Apex Technology Acquisition (NASDAQ:APXT) is suffering due to the wider SPAC sell-off. APXT stock is down almost 20% in the last three months, with shares trading only marginally above the $10 SPAC offering price.
For me, the price movement is not surprising. Special purpose acquisition companies, or SPACs, were the hottest investment concept for 2020. And it looked like nothing was going to change in 2021.
However, the Securities and Exchange Commission put a swift end to all the fun, cracking down on how accounting rules apply to a key element of blank-check companies.
The SEC is setting forth new guidance that warrants, issued to early investors during the SPAC process, might not be considered equity instruments and may instead be treated as liabilities for accounting purposes.
The move is leading to SPACs losing a lot of steam. Some of these vehicles deserved to be spanked. Those that have solid operating histories and positive tailwinds. But some stocks became unfortunate casualties of a larger trend.
I believe APXT stock has a lot to offer investors, especially at the price at which it is trading at the moment. At the heart of this SPAC is AvePoint, a software player with a strong connection to the Microsoft (NASDAQ:MSFT) software ecosystem.
We will get into the nitty-gritty of what the company does shortly. But $130 million in annual recurring revenues and a close connection with the biggest software giant in the world should get you salivating.
So, you definitely have an enticing story behind this one – something many SPACs do not have.
Why APXT Stock Is a Hot Ticket
Apex Technology Acquisition is a SPAC bringing AvePoint, the largest data management solutions provider for Microsoft 365, to the market. Once the merger is complete, APXT stock will change to AVPT but will continue to trade on the same exchange.
It is important to note that AvePoint is not a fly-by-night company or business. AvePoint’s Executive Chairman Kai Gong and CEO TJ Jiang co-founded the company in 2001.
The duo coded the program in a New Jersey library. They did not initially make much money for their troubles.
Since then, AvePoint has grown to become the largest independent software vendor of software-as-a-service (SaaS) solutions to migrate, manage and protect data in Microsoft 365.
As I mentioned, the company is already making up to $130 million in annual recurring revenues, and those revenues are increasing day by day. In addition, the company is a Microsoft Gold Certified Partner and five-time Global Partner of the Year.
Hence it is understandable that financials are very healthy for this one.
As part of its preliminary first-quarter results, AvePoint said its revenue came between $38.4 million to $38.8 million, and subscription revenue in the range of $26.7 million to $27 million, up 49.3% year-over-year at the mid-point.
As a result of the strong quarter, AvePoint raised its revenue guidance for this year to $194 million.
CEO Tianyi “TJ” Jiang reflected on the results.
Over the past two quarters we have made meaningful investments in scaling our go-to-market organization to accelerate growth and capture the significant market opportunity ahead. Our first quarter results continue the growth momentum we experienced in 2020 and combined with the ongoing ramp of our salesforce, gives us confidence in our outlook for 2021.
Nature of the Beast
The SPAC pullback does not show any signs of letting up. But my colleague Will Ashworth brings up a good point that AvePoint actually has a ton of experience and credibility, setting it apart from many SPACs that came to the market recently.
When researching this area, one must understand that several startups, particularly from the electric vehicle space, used the SPAC route to debut on the market. The reason? Well, usually, these companies wanted to avoid the regulation that a traditional IPO entails. That was not the case with all of them. But it was usually the deal with most of them.
Unfortunately, that led to several companies coming to the market with a lot of chutzpah but lacking solid fundamentals. Case in point, Nikola (NASDAQ:NKLA), a hybrid EV truck manufacturer that got taken out due to a scathing report from Hindenburg Research.
So, one can understand why investors are a bit gun-shy, and they want to avoid any pitfalls. That is why you see retail trades often taking profits and then moving to another more profitable area.
Is a Bounce Imminent?
Predicting where AvePoint ends up in the short term is difficult due to the fickle nature of the SPAC world. But the business is in a good place overall.
As Microsoft continues to grow its Azure platform, AvePoint will continue to see growth and prosperity. For many retail traders, SPACs are often considered to be purely for day trading. Once the opportunity strikes, you take your profits and move on.
But that is not the case with AvePoint, which has a solid story backing its growth.
On the date of publication, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.
