Is Patria Latin American Opportunity IPO a Good Buy?

Although investing in mature established economies like the U.S. offers a higher chance of stability compared to emerging markets, the Faustian bargain undergirding the former presents a lower probability of exceptional returns. As is the case with almost any rational circumstance in life, the higher the risk, the higher the reward.

Arguably, Patria Latin American Opportunity Acquisition Corp. is in the high-risk game. With the company’s management team seeking a merger operating within the namesake regional market, Patria, since filing its intention to go public, has always carried a relevant profile. For instance, the Latin America economy is attractive because of its population pyramid — one that features more working-age demographics than retiree communities.

However, recent turmoil in eastern Europe — specifically, Russia’s dangerously unsettling decision to invade Ukraine — may also afford Patria a possible new narrative: a hedge against rising uncertainty. Still, investors will want to carefully assess the pros and cons before participating in this upcoming new listing.

What Does Patria Latin American Opportunity Do?

As you might infer from its name, Patria Latin American Opportunity is a special purpose acquisition company (SPAC). Rather than launch an initial public offering (IPO) to support its own business endeavors, a SPAC makes a market debut to raise funds in support of an eventual merger. Once a viable target has been identified, the SPAC assumes the identity of the target while also providing it with a backdoor channel to enter the capital market.

Sponsoring this particular SPAC is an affiliate of Patria Investments Ltd., a leading global alternative asset manager. Although the blank-check firm has the option to explore various industries and geographies, it intends to leverage its Latin America expertise and capabilities, aiming for a merger target in these sectors:

• Healthcare: One subsegment that Patria could possibly consider is the regional home healthcare market. According to analysts from Market Data Forecast, this sector saw valuations reach $23 billion in 2021, with estimates calling for nearly $38 billion by 2026.
• Food and beverage: Because of the young and vast working-age population, the food and beverage market in Latin America is incredibly viable. Per Statista.com, analysts covering the sector in 2016 forecasted that this segment’s sales could reach $221 billion by 2021.
• Logistics: Unfortunately, the COVID-19 pandemic threw a monkey wrench into the global supply chain, posing serious challenges across the board. Nevertheless, analysts from Allied Market Research project that the Latin America logistics market will reach a valuation of $784.6 billion by 2027.
• Agribusiness: Based on data from the United Nations Foundation, “Climate change and associated severe weather, droughts, fires, pests and diseases are already threatening the production of food around the world.” Therefore, agribusiness is a massively vital sector, one that could reach $2.13 billion by 2026, according to Market Data Forecast.
• Education: If the COVID-19 crisis presented a silver lining, it’s that it sparked a push toward e-learning, a component of the broader educational technology (EdTech) industry. According to Statista.com, Latin America’s e-learning market may reach a valuation of $3 billion by 2023.
• Financial services: With greater access to connectivity solutions and educational opportunities, Latin America is possibly poised for a financial technology (fintech) revolution. Per Mordor Intelligence, this segment’s funding grew from $44 million in 2013 to $2.1 billion in 2019, presenting a potentially lucrative backdrop.

While Patria features myriad avenues for a merger target, you should realize that no SPAC guarantees discovering a worthwhile opportunity. In addition, you must always keep in mind the warnings that Harvard Law School presented regarding this IPO category, particularly a shell company’s dilutive nature post-merger.

When is the Patria Latin American IPO Date?

Amid one of the most chaotic periods in recent memory, Patria Latin American is scheduled to ink its name on the IPO calendar on March 1, 2022. Shares will trade on the Nasdaq exchange under the ticker symbol PLAOU.

Initially, Patria filed its intention to go public with the U.S. Securities and Exchange Commission (SEC) in March last year. Under the terms of this initial offering, the Cayman Islands-based SPAC disclosed plans to raise $250 million through the distribution of 25 million units at $10 each. At the time, only JPMorgan Chase & Co. (NYSE: JPM) represented the IPO’s bookrunner.

However, on Feb. 8, 2022, Patria downgraded its funding target by 20%. Now, it's seeking a total raise of $200 million through the distribution of 20 million units at the same offering price. Each unit consists of one share of common stock and one-half of a warrant, which is exercisable at $11.50.

