the SPAC’s press release, “Each whole warrant entitles the holder thereof to purchase 1 share of Class A common stock at a price of $11.50 per share.” Because the company in question distributes warrants to shareholders, their exercise dilutes the total pool of equity. This dynamic contrasts with stock options, which typically trade between investors.
Again, the specific mechanics behind SPACs like IRRXU require vigilance. Should Integrated Rail and Resources find and complete a compelling business combination, it doesn’t necessarily mean that the equity unit will soar uninterrupted. Success would only incentivize warrant exercising, which means that long-term believers must have nerves of steel to ride out bouts of volatility.
Moreover, you should also be aware that a SPAC is under no legal obligation to combine with a company from industries mentioned in its IPO prospectus. Some SPAC sponsors don’t even specify which sector it is targeting, instead only mentioning its intent to merge with a business, irrespective of what it is.
However, should Integrated Rail and Resource stay true to its prospectus, the financial backdrop of IRRXU stock would be quite intriguing. According to the U.S. Department of Transportation, the freight rail network encompasses almost 140,000 route miles and generates a valuation of nearly $80 billion.
What especially makes railroad transportation valuable is that the industry “offers ancillary benefits that other modes of transportation cannot, including reductions in road congestion, highway fatalities, fuel consumption, greenhouse gases, cost of logistics and public infrastructure maintenance costs.” As well, railroad operations provide more than 167,000 jobs.
Granted, the global supply chain crisis that impacted everything from Halloween costumes to shipments of personal vehicles has affected the broader transportation machinery, with worker shortages being a massive headwind. However, economic uncertainties could bring back workers who may be sitting on the sidelines.
Integrated Rail and Resources Acquisition Potential
Although IPOs are always risky endeavors — and SPACs in particular draw well-deserved skepticism — IRRXU stock may provide some pizzazz for those who can tolerate market volatility.
For 1 thing, rail freight intermodal traffic has been booming since the lows of the COVID-19 pandemic. Thanks to government-supported stimulus checks and the bolstering of unemployment benefits, millions of consumers found themselves in a much better place financially than what the initial strike of the global health crisis implied.
Also, prospective investors of IRRXU stock should note that rail freight traffic began declining in earnest in late 2018 and not in 2020. Instead, the pandemic temporarily accelerated the downward trend, which was initially caused by the Trump administration-era trade war between the U.S. and China.
Theoretically, then, it’s possible that the demand surge society is currently witnessing isn’t just stemming from the retail revenge concept tied to the pandemic but rather geopolitically motivated retail abstinence that occurred throughout most of 2019.
Additionally, a Bloomberg article reported that Americans are still sitting on $2.7 trillion in crisis savings, hoarded away likely due to fears of economic instability. Assuming such fears fade along with the pandemic itself, those trillions could start working their way into the economy, boding well for the freight transportation industry.
How To Buy Integrated Rail and Resources Acquisition IPO (IRRXU) Stock
Having already made its debut, you must acquire IRRXU shares during regular market hours. However, if you don’t know how to buy stocks, just follow the simple steps below.
Step 1: Pick a brokerage.
With the best brokers competing on similar or identical financial incentives such as commission-free trading, this favorable circumstance allows you to pick a platform that best suits your investing style, along with access to alternative investments.
Step 2: Decide how many shares you want.
Since SPACs can take 2 years to identify an appropriate business combination, you’ll want to choose a balanced share count to help mitigate downside risks and opportunity costs.
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:
- 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).
IRRXU Restrictions for Retail Investors
Review the Financial Industry Regulatory Authority (FINRA) rules on restricted persons before participating. Don’t trade stocks in which you have privileged (non-public) information.
While you can’t buy IRRXU pre-IPO (or shares at their initial offering price), you can plan ahead for future opportunities with companies like ClickIPO. This platform allows you to apply for pre-IPO access for select enterprises aiming to go public.
Shipping Profits to Your Portfolio
Undoubtedly, SPAC-based IPOs present myriad unknowns to prospective retail investors. At the same time, IRRXU stock connects to the relevant railroad transportation industry, a market segment that could rise in significance in the years ahead from an improved economy and surprisingly strong consumer savings.