While it’s good policy to never judge a book by its cover, with spatial imaging specialist Matterport (NASDAQ:MTTR), you almost certainly have to take into consideration how it entered the public arena. Following its reverse merger with a special purpose acquisition company (SPAC), MTTR stock saw rising support from the spring of 2021 to November of that year. Since then, circumstances have not looked pleasant.
At the tail end of November, MTTR stock was priced at over $30 per share. But by the end of January, the equity unit slipped into single-digit territory, as most SPACs tend to set their initial offering price at $10. And by no means is Matterport distinct in its underperformance. Overall, SPACs post-business combination have significantly underperformed the benchmark S&P 500 index.
Of course, you have the high-profile names like Virgin Galactic (NYSE:SPCE), which is down 39% year-to-date. Another company that made waves earlier before the blank-check implosion is Lordstown Motors (NASDAQ:RIDE), which has hemorrhaged 76% over the last year. Then you have relevant businesses that did the shell company dance like SoFi Technologies (NASDAQ:SOFI). It’s down 59% YTD.
The thing is, all these companies were seemingly relevant during their hype phase. Virgin Galactic played into the potentially multi-trillion-dollar space economy. Lordstown addressed the booming electrification of fleet vehicles. And SoFi catered to millennials and members of Generation Z with its fintech platform. But in the end, it didn’t matter. So will it matter for MTTR stock? The situation doesn’t look great.
Clearly, MTTR stock benefits from two key factors. First, the virtualization of physical spaces provides a new tool for the real estate industry. Second, the same innovation also has profound implications for the metaverse, the supposedly next evolution of internet connectivity.
However, without the overwhelming fear of the coronavirus pandemic, it’s difficult to see virtualization as a particularly profitable application for real estate. It’s nice but it might not be a difference maker for MTTR stock. Regarding the metaverse, modern societies are already negatively impacted with too much screen time. Why would wearing a virtual reality headset for much of the day ameliorate this condition?
Arguably when SPACs started making the rounds in the post-pandemic period, the retail investor crowd gravitated toward them. As people then suffered from the dilutive aftershock of these shell companies, opinions started to change.
Yes, it kind of stinks to judge an investment simply on the basis of how it went public. But with such overwhelming data, prospective traders of MTTR stock should at least consider the association to SPACs and their poor track record before plunking down the cash.
On the date of publication, Josh Enomoto 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.