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Hurtling through the dark recesses of space, an orphaned girl desperately hides from an unholy presence, a terrifying concoction of a reptilian and arachnid species angrily seeking its prey. As the monstrous being hones in on the child, all hope seems to fade — that is, until a woman augmented with a steel exoskeleton arrives on the scene.
Delivering one of the most iconic (but unfortunately unrepeatable) lines in modern Hollywood history, Ripley — played by the equally iconic Sigourney Weaver — bashes the queen beast into submission, eventually exiting the monster into the great beyond like a cosmic lavatory. While most of this pivotal sequence from the movie “Aliens” is thankfully nothing more than fiction, the exoskeleton part is very much reality.
Investors can thank industrial technology firm Sarcos for reaching into the domain of science fiction and imparting a radical paradigm shift. While the company’s core products are more at home carrying hefty packages rather than engaging in hand-to-hand combat with space aliens, Sarcos’s initial public offering (IPO) nevertheless presents an opportunity to profit from the future of industry and defense.
When Is the Sarcos IPO Date?
When people mention the term IPO, they’re referring to the first time that a private enterprise offers its equity shares to the public under a primary market transaction. In the traditional process, financial institutions underwriting the deal actually buy the new issues, who then turn around and sell them to their choicest clients, almost always institutional investors.
For regular retail investors, though, they usually must wait until the shares become available in a public exchange. This secondary market transaction often entails (for a heavily hyped security) a higher premium over the initial offering price, making the traditional market debut disadvantageous to ordinary participants.
But with the Sarcos IPO, the company is entering the public market via a business combination with a special purpose acquisition company (SPAC). A blank-check firm or shell company has no underlying operations of its own. Instead, it usually has a 2-year time window to identify and merge with a viable private enterprise.
The SPAC combination — also known as a reverse merger — represents a symbiotic relationship: one partner (the shell company) provides access to the capital market while the other entity provides the business. In this case, the shareholders of Rotor Acquisition Corp. (NYSE: ROT) announced around mid-September of this year the approval to combine with Sarcos.
The industrial robotics specialist’s shares will make their debut on the IPO calendar on Sept. 27, trading on the Nasdaq exchange under the ticker symbol STRC. As for the SPAC, Rotor Acquisition closed its IPO deal of 27.6 million shares priced at $10 per unit on Jan. 20 earlier this year. All told, Rotor generated $276 million on the deal, with Credit Suisse (NYSE: CS) providing the sole bookrunning management for the offering.
Under the terms of the proceeds, Bloomberg reported earlier this past April — when the 2 companies disclosed their intent to merge — that Sarcos will command a valuation of $1.3 billion. Notably, the article mentioned that Rotor and Sarcos raised approximately $220 million in a private investment in public equity (PIPE) that included major backers like BlackRock (NYSE: BLK), Millennium Management, Palantir Technologies (NYSE: PLTR), Caterpillar Venture Capital Inc. and Schlumberger (NYSE: SLB).
Sarcos Financial History
Given the incredible institutional support that STRC stock has generated, this dynamic organically facilitates confidence for would-be takers. That said, interested parties must realize that institutional money occasionally makes mistakes — they are human after all. Still, a factor that distinguishes Sarcos from other opportunities is that rising scale makes the company’s financial proposition much more credible.
Per the Bloomberg report, Sarcos will “lease its exoskeleton, wearable device starting at $100,000 a year, similar to the total cost of hiring a worker for $25 an hour in the U.S.” At first, this figure seems like a losing proposition. According to the Economic Research Institute, the average warehouse worker — who might find exceptional benefits in using augmented wearable robotics technology — in high standard-of-living California makes $38,109 a year or a little over $18 an hour.
Obviously, under this narrowly defined framework, a warehouse manager would rather hire someone at $18 an hour rather than pay that same salary plus an equivalent lease at $25 an hour. However, Sarcos CEO Ben Wolff emphasized that the company’s value proposition is “to deliver the productivity of 3, 4 or 5 workers, depending on the use cases, industry and the job.” Therefore, at minimum, Sarcos’s robotics will provide the hourly output of $54 of productivity costs but at the overhead expense of $43 an hour.
