Is The Clover Leaf Capital Corp. IPO a Good Buy?

If there’s any example of a full-circle investment in today’s financial ecosystem, it would have to be the cannabis sector. Currently, the otherwise divisive political landscape has largely reached consensus to…

relax restrictions on the much-maligned plant. During President Biden’s campaign in 2020, he pledged to decriminalize the use of cannabis and automatically expunge prior convictions related to such consumption.

Although championed as a progressive move, cannabis actually has a long and storied history in America. According to PBS Frontline, the then-colony of the British Empire produced high volumes of hemp, with the commodity exchanged as legal tender in Pennsylvania, Virginia and Maryland in the early 1600s. Only until the ugly politics of immigration entered the picture did the U.S. government crack down on the plant.

Today, the tolerant environment allows companies like Clover Leaf Capital Corp. — a special purpose acquisition company (SPAC) seeking to merge with a cannabis-related enterprise — to flourish, thereby expanding opportunities for retail investors.

When is the Clover Leaf Capital Corp. IPO Date?

On April 7, 2021, Clover Leaf Capital filed its intentions to raise $125 million via an initial public offering (IPO) with the Securities and Exchange Commission. Backed by privately held Yntegra Group, Clover Leaf announced that while it gave itself the flexibility to pursue any viable business combination, it specifically intended to focus on the legal cannabis market. At the proposed capital raise, the SPAC would command a market value of $158 million.

Later, on July 19, Clover priced its IPO — which involved the sale of 12.5 million shares — at $10 per unit. Maxim Group LLC provided the sole bookrunning management services for the offering. Shares began trading on the Nasdaq exchange under the ticker symbol CLOE.

Beginning Sept. 9, holders of CLOE stock which were purchased in the IPO can elect to separately trade the shares of the common stock and the rights included in the units — the reason why Clover appears on the IPO calendar on this date.

Unlike a traditional public market offering, a SPAC-based IPO does not represent a capital raise for a particular enterprise. In fact, a SPAC has no underlying operations, which is why analysts refer to such entities as blank-check firms or shell companies. Rather, a SPAC’s only goal is to identify a promising private firm. Once shareholders approve of the business combination, the SPAC merges with the target, making the latter a public entity by default.

It helps to view SPAC mergers as a symbiotic relationship: the merger candidate brings the business to the table while the shell company provides access to the capital market. Therefore, financial journalists often refer to these arrangements as reverse mergers.

On paper, a SPAC IPO opens many doors for retail investors. Under a traditional new offering paradigm, underwriters usually only provide access to shares at their initial price to their choicest clients such as mutual funds. This circumstance forces public buyers to wait for new issues to be released at the open market, which may arrive at a pricing disadvantage. With SPACs, retail buyers can acquire shares at any phase, from pre-merger-announcement to post-combination.

Still, SPACs following their mergers have…

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