ShiftPixy, PIXY, Jumps 200% on SPAC Distribution Of AXH

ShiftPixy (NASDAQ: PIXY) stock is up 200% since Friday on the announcement that the company is to distribute its AXH stock pro-rata to stockholders. The reason for this move is actually not great news for ShiftPixy itself, it has to be said. For that reason appears to be that the AXH stock is of such great value, compared to everything else, that they need to get rid of it.

ShiftPixy itself is one of those ideas that might have come off but it appears that it didn’t. It’s an app and system aiding gig work in the restaurant world. Sure, we all know about gig work and Deliveroo and Uber, and the rest. But restaurant work does have quite a flow of staff through jobs over time. There are large changes in demand so flexibility in the workforce both happens and is desired. We can imagine that restauranteurs might be keen to sign up to a system that offers a pool of workers than can be matched to that changing demand.

Equally, we could imagine the workforce signing up as an additional string to the bow to gain extra shifts. Add in what ShiftPixy already offered – to take care of all the necessary paperwork – and is could with that emphasis on could, be a viable idea.

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Then, of course, came lockdown, and that killed that for a time. It’s also possible that it just won’t work, perhaps for reasons of geography or fragmentation of the market, and so on.

However, ShiftPixy also sponsored several SPACs. One announced aim was that one of them, Industrial Human Capital (NASDAQ: AXH) would buy a recruitment company, a gig worker placement one perhaps, which would then use ShiftPixy’s services to do the paperwork which would provide scale for the service. Not a bad idea as ideas go. AXH exists, is funded, and is looking for a deal.

So, what’s this distribution of AXH stock then? PIXY gains some 15% of the stock as and when AXH does an actual deal – that’s the sponsor’s share. There’s no guarantee that a deal will ever be done and if it isn’t then that sponsor stock goes to zero. But the current value of that potential AXH stock is such that ShiftPixy risks being classified – with all of the tax implications, etc – as an investment company. The most important part being able to avoid registration under the Investment Company Act 1940, an expensive thing for a small company to do.

OK, there’s some potential value to the AXH stock – must be, this is why the whole process is being undertaken. Those who own ShiftPixy get that AXH stock. But note also what this tells us about the valuation of ShiftPixy’s ongoing business. It’s small enough that the holding of sponsor stock in the SPAC so swamps the business valuation that it risks being an investment company.

This is not a net positive for ShiftPixy’s stock price post-distribution now, is it?