A commonly cited adage within Hollywood and the broader entertainment industry is that there’s no such thing as bad publicity. Though the sentiment features obvious limitations, the general principle carries substance. On balance, it’s better for a media personality to have the spotlight on them — even for the wrong reasons — than to not have the spotlight at all.
However, this maxim doesn’t usually translate well on Wall Street. Analysts at Societe Generale (PINK: SCGLY) noted that whenever a high-profile environmental, social and governance (ESG)-related infraction or scandal occurs, it’s better for stakeholders to sell shares immediately becuase of a greater chance of volatility. But in some rare cases, controversy can help fuel an equity unit.
Perhaps the most conspicuous example is Digital World Acquisition Corp. (NASDAQ: DWAC), which business executive Patrick Orlando leads. A special purpose acquisition company (SPAC), Digital World aims to take Trump Media & Technology Group (TMTG) public. Undergirding TMTG is Truth Social, a social media platform that purports to be a contender to big tech’s hegemony over public discourse.
Despite Truth Social’s direct connections with founder and former U.S. President Donald Trump, DWAC presently commands a rich premium over its initial offering price. Could the same sentiment apply to Orlando’s involvement in the initial public offering (IPO) for Nubia Brand International Corp.? Here’s the rundown on an intriguing new listing.
When Is the Nubia Brand IPO Date?
Among the few market debutantes that form the caboose to a record-breaking year for new issues, Nubia Brand International will ink its name on the IPO calendar on Dec. 29. The company will price its shares at $10 each, distributing 10 million units in total for a gross raise of $100 million before deducting expenses associated with the offerings.
Each unit will consist of one share of common stock and one-half of a warrant, which stakeholders can exercise at $11.50. Should the raise occur according to plan, Nubia will command a market value of $126 million. Shares will trade on the Nasdaq exchange under the ticker symbol NUBIU. EF Hutton represents the sole bookrunner.
As a SPAC, Nubia features no underlying operations. Instead, the company will launch its IPO to raise funds in support of attracting a merger deal with a hopefully viable private enterprise. According to its amended Form S-1 registration document filed with the U.S. Securities and Exchange Commission (SEC), Nubia seeks a merger with an organization in the wireless telecommunications industry.
Because SPACs — also known as blank-check firms or shell companies — are ground-floor opportunities with a twist (participating shareholders have no idea what the eventual business combination will be prior to an official announcement), investors must largely depend on the reputation of sponsors to get a deal done.
With NUBIU stock, its offering presents a range of complex issues, with cynicism arguably ranking among the top drivers. While Patrick Orlando may not have been a household name, his spearheading of the so-called Trump SPAC certainly raised his profile. Against DWAC’s first public closing price, shares are now up 428% at time of writing.
Of course, such raging success over a short frame drew eyebrows — and apparently for good reason. Controversy surrounds DWAC because critics allege that Orlando and Trump met prior to the SPAC going public. If the meeting “represented substantive deal talks, it could violate SEC rules,” per The Wall Street Journal.
Also, Benzinga staff writer Chris Katje reports that concerns exist surrounding DWAC’s $1 billion private investment in public equity (PIPE) round. To succinctly describe a complex dynamic, PIPEs themselves attract controversy because they mainly involve wealthy private investors acquiring equity stakes at a discount in the primary market (as opposed to secondary markets such as the Nasdaq stock exchange).
However, Orlando nevertheless benefitted early believers (whether retail or PIPE participants) in DWAC. Thus, it’s possible that he could help boost NUBIU stock, where he serves as an advisor to the board of directors of the underlying SPAC.
Nubia Brand Financial History
Because of its structure as a shell company, Nubia has no financial history other than its $100 million gross raise. Following the closure of the IPO, the raised money will enter a trust account. From there, two main avenues are possible. First, Nubia could succeed in identifying and merging with a private enterprise, at which point the identity and the resources of the SPAC combine with the target.
But if Nubia fails to find an appropriate enterprise, the SPAC will redistribute the funds back to the investors. For most SPACs, the redistribution occurs at the initial offering price (typically $10 per unit). As well, investors who don’t agree with the proposed merger can redeem their shares at the usual $10 redemption rate.
Prospective investors of NUBIU stock should be aware that, according to The New York Times, SPAC redemption rates have been around 50% in 2021, up from 20% in 2020. That so many participants in shell-company-based IPOs are willing to absorb the opportunity costs of redemptions — SPACs typically have two years to merge with an enterprise — speaks volumes about the risks of this market subsegment.
Nevertheless, it’s important to assess each opportunity — whether a traditional IPO or a SPAC-based one — by its own merits. Should Nubia follow through with its stated intention to merge with a wireless communications company, the SPAC would enjoy a massive total addressable market.
Thanks to the integration of the Internet of Things in industrial applications, along with the advent of automation and smart robotics, wireless communications essentially mirror the selling of tickets to the Super Bowl. You might not know which team is going to win or even who will duke it out. However, you have reasonable assurances that, given the popularity of the NFL, tickets will sell out.
Analysts at Market Research Future provide a similar thesis. Because of its wide-ranging potential, wireless communications platforms can serve “different applications like the telecommunication industry, consumer electronics, healthcare, automation, smart grids, aerospace and defense, automotive and others.”
To put some hard numbers into the mix, researchers at MarketsAndMarkets estimate that the global wireless connectivity sector could grow from $69 billion in 2020 to $141.1 billion by 2025, representing a compound annual growth rate (CAGR) of 15.4%.
Nubia Brand Potential
Although it’s not a thesis that an investor should bank on exclusively, the notoriety effect of Truth Social could rub off on NUBIU stock. To be sure, the two enterprises are largely unrelated. However, the retail market may recognize — perhaps through social media chatter — that if Patrick Orlando can bag a whale like TMTG, he could assist Nubia with another grand deal.
Also, the wireless communications market could invite high-scale partnerships or even outright acquisitions. Some of the biggest tech giants operate in this sector, including Qualcomm Inc. (NASDAQ: QCOM), AT&T Inc. (NYSE: T) and IBM (NYSE: IBM).
But before you get your hopes up, bear in mind that SPACs don’t have to merge with businesses in their disclosed focus areas. True, it’s in their best interest to follow through with their disclosure since SPACs often elect their leadership team based on a focused acumen. However, shell companies can always go rogue.
Finally, while an Orlando-associated SPAC may enjoy a “bad boy” image, sometimes being too hubristic is a liability. With blank-check firms already suffering from reputational damage, more controversy might not be appropriate.
How to Buy Nubia Brand IPO (NUBIU) Stock
As NUBIU is set to launch shortly, prospective investors must acquire shares at the open, necessitating knowing how to buy stocks. Below is a quick recap.
Step 1: Pick a brokerage.
With the best brokers competing on similar functionalities and fee structures, choose a platform that you’re most comfortable with.
Step 2: Decide how many shares you want.
SPACs are inherently risky, and NUBIU will likely be no different. Therefore, go with 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:
- 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).
NUBIU 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.
Although NUBIU isn’t available for pre-IPO purchase, platforms like SoFi Invest offer early access to many eagerly anticipated IPOs.
Nubia and the ‘Shoulder’ Wars
Whispering in one ear, a tempting spirit urges consideration of NUBIU stock under the thesis that controversy sells. But the better angel suggests that fiscal audacity is not a viable argument. In the end, investors should treat Nubia like any other SPAC: with extreme vigilance.
Disclosure: The author holds a long position in AT&T.