Need info on SPAC "Special Purpose Acquisition Company". Found one that surged and then dropped by 50%

[DMGun]

Hello fellow ODT Traders - This may be rare and problematic, so don't take this as a stock tip.

I got involved in a bizarre instance Friday concerning Aurora technology acquisition company. Ticker ATAK

There were press releases that the shares had increased 40% in premarket trading. It went from ~$11.00 per share to $14.00

By time normal trading opened, the price had dropped to $13.08. Trading volume for the day was insane, with over 2 Million share vs average of 16 K shares.

At closing, it had dropped to $7.00 per share. It dropped again on Monday to as low as $6.00

The two years to secure a company was due December 6th, but they have been extended to January 9th.

If anyone knows anything about SPAC's I would like to ask some questions.

I have learned that if SPAC's do not form an acquisition, "Share holders get their $10.00 back".

Any ideas if there are any assurance this will rise back to $10 - 11.00 per share like before the blow up?
If not, does each share get dissolved and the share holder gets credited with $10.00 cash?

Any opinions if this is a 66% gain opportunity or a black hole?

Thanks, DMGun - David

 

[eightnsand]

If you can’t figure it you ought not to be in it.
All modern stock trading is manipulated. Get out while you can and buy tangibles or something you understand.
IMHO

 

[moosensquirrel]

If you can’t figure it you ought not to be in it.
All modern stock trading is manipulated. Get out while you can and buy tangibles or something you understand.
IMHO

Yes: By the time the hoi pilloi
hear of a great opportunity, the smart money has already drained the value, sold, and are down the road.

"De banking" is one possible alternative.

 

[BHPSteel]

This does not constitute investment advice. I am not a financial advisor, nor do I play one in a movie or even in my own imagination.

10 seconds of Googling got me this:

Aurora Technology Acquisition Corp. Announces Additional Contribution to Trust Account to Extend Deadline to Consummate Business Combination

/PRNewswire/ -- Aurora Technology Acquisition Corp. (NASDAQ: ATAKU, ATAK, ATAKW, ATAKR) (the "Company") announced today that its sponsor, ATAC Sponsor LLC (the...

www.prnewswire.com

What does this mean? A company is incurring debt by borrowing money from an associated company to cover operating costs, but if you were an investor you couldn't vote to stop this happening, or redeem your investment. If it's incurring debt, and the only money it has, or had before is the money you paid to invest in it, then no, if there's no investment made, there's no way any profit can be made to pay off that debt and get your money back.

When you cut away all the fluff, investors basically gave a bag of cash to a bunch of people (all seemingly Chinese) hoping they'd buy up some promising but undercapitalized company and make it profitable. The lure is that the acquisition would be "on high-growth technology companies based in North America and Asia (excluding China)". In 2023. The deadline for making that acquisition expired on December 7th, meaning that the vehicle itself failed in its objectives, and (I guess) contractually its investors could cash out if they wanted to. And they cashed out. Why wouldn't they? At the very least, the SPAC didn't deliver.

Here's their "5 year" chart. The corp was formed in December 2021, and as you see for the last 18 months, there has been almost no volatility in the share price, which is unsurprising since the investors had no ability to sell out of the investment.

Doesn't look promising, does it?

Investing in instruments like this expose the investor to many risks that aren't obvious to people who restrict themselves to exchange-traded, liquid investments like stocks, bonds and managed funds.

When you look at the filings, it looks like the most significant investors are other investment firms, who should be capable of understanding the risks and the potential returns for the SPAC.

Lastly, SPACs are often formed with the specific objective of making a targeted purchase of an organization that the investment guys have already identified, and consequently, if that deal "falls through", they have a pile of cash and nothing to buy with it, and that's what appears to have happened here, when an investment was made in DIH, a medical robotics company. In situations like this, a SPAC's performance and prospects are directly tied to those of its sole investment.

 

[DMGun]

Sold it all and locked in the loss. Now Watch it jump back to $11.00 a share.

Ah the stock market, there are a few ways to make a little money and a LOT of ways to LOSE A LOT OF $.

Thanks for replies.

 

[BHPSteel]

At least you get the tax write-off

 

[DMGun]

Yeah, I'll be writing this off until 2030.
Jumped in waist deep in 4 separate buys to lower my cost basis.

 

[DMGun]

Does anyone see anything unusual about this (coordinated Pump and Dump action)?

The stock absorbed all previous surges in volume and stayed within a few cents of $10.90. Then on December 12th, volume of 700 Shares caused a 20% Share Price Spike, then on 12/15 premarket, there is a 40% Share Price Spike it went from $11 to over $14 and has dropped to $5.00 in three days

Could the 2 million share surge in volume have been induced by many stories about "A Surge of 40%" posted across many companies / new outlets. The price has steadily dropped to $4.40 per share in four days.

I really do not get how this could happen to a SPAC, that is supposed to have a $10.00 implied value since that is what each share is due back if the acquisition does not happen. Is this unique since there was an extension?


https://investorplace.com/2023/12/why-is-aurora-tech-atak-stock-up-40-today/

Thanks for your thoughts... DMGun - David

 

[eightnsand]

This just in.

 

[GA 1911]

Does anyone see anything unusual about this (coordinated Pump and Dump action)?

You got played.

I am a SEC Registered Investment Adviser (RIA) which means I can charge for advice (anyone can offer free advice).

I would not gamble in any SPAC. None, ever. People lost billions buying this stuff so stay away. I say buy a good balance sheet profitable company that has good prospects for future growth. A nice dividend is extra good.

The S&P500 was up 25% in 2023. It was a great year.