Appreciate Holdings (NASDAQ: SFR) is one of those companies that might not have been of great benefit to investors on the public markets. In fact, as we've noted before, Appreciate Hldgs has lost 97% of its value since flotation and that was only since the fall of last year. This is not - to be very British and reserved about it - a good performance. On the other hand SFR is wildly volatile, last time we looked it had risen 200% in a day. We suggested it would gently fall back which is exactly what it did do. On Friday it was up 60% and then fell back again 15% post market. We'd not make any firm predictions about the next SFR stock price move but we'd also not suggest that there's a grand turnaround in corporate performance about to appear.
What we should do though is use Appreciate as an example of why the SPAC process isn't necessarily that excellent end run around the IPO process that so many seem to think it is. The basic idea is that to run an IPO takes a long time, is complex, it's expensive. Indeed it is, even before the lawyers and accountants it can cost 7% of the money raised. It's also possible to think that there might be a bit of a cartel there as that price never does seem to change very much.
So, why not just set up a shell company (which is what a SPAC is) and have a corporate shell already quoted, which has some money in it. This can then buy/merge with the unquoted company which gets to come to market without all that expense and fuss. Well, OK. Except that as with lending money - it's finding people worth lending to which is the difficult trick - finding companies that are worth bringing to market is the difficult thing. The IPO process helps to weed out those who perhaps shouldn't be offered retail investors' money might be another way of putting it.
Appreciate Holdings share price from NASDAQ
The latest bounce around of the SFR stock price seemed to centre around the idea that they cannot complete their accounts on time: “The company got an additional written notice from the Nasdaq stock market due to its inability to file its 10-Q and 10-K forms for Q1 2023 and FY 2022, respectively.”
What? This is a company that only came to market in Nov. 2022. And it can't get its accounts sorted up to Dec 2022? This is ridiculous. Or perhaps more accurately it's the sort of nonsense that the IPO process would never have allowed through.
We'd expect Appreciate Holdings stock price to continue to be highly volatile because at current prices it's really no more than option money on their being able to get themselves sorted out. But the real value to us is that proof that sure, there are costs to the IPO process, costs that the SPAC route does an end run around. Sadly, one of those costs avoided seems to be proving the ability to do basic accounting. That's not a good thing for us out here as investors.