While the COVID-19 pandemic disrupted the global economy and catalyzed myriad political changes, not everyone suffered the same magnitude of consequences. Indeed, some companies, such as PowerUp Acquisition Corp., could end up benefiting from what other entities would consider a catastrophic event.
Thanks to its focus on video games and the emerging metaverse movement, PowerUp could corral bullish interest because of behavioral changes in the new normal. However, prospective investors must also be aware of huge competitive concerns that could derail its upcoming market debut.
What Does PowerUp Acquisition Do?
As a special purpose acquisition company (SPAC), PowerUp Acquisition does not feature any underlying operations. Instead, its main purpose is to initiate an initial public offering (IPO) — the process involved in taking a private enterprise to the capital market — to financially support a bid to merge with a privately held company. Therefore, many journalists and analysts refer to a SPAC-based IPO as a reverse merger: essentially, it’s a backdoor approach to going public.
Based on the information that the SPAC sponsors provided, PowerUp will attempt to identify and combine with an enterprise “within the interactive media, digital media, sports, entertainment, and/or leisure, with a particular focus on video gaming, gaming adjacent and new metaverse video gaming businesses.” Because of the relevance of video games and the metaverse, PowerUp enjoys much more attention than a typical blank-check firm.
However, investors must be aware that a SPAC is not obligated to merge with an entity among its targeted industries unless specifically written as such. Since PowerUp can theoretically merge with any company in any industry (within certain limitations), interested participants for this IPO should exercise careful money management principles.
When is the PowerUp Acquisition IPO Date?
An intriguing concept tied to high-profile sectors, PowerUp Acquisition is scheduled to make its debut on the IPO calendar on Feb. 18, 2022. Shares will list on the Nasdaq exchange under the ticker symbol PWUPU.
Initially, PowerUp filed its intention to go public with the U.S.Securities and Exchange Commission (SEC) confidentially on March 16, 2021. Later, on Dec. 30, the company filed its Form S-1, otherwise known as an IPO investment prospectus. Under the terms of the deal at the time, management disclosed its target to raise $225 million through the distribution of 22.5 million units at $10 each.
At the above proposed deal size, PowerUp would have commanded a market value of $282 million. However, on Valentine's Day, the SPAC raised the deal size to $250 million. Now, the offering involves 25 million units distributed at the same per-share price. Each unit consists of one share of common stock and one-half of a warrant, exercisable at $11.50 — unchanged from the original S-1 document.
Further, the “initial trust will now be overfunded at $10.25 per unit, up from $10.15 in the previous filing. At the revised deal size, PowerUp Acquisition will raise 11% more in proceeds than previously anticipated.” Citigroup Inc. (NYSE: C) represents the sole bookrunner for this IPO.
The timing of the PowerUp offering couldn’t have arrived at a more perplexing juncture. On one hand, the otherwise terrible pandemic represented a fortuitously perfect upside catalyst for the video gaming industry. Per the World Economic Forum, “COVID-19 saw video games explode in popularity, as consumers were forced to stay at home and keep themselves entertained.”
Better yet, the surge in demand wasn’t just isolated to the U.S. market. “Mobile game sales on iPhones rose 44% in Japan and 20% in the European Union in July, according to data from Sensor Tower.” Video games, which were already popular pre-pandemic, may see a semi-permanent increase in sales trajectory relative to industry projections issued prior to the crisis.
What’s more, no scientific consensus exists that indicates such an increase in digital entertainment consumption is a negative for society. According to The Royal Society, “People have never played more video games, and many stakeholders are worried that this activity might be bad for players. So far, research has not had adequate data to test whether these worries are justified and if policymakers should act to regulate video game play time.”
If anything, The Royal Society discovered that “contrary to many fears that excessive play time will lead to addiction and poor mental health, we found a small positive relation between game play and affective well-being.”
On the flipside, several organizations have reported consumer surveys regarding unwanted weight gain during the crisis — a clear consequence of government mandates restricting normal social activities. Therefore, it’s difficult to predict whether demand for platforms that incentivize sedentary behaviors will attract demand as the world gradually recovers from the pandemic.
Additionally, the phenomenon of retail revenge has seen consumers eagerly gravitate toward lost social experiences — not additional digitalization. Thus, the timing aspect of PWUPU stock is as capable of backfiring as it is facilitating forward propulsion.