You can see why so many are interested in STRC stock. However, it gets better according to the CEO, who projects that the leasing cost of the exoskeleton will drop to $65,000 once Sarcos achieves full-scale production in 5 years. Proportionally, that could reduce the total cost equivalency to around $16.25 an hour. Assuming it reaches such scale, Sarcos’s cost-savings proposition would become exceptionally compelling to multiple industries that require management of heavy loads.
While it’s always risky for investors to put their money into novel solutions, what’s particularly enticing about STRC stock is the underlying business’s relevance to the needs and concerns of the modern workplace.
According to the National Safety Council, the average cost of a worker’s compensation claim between 2018 and 2019 was $42,008. Granted, costs vary depending on the type of workplace injury, with vehicular-related accident claims averaging nearly $82,000. At the same time, compensation claims associated with heavy, non-assisted lifting such as strain and cumulative injuries average $34,409 and $31,363, respectively.
In other words, just 1 claim can substantially and negatively impact a company’s employment-related expenses. But with augmented robotics, issuing firms can help minimize certain types of workplace injuries while most importantly protecting human assets — it’s really a win-win for STRC stock, assuming of course that Sarcos can deliver on its promises.
It’s important to realize that so far this year, SPAC-based IPOs have underperformed benchmark indices. As well, the use of exoskeletons in the workplace is a novel concept and could result in its own unique set of injury risks. Moreover, should the global economy weaken, STRC stock could slip on reduced revenue opportunities.
Still, on a positive note, Sarcos is incredibly versatile. In addition to its relevance to commercial industries, its defense division provides lifesaving solutions, such as the deployment of unmanned vehicles to survey treacherous territory. Thus, STRC stock can benefit from commercial and governmental applications.
How to Buy Sarcos IPO (STRC) Stock
Before you place a heavy wager on STRC stock, you should perform your due diligence on SPAC business combinations. A particular risk factor is that completed reverse mergers tend to be dilutive, affecting market valuation.
At the same time, the benefit of SPACs is that this investment vehicle introduces opportunities to public investors that might not otherwise be available. In addition, SPACs trade like any other equity unit, meaning that you can jump right in if you know how to buy stocks. If not, follow the steps below.
Step 1: Pick a brokerage.
While any reputable brokerage will allow you to buy SPACs, investors interested in building their acumen should narrow their list of best brokers to platforms that provide access to other financial arenas.
Step 2: Decide how many shares you want.
Whether you’re betting on a traditional or SPAC-based debut, all IPOs carry volatility risk. Therefore, formulate a balanced share count, one that facilitates potential rewards but also limits downside.
Step 3: Choose your order type.
Before placing your first order, acquaint yourself with these market concepts.
- Bid: The buyer’s top offer for a stock.
- Ask: The seller’s lowest agreeable price.
- Spread: The difference in the bid-ask price, the spread is a risk indicator. Narrower spreads represent lower risk since the market maker facilitates high-volume (high-demand) transactions, while the opposite is true for wider spreads.
- 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: A defensive mechanism, a stop-loss order automatically exits your position at either a predetermined price or anything lower.
- Stop-limit order: Stop limits are similar to stop losses but only execute (exit) at a predetermined price. 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).
STRC Restrictions for Retail Investors
Review the Financial Industry Regulatory Authority (FINRA) rules on restricted persons if you fear a possible conflict of interest. Securities regulators impose a draconian stance on anyone profiteering from privileged information.
If you are interested in traditional IPOs, you should consider opening an account with ClickIPO, a service that distributes pre-IPO shares (or shares at their initial offering price) of select enterprises.
An IPO That’s Not Bad for a Human
As society gradually normalizes from the COVID-19 pandemic, a heightened push exists in commerce to make up for lost time. However, rehiring workers and training them in high-pressure industries costs money — along with the risk of workplace incidents. But through Sarcos’s unique exoskeleton robotics, the company can help spark a smooth and efficient transition, making STRC stock a must-watch debut.