The special purpose acquisition company (SPAC) rush isn’t over. One company that has officially gone public today following its successful SPAC merger is HUB Cyber Security (NASDAQ:HUBC). Unfortunately for early investors, HUBC stock is on the decline today, losing more than 35% of its value in early afternoon trading.
Much of today’s decline appears to be due to some previous reporting on issues tied to the merger. The company’s SPAC sponsor, Mount Rainier Acquisition Corp, intended to bring HUB public earlier in February. However, a series of delayed votes on the subject led to the ultimate conclusion of the merger today.
Some of the delays were caused in part by a prominent hedge fund, which pulled its $10 million funding for the deal at the last minute. Little institutional investor interest in the deal to replace these funds appears to have retail investors spooked. Accordingly, the company was reportedly looking at obtaining financing for the deal at double-digit-percentage interest rates. Not good.
With the deal finally closed, it appears many early investors are taking this as an opportunity to step away from the deal. Let’s dive into what investors may want to make of this intriguing stock.
HUBC Stock Dips on First Day of Trading
Israel-based HUB Cyber Security provides solutions aimed at government clientele. Thus, like other U.S.-based rivals such as Palantir (NYSE:PLTR), which also went public via SPAC merger, some investors may remain hesitant to buy into this name, given the performance of its peers over the past couple years.
Indeed, investors have largely invested the SPAC sector as a whole lately. And given the apparent drama following HUB around, this is a company some investors simply don’t want to touch. For existing investors, this can mean some likely painful price action over the near term.
We’ll have to see how HUB’s financial picture looks a quarter or two down the road. Like many de-SPAC companies, HUB is not yet profitable. Accordingly, in this macro environment, there may be even less demand for such stocks in the intermediate term.
For now, I think this is a stock to put on the watch list. If its valuation gets to a level that’s absurd, perhaps there’s a case to be made that it’s worth buying. But for now, I’m on the sidelines with this one.
On the date of publication, Chris MacDonald 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.