Another notable change is that the Patria IPO now has another bookrunner to support the deal, Citigroup Inc. (NYSE: C). Still, investors will want to be careful with the latest terms since a new listing’s deal-size downgrading isn’t conducive to market confidence.

Though unfortunate, Patria may not have had much of a choice. Over the last several days, Russian President Vladimir Putin ordered an all-out invasion of Ukraine, a shocking decision which international leaders roundly condemned as reckless. As a result, the U.S. and a growing number of powerful nations imposed severe and restrictive sanctions and penalties on Russia.

To be sure, these measures are designed to isolate the country and impede its military from further aggression. As well, they may impart a political coup since the sanctions have caused a run on banks in Russia, particularly as the ruble plummets under the weight of collective global action.

However, these tactics may also hurt the U.S. and its western partners. For one thing, the Russians could retaliate with debilitating cyberattacks. But the interconnectedness of the global economy also means that American blue chips like Alphabet Inc. (NASDAQ: GOOG, NASDAQ: GOOGL) could suffer, an argument that Benzinga staff writer Anusuya Lahiri forwarded.

Yet in a perhaps cynical manner, the worrying escalation between the U.S., Ukraine and Russia — with the latter putting its nuclear forces on high alert — could provide an opportunity for Patria. With Latin America being relatively insulated from the crisis compared to other nations active in the situation, PLAOU stock could rise as a possible hedge.

What Analysts are Saying About Patria Latin American IPO

Although analyst opinion on Patria Latin American is extremely limited, the same can’t be said about its core regional focus. According to experts from Deloitte Insights, the region posted a solid economic recovery last year.

Primarily, Latin America benefited from a trickle-down effect. As the U.S. and China — the world’s top two economies — gradually recovered, prices of raw materials rebounded. Of course, with the region dominating raw material exports, the resilience in the major economies was a blessing for the region. As well, the global vaccination rollout helped to mitigate the impact of the COVID-19 pandemic.

At the same time, Deloitte mentioned that Latin America might only experience moderate growth in 2022, particularly as the soaring consumer inflation that has substantially affected American consumers has also trickled its way down south.

But perhaps the most worrying aspect is that the effort to address the pandemic’s impact might paper over longstanding concerns. According to the World Economic Forum, the global health crisis “reached Latin America at a time when structural economic and social deficiencies in the region had not been resolved.”

Patria Latin American Financial History

As a SPAC, Patria Latin American features no financial history other than the money it raises from its IPO to support its merger initiatives.

Patria Latin American Potential

Thanks to a vibrant labor force and distinct cultural elements, Patria Latin American enjoys a wealth of potential upside opportunities. For instance, while the Coca-Cola Co. (NYSE: KO) brand originated in the U.S., American consumers consider it background noise. However, in Mexico, Coke is integrated into the culture, even connected to some religious ceremonies.

Further, the population in Latin America won’t peak around 2060 — a year when most millennials should be in or near retirement age. By that point, a bulk of investors will likely have shifted to safer reliable categories like government bonds and money markets. Put another way, the region should be relevant for decades.

However, no investment is without risk. One of the pressing concerns for Latin America-based acquisitions is inequality, both from the region compared to the developed world along with domestic inequities. As nations progress, what the World Economic Forum labels digital inequalities could expose PLAOU stock to significant downside danger.

While Latin America certainly doesn’t lack in manpower, digitalization focuses on productivity per capita. Thus, it’s possible that in the future, population growth implications might not feature the same importance as it does in the present paradigm.

Where to Buy Patria Latin American IPO Stock

Interested investors of Patria Latin American must acquire shares at the open, necessitating knowing how to buy stocks. But before that, you’ll have to open a brokerage account, one that suits your needs. Below is a list of best brokers to consider.

PLAOU Restrictions for Retail Investors

Review the Financial Industry Regulatory Authority (FINRA) rules on restricted persons before participating in an IPO. Don’t engage if you have privileged information.

PLAOU Pre-IPO

While you cannot acquire PLAOU shares on a pre-IPO basis, those interested in early bird opportunities should consider opening an account with Freedom Finance.