FG New America Acquisition Corp

FG New America Acquisition Corp (NYSE: FGNA) is a blank check Company. The Company is formed with an objective of stock purchase, capital stock exchange, effecting a merger, reorganization or similar business combination and asset acquisition.

Investment Highlights - FG New America Acquisition Corp – Avoid at USD 10.92

• The Company remained in the development stage and has not generated any revenue stream for the current period.
• The Company may fail to meet working capital requirements if unable to raise funds from the share placing.
• From the technical standpoint, 14-day RSI is supporting downward movement (around 65 level), which means the stock price could decline in the short term.

Key Risks

• The Company is exposed to various operational and financial risks with cybercrime, regulatory changes, and foreign exchange fluctuations.
• Liquidity and interest rate risks could affect the operations of the Company.

Financial Highlights from the period 24 June to 30 September 2020 (released on 12 November 2020)

(Source: Quarterly Report, Company Website) 

• At the end of three months as of September 2020, the Company did not generate any revenue and incurred a formation cost of $1,000.
• The Company reported a net loss of $1,000 as on 30 September 2020 and remained same at the time of inception.
• The cash balance as on 30 September 2020 stood at $27,102 with total assets of $1,958,367.
• The Company has not generated any cash flow from operating and investing activities; all cash flow is generated from financing activities.

One Month Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

Conclusion

The Company is in the development stage and hence rely on grants and cash balances to carry on all the business activities. The operations are financed by the sale of equity securities by private placements. The Bottom-line performance has been in the negative zone, and the entire cash flow is generated from financing activities. FG New America Acquisition Corp is classified as an emerging growth company according to Securities Act and is exempt from various reporting requirements. Since the Company do not generate any revenue, it may face an issue to meet working capital needs and will be using cash balance to meet expenses. The Company operates in a challenging environment which requires continuous investment, sometimes at the cost of profitability, to stay ahead of competitors. The stock made a 52-week low and high of USD 9.78 and USD 10.98, respectively.

Based on the above rationale, we have given an “Avoid” recommendation on FG New America Acquisition Corp at the closing price of USD 10.92 (as on 21 January 2021), and with support from few catalysts needs to be evaluated at a later stage such as the commencement of business activities and raise of additional funds from equity placing.

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