Shares of Aurora Acquisition (NASDAQ:AURC) — a special purpose acquisition company (SPAC) that has no operations of its own but exists to merge with a private business enterprise — popped sharply on Wednesday in anticipation of a critical shareholder vote. Aurora seeks to merge with mortgage automation platform Better.com, a deal delayed multiple times in part due to controversies. However, positive speculation saw AURC stock reach for the stars.
Indeed, speculation for Aurora ran so hot during the start of the midweek session that it triggered the Nasdaq circuit breaker. Fundamentally, this action forcibly pauses trading activity in the affected security, enabling investors to digest publicly available news. Still, the imposition of the circuit breaker didn’t appear to soften the bulls’ eagerness, with AURC stock continuing to gyrate in a northbound direction. The stock sits about 70% in the green today.
As InvestorPlace assistant news writer Shrey Dua mentioned, Aurora announced via a securities filing that it set a merger vote for Aug. 11. Notably, this upcoming date represents an extension to the SPAC’s previous deadline, which required the merger to go through by March. And the March deadline was itself an extension.
Even with the stutter-stepping, interest in AURC stock has been mercurial. In the trailing month, shares gained nearly 400% of equity value.
AURC Stock Overcomes Controversy but Faces Ambiguities
Although the tale of the tape suggests that Aurora will finally land the underlying deal – thus enabling Better.com to complete its initial public offering (IPO) — AURC stock still presents huge risks for prospective investors.
For one thing, Better.com may have grown too fast, imprudently responding to housing market speculation. According to the National Mortgage Professional, in 2021, Better experienced “explosive expansion,” boosting its labor force by nearly 400% from its 2019 comparison.
However, HousingWire points out that in the first quarter of this year, Better funded 2,347 loans, representing a steep decline of 87% compared to the year-ago quarter. Thus, AURC stock could face a severe correction depending on the health of the real estate market.
What’s worse, from a public relations perspective, Better CEO Vishal Garg sparked national outrage when he laid off about 900 employees over a teleconferencing platform. Amid the heavy criticism, Garg apologized for failing to show “respect and appreciation” during the call.
More critically, it’s not entirely clear how the present state of housing will impact AURC stock. Federal government data shows that the median sales price of homes sold in the U.S. declined conspicuously since Q4 2022. However, the Federal Reserve’s efforts to substantively reduce inflation may yield a harsher-than-expected disinflation. If so, the spike in mass layoffs — particularly for high-paying technology jobs — likely won’t be helpful.
Why It Matters
While SPACs offer an opportunity for retail investors to speculate on the ground floor for IPOs, they tend to carry enormous risks. In particular, Harvard Law School warned that these blank-check firms tend to carry deceptively high costs due to embedded dilution.
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.
