In an almost shocking irony, shares of special purpose acquisition company (SPAC) Abri SPAC I (NASDAQ:ASPA) skyrocketed against the backdrop of a downcast midweek session on Wall Street. While these blank-check firms represented a hot ticket during the pandemic, they quickly underperformed. Subsequently, investors should be cautious about ASPA stock, irrespective of its dramatic triple-digit-percentage return on the day.
Based on Abri’s Form 8-K filing with the U.S. Securities and Exchange Commission (SEC), on Oct. 23, the SPAC held a special meeting of shareholders. On Sept. 1, the record date for the special meeting, there were 2.41 million shares of ASPA stock entitled to have a voting right. Subsequently, 96.5% of this count saw representation in person or by proxy.
As for the meat of the discussion, Abri proposed to merge with a subsidiary of Logiq (OTCMKTS:LGIQ), a digital advertising technology firm. Per its website, Logiq provides an all-in-one data, artificial intelligence (AI) and media buying platform. This convenient layout allows its clients to focus on connecting with future customers rather than getting bogged down with technicalities.
Further, the subsidiary is called DLQ, Inc., which the 8-K document describes as a Nevada corporation. Notably, every representative voice — except for one abstention — voted in favor of the business combination.
ASPA Stock Soars, but Credibility Concerns Linger
Given the resounding approval of the reverse merger, shareholders of ASPA stock apparently see great value in the deal. Still, investors will want to be careful in their approach, given the volatility associated with this backdoor approach to the public market.
Typically, SPACs — which have zero operations of their own — enter the public arena for the sole purpose of merging with a private enterprise. In this manner, these blank-check firms and their merging subjects form a symbiotic relationship: one provides the actual business while the other party provides the ticket to the capital market.
However, with ASPA stock, the directive is slightly more nuanced. Because Logiq — the parent of DLQ — is already publicly traded in the over-the-counter market, the underlying merger represents a backdoor “uplisting” to a proper exchange. Here, Logiq (via DLQ) provides the business, while Abri provides a pathway to the Nasdaq exchange.
For Abri, the merger features an obvious benefit. If shareholders did not agree to the business combination, then ASPA stock would roam around until the underlying SPAC found another target. For Logiq, it promotes itself onto an exchange without having to jump through extensive hoops.
Why It Matters
Before investors jump on ASPA stock, a sobering reality check is required. According to Institutional Investor, of the 431 SPACs that completed a merger between 2020 and 2021, 90% of them suffered negative net returns. That’s a catastrophic failure rate that, again, requires careful consideration.
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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.
