TradeUp Acquisition Corp (NASDAQ: UPTD) stock has been, as they say, volatile recently. UPTD stock was up 67% on Thursday which is, again as they say, pretty volatile. There’s no specific or particular new to drive this either. It’s just view changing about the value of the prospective merger partner. And, of course, views on whether a merger will really go ahead.
An acquisition corp, or a SPAC, has two different valuation drivers. Any holder of the stock can go ask for their $10 back at the time any deal is announced or goes through. Therefore there’s a certain underpinning to that valuation. But obviously enough the merger partner might be worth more than that - so there’s an upside too. And, sadly, some merger partners have turned out to be worth very much less than that too.
So, in theory, a SPAC should trade around $10 until there are detailed discussions over who to merge with. There’s a time limit on this. Which is what is producing this volatility right now.
TradeUp Acquisition Corp stock price from Google Finance
That jump was as a result of this: “TradeUP Acquisition Corp. (the "Company" or "TradeUP") (NASDAQ: UPTD) on Friday announced that, in order to extend the date by which the Company must complete its initial business combination from August 19, 2023 to September 19, 2023, for each public share that is not redeemed by the Company's stockholders in connection with such extension (collectively, the "Remaining Shares", each, a "Remaining Share"), the Company has deposited into its trust account (the "Trust Account") an aggregate of $37,432.70 (the "Monthly Extension Fee"), representing $0.05 per Remaining Share of the Company.
The payment for such Monthly Extension Fee was made by Estrella Biopharma, Inc., a Delaware corporation ("Estrella"), pursuant to the Agreement and Plan of Merger (the "Merger Agreement"), entered by and among the Company, Tradeup Merger Sub Inc., a Delaware corporation and direct and wholly owned subsidiary of UPTD ("Merger Sub"), and Estrella on September 30, 2022.”
There is someone really interested enough in doing the merger that they’re willing to pay good money to keep the show on the road. Clearly that excitement faded back and our best assumption about Thursday’s rise is that it’s back again.
For there is no news to explain this, therefore we’ve got to assume that it’s about changes in sentiment. Those balancing items of will the deal go through at TradeUp, if so at what price and finally, how many will ask for their $10 back when they see the terms? Given the complexity of that calculation - and the number of assumptions that have to be made to make it - the volatility is perhaps not surprising.
