SPACs Have Been Frothy, But Apex Technology Is an Exception

Last year a landmark year for special purpose acquisition companies (SPACs). More companies went public via the SPAC route than any time from 2009 to 2019. As a result, the market for SPACs had become frothy and needed correction, which has been the case so far this year. However, Apex Technology (NASDAQ:APXT) stock was fairly priced even after the company’s announced merger plan with fast-growing software provider AvePoint.

image of a cloud surrounded by various symbols related to internet connectivity and interaction
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Apex Technology announced its merger with AvePoint back in November. APXT stock popped almost 30% after the announcement and was trading as high as $15.30. It continued to gain momentum in December and in January before losing ground in February.

However, based on forward projections, it trades at just 9x revenues. Therefore, the stock is fairly priced, and the recent correction offers an attractive entry point to invest in AvePoint.

AvePoint Marches On

AvePoint is a third-party data management software provider to the world’s largest cloud platform, Microsoft (NASDAQ:MSFT) Cloud. It offers its services within the hugely profitable SaaS framework. Its growth has been impressive so far, with a 30% growth each year.  Moreover, its adjusted operating margins were at a healthy 12% in the past year.

The pandemic accelerated the shift toward cloud from on-site, which has caught AvePoint in an incredible spot at this time. In the longer term, the work-from-home economy should continue to drive growth at a healthy pace. The significant requirements for data management and security for remote work are where AvePoint comes in with its robust services. It continues to add nifty new updates to its SaaS, including security insights, automated tools and other related facilities.

AvePoint recently released its first-quarter results, where revenues of $38.8 million shot up 19% on a year-over-year basis. Moreover, a total ARR of $129.2 million grew 33% from the same period last year, while SaaS revenues were up an incredible 78% to $18.3 million. Based on its stellar results, it has raised its revenue guidance for 2021 from $193 million to $194 million.

It its earnings statement, CEO Tianyi Jiang stated, “The investments we are making in our go-to-market organization, including the build-out of new channel partnerships, are starting to generate results.”

What Went Wrong?

APXT Stock price
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APXT stock had been flying high after it announcing its merger with AvePoint Technologies in November. It continued on an upward trajectory until February and is now trading close to its trust value. With such a steep decline, one might wonder what went wrong. AvePoint and Apex scheduled a June 30 meeting to vote on the merger.

But AvePoint hasn’t missed a step. Its first-quarter results suggest that business has been solid, and it has picked up from where it left off last year. Moreover, projections for fiscal 2021 are up, and the tailwinds created by the pandemic will positively impact revenues for years to come.

The real reason is that the market for SPACs has been frothy for quite some time now. A Forbes article highlighted how an average SPAC has risen by at least 15% as 2020 ended. Therefore, the correction was on the cards, and APXT stock was also a casualty.  However, it now means that the stock is trading at a significant discount.

Final Word On APXT Stock

APXT stock has been on a negative streak in the past few months. SPACs across the board have lost a sizeable portion of their values in the past few months, and APXT stock is no different. The bull case APXT remains unchanged, though, and its merger target, AvePoint, continues to perform exceedingly well.

So, if anything, the sell-off offers an excellent buying opportunity for investors.

On the date of publication, Muslim 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 Publishing Guidelines.

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