Dubai-based Shisha Maker AIR Envisions Future and Investment Opportunities with SPAC Listing

A new wave of investment is coming out of Dubai, the business hub of the Middle East. In this issue, we focus on the news that AIR, a Dubai-based manufacturer of high-end shisha products, will go public through a merger with a special purpose acquisition company (SPAC) owned by Cantor Fitzgerald, a leading financial services company. We will take an in-depth look at the opportunities and potential risks.

As the Middle East economy continues to diversify, with niche but high-growth sectors gaining attention due to their unique blend of traditional and modern cultures, AIR’s listing is more than just another company’s move; it is a symbolic event of Dubai’s economic growth and the dynamism of the Middle East market as a whole. We hope this investment guide will help you consider your next steps.

Dubai’s Shisha Market, Its Attractiveness and Growth Potential

Dubai is no longer an economy dependent solely on oil. A diverse range of industries, including tourism, finance, real estate, and technology, are rapidly developing and attracting businesses and wealthy individuals from around the world. The shisha industry is benefiting from this economic diversification. Dubai’s luxury hotels, restaurants, and lounges offer a sophisticated shisha experience that is deeply ingrained in the lifestyles of tourists and locals alike.

• A thriving tourism industry: Tens of millions of visitors to Dubai each year are looking for unique experiences, and shisha is one of the most popular. Shisha is one of the most popular and profitable activities, especially for upscale shisha bars catering to the wealthy.
• Shisha Culture Penetration: In the Middle East, shisha is more than just a smoking device; it is an important tool for socializing and relaxation. In Dubai, this culture has been elevated to a modern luxury experience.
• Affluent consumers: The global affluent population in Dubai are willing to spend on high quality, well-designed products and services, and luxury brands such as AIR are well positioned to capture this demand.

AIR has built a reputation for innovative design and quality products in the Dubai market. Their shisha is recognized as a piece of art, not just a tool, and has become a status symbol among the wealthy. The funds generated through the merger with SPAC are expected to provide a strong impetus to accelerate their further growth strategy. The shift of investment to the non-oil sector of the Middle East market is evident, and this focus on the consumer goods sector will continue to grow. For investors, investing in lifestyle brands from Dubai can be an attractive opportunity to directly benefit from the region’s growth.

SPAC Listing Mechanism and Implications for AIR

The Special Purpose Acquisition Company (SPAC) listing chosen by AIR is a financing method that has been gaining attention in recent years. Since it has different characteristics from a conventional initial public offering (IPO), it is important to understand the mechanism of a SPAC listing when making an investment decision.

What is SPAC?

• Blank check company: First, an “empty box” company (SPAC) without a specific business goes public and raises funds from investors.
• The goal is to use the funds raised to acquire or merge with a privately held company (de SPAC).
• Faster listing: Compared to a traditional IPO, AIR offers the advantages of a faster review process and less susceptibility to market conditions.

AIR’s merger with SPAC, a Cantor Fitzgerald affiliate, has the significant advantage of leveraging the credibility and network of Cantor Fitzgerald, a major player in the financial world. This will enable AIR to more smoothly establish itself as a public company and attract the attention of investors worldwide. The funds raised are expected to be used primarily for the following growth strategies

1. Product development and innovation: investment in new designs and flavors, as well as technological innovations such as electronic shisha.
2. Global marketing: international advertising efforts to increase brand awareness.
3. Expand sales channels: enter new markets, strengthen online stores, expand partnerships.
4. Expansion through M& A: pursuing synergies through acquisitions of related companies.

However, SPAC listing also comes with potential risks. For example, there is a short due diligence period and dilution risk due to the sponsor’s shareholding. Investors should carefully consider these risk factors while evaluating AIR’s strong brand, leadership in a growing market, and the vision of its experienced management team. This listing marks the beginning of a new chapter for AIR, and its developments will be an important touchstone in the Middle East lifestyle industry.

Global Expansion and Market Expansion Strategy

With its unique brand and high quality products, AIR from Dubai is no longer a regional company, and the funding and attention that the SPAC listing will bring will be a major step forward in making their global market ambitions a reality.

Pillars of AIR’s global strategy

1. Strengthening its foothold in Middle Eastern and African markets: Building on its success in Dubai, AIR will further strengthen its presence in neighboring growth markets such as Saudi Arabia, Qatar, and Egypt. These regions have a deeply rooted shisha culture and a growing number of upscale consumers.
2. Strategic Entry into Western Markets: Shisha is a popular part of certain communities and nightlife in Western countries, and AIR has the potential to develop new niche markets by offering its sleek design and premium experience. However, adapting to country-specific regulations and cultural differences will be important.
3. Diversification and innovation: In addition to traditional shisha, AIR will focus on developing innovative products such as flavor diversification, small portable shisha, and even electronic shisha. This will enable the company to reach a broader customer base.
4. Differentiation from competitors: While there are many shisha products on the market, AIR clearly differentiates itself by emphasizing “luxury,” “design,” and “high quality. This is essential to establishing a competitive advantage, especially in the higher-priced markets.

In addition, consideration of ESG (Environmental, Social, and Governance) factors is unavoidable for modern companies. Since the shisha industry deals with smoking products, the social dimension of “health issues” in particular calls for corporate responsibility, and it will be interesting to see how AIR faces this challenge, whether through transparent disclosure, research and development to reduce health hazards, or investment in alternative products. To achieve sustainable growth, it is essential not only to achieve economic success, but also to be socially responsible. Strategic efforts to address these factors will be required to establish itself as a global brand.

Risks and Returns Investors Should Consider

When considering an investment in an AIR company, one should be fully aware of its attractive growth potential as well as potential risk factors. It is an ironclad rule of investment that with high returns comes high risk.

Key Risk Factors

• Regulatory risks specific to the shisha industry: Smoking is increasingly regulated worldwide, and shisha is no exception. Health concerns may lead to the introduction of sales restrictions, advertising regulations, and high taxes in many countries. These regulations may become a major barrier to expansion, especially in the U.S. and European markets.
• Middle East geopolitical risk and economic volatility: The Middle East region, where AIR’s business is based, is subject to geopolitical instability. Regional conflicts, fluctuations in oil prices, and changes in economic policies may affect consumer purchasing patterns and tourist flows.
• Factors that may cause share price volatility after SPAC listing: While SPAC listings are quick, it may take time for the market to solidify its valuation. There is a risk of significant share price volatility due to selling pressure from post-listing lock-up releases, actions of SPAC sponsors, and overall market sentiment.
• Increased competition and risk of counterfeit products: The more successful AIR is, the greater the risk that new competitors will enter the market and counterfeit designs and products will become available. Sustaining brand strength and innovation is critical.

Expected Returns and Long-Term Perspective

Even with these risks, the investment opportunity offered by AIR can be attractive. The following are some of the reasons for this

• Strong brand and market advantages: The brand strength and high quality products developed in the upscale Dubai market could provide a long-term competitive advantage.
• Focus on growth markets: The Middle East and African markets continue to experience strong economic growth, and rising consumer disposable incomes will boost demand for lifestyle products such as shisha.
• Innovation and diversification: Developing new products and responding quickly to market needs has the potential to create new revenue streams.
• Linkage to Dubai’s economy: As Dubai continues to establish itself as a major global city, AIR is expected to closely link to and benefit from its growth.

Investors would be wise to consider investing in AIR from a long-term perspective, evaluating its long-term growth strategy, market positioning, and the vision of its management team, rather than being swayed by short-term share price fluctuations. AIR’s challenge to embody the dynamism of Dubai may add new color to your portfolio.