What Analysts are Saying About PowerUp Acquisition IPO
Unfortunately, as a shell company with no business of its own, PowerUp Acquisition features very limited analyst coverage. Upon identifying a merger target — the SPAC will have 15 months to do so, barring the exercise of its extension period — Wall Street will almost certainly weigh in, especially given the large $250 million deal size. Until then, investors are essentially flying blind.
However, this fact hasn’t prevented investment experts from providing an opinion about the viability of PWUPU stock. Primarily, early coverage focuses on the SPAC’s leadership team, particularly CEO Jack Tretton. Commanding a 35-year career in the video game industry, Tretton is perhaps best known for his leadership role at Sony Computer Entertainment America, a subsidiary under Sony Group Corp. (NYSE: SONY) which is now renamed Sony Interactive Entertainment.
Per PowerUp’s IPO prospectus, Tretton “helped establish the PlayStation brand as a worldwide leader in interactive entertainment. Mr. Tretton received credits on over 200 titles at Sony, with an average of 74% gross IRR. Under his leadership, Sony’s in-house titles posted stronger sales trends versus the overall industry average, with an average outperformance of 42% for AAA releases.”
Moreover, expert coverage on this SPAC centers on gaming and entertainment industry veteran Bruce Hack, who previously operated in leadership roles at Activision Blizzard Inc. (NASDAQ: ATVI) and Vivendi (PINK: VIVHY). Per PowerUp’s prospectus, Hack “architected one of the largest turnarounds in video game history” through the launch of Blizzard’s World of Warcraft.
Another outside factor that could support PWUPU stock should the underlying SPAC target the industry is the metaverse. The next generation of connectivity technologies, the metaverse facilitates the integration of users’ personalities into digital ecosystems through advancements in augmented and virtual reality devices.
A difficult-to-grasp concept for hardened luddites, blue-chip companies are nevertheless banking on the metaverse’s possible exponential growth. Most notably, Meta Platforms Inc. (NASDAQ: FB) — formerly known as Facebook — has pivoted sharply to this innovation. Therefore, PowerUp possibly features a wide (and expanding) addressable market, though competition would obviously impose a hefty headwind.
PowerUp Acquisition Financial History
Structured as a SPAC, PowerUp has no financial history other than the money it will raise in its offering. Therefore, prospective investors of PWUPU stock will be placing blind faith in its issuing sponsors. However, as stated above, PowerUp commands entertainment industry titans in its leadership team, meaning at least one aspect of this offering features a confidence-lifting narrative.
However, any intellectually honest discussion about SPACs will observe that largely, retail investors who have held onto shares for the long haul following a business combination have generally not fared well. While the major investment indices have been volatile, SPACs post-merger have been much more so.
Of course, you must adjudicate each opportunity individually. But as Harvard Law School points out, the inherent nature of SPACs — mainly their issuance of warrants — promotes dilutive incentivization. Thus, prospective buyers of PWUPU stock should consider the history of blank-check firms overall before participating in PowerUp’s debut.
PowerUp Acquisition Potential
With so many gaming heavy hitters on the PowerUp team, it doesn’t take much to realize the upside potential of PWUPU stock — assuming the stars align correctly. Principally, the video game industry is massive. According to Mordor Intelligence, experts project the market to reach a valuation of $314.4 billion by 2027, translating to a compound annual growth rate (CAGR) of 9.64% between 2022 and 2027.
Should PowerUp ultimately merge with a metaverse-specific entity, the possibilities could be even more enticing. From a Bloomberg report, analysts project that the metaverse market could reach $783.3 billion in 2024. This statistic compares favorably to $478.7 billion in 2020 — an impressive tally on its own and further justifying blue-chip organizations pivoting to this next-generation technology.
Still, prospective investors must realize that massive opportunities also attract massive competition. With tech titans like Meta Platforms and Microsoft Corp. (NASDAQ: MSFT) ravenously entering the metaverse, PowerUp buyers should not expect an easy ride.
Where to Buy PowerUp Acquisition IPO Stock
PWUPU 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.
Though a pre-IPO round for PowerUp is not available, investors seeking early bird opportunities should consider opening an account with ClickIPO.
Disclosure: The author holds a long position in SONY stock.