Anghami Stock Jumps 40% On Listing – Is There Life In SPACs Yet?

Trade Anghami Shares Your Capital Is At Risk
Tim Worstall
Updated: 7 Feb 2022

Key points:

Anghami De Inc (NASDAQ: ANGH) and formerly (NASDAQ: VMAC) has jumped 40% premarket on the back of the SPAC merger with VMAC. Anghami is, roughly enough, the Arab world – and Arab language – version of Spotify so there’s obviously excitement at that coming to market.

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Anghami has had a slightly turbulent ride to this point. The SPAC vehicle itself, VMAC, rumbled along at $10 or so from creation back in 2020. As we’d expect, of course, there was $10 in cash behind each piece of stock, that’s how a SPAC works. The only excitement was ever going to be when a merger candidate was identified and serious discussions start to take place.

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The oddity with Anghami here has been that when the target became known the stock price at VMAC dropped to close to $8. Clearly, the market thought that one of two things was going to happen. Either that the merger terms with Anghami would not be beneficial to SPAC holders or, possibly, that too many would withdraw their $10 and too little cash would be raised. That has happened of course, as with Buzzfeed where they managed to raise tens of millions of $ instead of hundreds of millions.

Then when the merger was actually voted on the price soared. Which then led to a considerable oddity, which is that between the agreement to merge and go public and the reality – those events of Friday – the VMAC/ANGH stock price dropped back to $8.80, then jumped 22% on Fri day and another 40% aftermarket and premarket today.

The lesson we as traders should take from the Anghami story is that SPACs still do have some life in them. Like any new – not that it is so new, shell companies have been around forever but newly fashionable shall we say – stock market technique there’s likely to be that initial success then everyone piles in. That reduces the average quality of the offering and also the profit is eroded by that competition. We see this with every new thing – HFT margins are around the cost of capital now, hedge funds even seem to have lower than normal investment returns.

That then means that just a new SPAC just isn’t an exciting offering. What matters becomes the quality of the target merger. Not the technique itself any more. And that’s where the problem starts of course. For stock markets are already full of the most dreadful dogs so what makes anyone think there are mountains of diamonds out there ready to join those stock markets? The answer being, as we’ve found out (Buzzfeed again) that there aren’t – but there are still some.

What this means for us as traders is that we can’t just trade the sector. Randomly strewing money around the SPAC sector was something that did work, for a short period of time. As Anghami shows there are still deals that make money – at least so far – for investors who get their timing right. But it’s necessary to be selective, it’s no longer about the sector but the specific merger target of the SPAC.

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