Digital Transformation Opportunities (NASDAQ: DTOC) stock was up 89% yesterday on the announcement of the merger partner, American Oncology, and DTOC managing to agree terms - the deal is on. DTOC stock gave up 15% after hours as perhaps the result of more mature consideration of the deal. What will matter next is how many of the current shareholders take their $10 home again - as with all Despac operations.
The announcement itself: “Digital Transformation Opportunities in an 8-K said shareholders voted in favor of combining with American Oncology Network. The SPAC said 9,931,654 were voted is support of the deal, with 14,139 against. American Oncology is a network of community-based oncology practices. Since 2019, AON has generated compounded annual revenue growth of more than 60% through June 2022 and now generates more than $1 billion in annual revenue and operates profitably. AON’s platform currently includes 107 physicians and 24 practices across 71 locations in 18 states.” Well, OK, great and all that. But of course there’s not $1 billion of revenue accruing to the network, that’s the amount flowing through it, a rather different thing.
Digital Transformation Opportunities stock price from Google Finance
The most interesting part, to us, is perhaps this: “All told, when combined with earlier redemptions, the SPAC lost about 99.5% of its trust, leaving approximately $1.5 million.”
As we’ve said before we think the Spac craze is well past its peak. DTOC did raise $300 million originally, but people can withdraw their $10 per share in cash at any time. Very large numbers of people did. And we think this is common among those Spacs that floated in the craze and are now, still, looking around for merger partners.
The problem being that at any one time there’re only a limited number of companies out there worth doing a Spac merger with. Just as there are only some small number worth having an IPO of - and the Spac folk will be that one step further out, rather more marginal. So many Spacs floated that they’ve not all been able to find useful partners. Which is why the quality of those that do seems to be declining, why so many are withdrawing their cash from the Spacs.
Sure, there still will be good deals that happen - but the craze, we think, has passed.
