Executive Summary / Key Takeaways

• DT Cloud Star Acquisition Corporation (DTSQ) is a Special Purpose Acquisition Company (SPAC) with approximately $71.19 million held in trust as of March 31, 2025, actively seeking a business combination target, likely within the cloud and technology sectors.
• The company's shares are currently trading significantly below their cash-in-trust value per share, presenting a potential arbitrage opportunity for investors if the SPAC liquidates or completes a favorable transaction.
• As a non-operating entity, DTSQ's financial performance is currently driven by interest and unrealized gains earned on the Trust Account assets, resulting in net income ($630,284 in Q1 2025) despite operating costs.
• A critical factor for DTSQ is its deadline to complete a business combination by October 26, 2025, which, if missed, would trigger a mandatory redemption of public shares and liquidation, raising substantial doubt about the company's ability to continue as a going concern.
• DTSQ operates in a competitive landscape against other SPACs, private equity firms, and traditional IPOs, facing challenges related to its smaller scale and deal execution speed compared to larger peers.

The SPAC Mandate and the Search for a Star

DT Cloud Star Acquisition Corporation is a blank check company, a structure specifically designed to raise capital through an initial public offering (IPO) with the sole purpose of merging with or acquiring an existing private company. Incorporated in the Cayman Islands in late 2022 and completing its IPO in July 2024, DTSQ set out with a clear mandate: to identify and consummate a business combination with one or more target businesses. This strategic approach allows a private company to become publicly traded more quickly than through a traditional IPO, while providing the SPAC shareholders with a potential return on their investment, either through participation in the combined entity or redemption of their shares.

The company's search for a target is broad, not limited by a specific industry or geographic region, although its name suggests a potential focus on the "Cloud Star" sectors, implying an interest in technology, particularly cloud-related businesses. Nasdaq rules require that the target business(es) must collectively have a fair market value equal to at least 80% of the balance in the Trust Account (less deferred underwriting commissions and taxes payable on interest) at the time a definitive agreement is signed. The post-combination company must own or acquire 50% or more of the target's voting securities or otherwise acquire a controlling interest.

In the competitive arena of SPACs, DTSQ faces numerous rivals. Larger, more established SPACs like Churchill Capital Corp VII (CCVII) and Pershing Square Tontine Holdings (PSTH) command significantly larger trust accounts, providing greater bidding power for high-value targets. For instance, CCVII's initial $1.5 billion trust account dwarfs DTSQ's $69 million initial trust size. While DTSQ may offer advantages in terms of potentially lower acquisition costs (e.g., reduced warrant expenses), it faces challenges in deal execution speed and market positioning compared to peers with more extensive networks or longer track records. The SPAC market also competes with alternative paths to public markets, such as traditional IPOs and private equity buyouts, which can offer different terms and timelines to potential targets. Indirect competitors leveraging technology, such as AI-driven platforms used by some firms for faster due diligence, highlight the need for efficiency in the search process, a capability DTSQ must ensure it possesses or can access to remain competitive.

As a non-operating entity, DTSQ itself does not possess proprietary operational technology. Its technological focus is centered on the type of companies it seeks to acquire – likely those with differentiated technology in the cloud and tech sectors – and the potential use of technology in its search and due diligence processes. While specific details on DTSQ's internal technological capabilities for target identification are not disclosed, leveraging data analytics or sponsor expertise in evaluating tech companies would be crucial to identifying promising targets and assessing their technological advantages and market potential. The strategic intent is to find a target whose technology provides a competitive moat, enabling future growth and profitability for the combined entity.

Financial Snapshot and the Trust Account's Role

As a blank check company, DTSQ has not generated any operating revenue since its inception. Its financial activities revolve primarily around managing the funds raised in the IPO and incurring costs associated with its formation, public company status, and the search for a business combination.

For the three months ended March 31, 2025, DTSQ reported a net income of $630,284. This income was not derived from business operations but rather from non-operating sources, specifically interest and dividends earned on the marketable securities held in the Trust Account ($484,684) and unrealized gains on these securities ($253,022), totaling $741,143 in other income. This significantly offset the operating expenses of $110,859 incurred during the period. In contrast, the three months ended March 31, 2024 (prior to the IPO), showed a net loss of $10,623 from operating costs with no offsetting income from a Trust Account.

The Trust Account is the financial heart of the SPAC. As of March 31, 2025, the balance in the Trust Account was $71.19 million, up from $70.46 million at December 31, 2024, reflecting the accumulation of interest and investment gains. These funds are invested in U.S. government treasury bills or money market funds and are held for the benefit of public shareholders. The per-share redemption value for public shares, based on the Trust Account balance, was approximately $10.32 as of March 31, 2025.

Outside the Trust Account, DTSQ had cash at bank of $271,508 and total current assets of $358,153 as of March 31, 2025. Current liabilities totaled $125,851, including accrued expenses and amounts due to the Sponsor ($114,500). This resulted in working capital of $232,302 (excluding the Trust Account and deferred underwriting commissions). Management has noted that this working capital position indicates a lack of liquidity needed to sustain operations for a full year outside the Trust Account, highlighting a reliance on potential working capital loans from the Sponsor or affiliates. A promissory note allows the company to borrow up to $300,000 from the Sponsor, though no amount was outstanding as of March 31, 2025.

A notable point for investors is the disconnect between the cash held in trust per share and the company's market valuation. While the Trust Account held approximately $10.32 per public share as of March 31, 2025, the company's TTM market capitalization was around $30 million, and the stock has traded below this cash value. This situation, common in the current SPAC environment, presents a potential opportunity for investors to acquire shares at a discount to the liquidation value, assuming the Trust assets are protected.

The Ticking Clock and Future Outlook

The primary strategic objective for DTSQ is the successful consummation of a business combination. Management is actively engaged in identifying and evaluating potential targets and expresses confidence in finding a suitable business. However, there is no assurance that a definitive agreement will be reached or that a transaction will be completed in the near term.

A critical deadline looms: DTSQ must complete a business combination by October 26, 2025, which is 15 months from the closing of its IPO, unless this period is extended. The inability to consummate a business combination within this timeframe would trigger a mandatory redemption of 100% of the outstanding public shares at a per-share price equal to the aggregate amount then on deposit in the Trust Account (including interest net of taxes payable), followed by the company's liquidation.

This deadline presents a significant risk. Management has explicitly stated that the potential inability to consummate an initial business combination within the prescribed period raises substantial doubt about the company's ability to continue as a going concern. In the event of liquidation, while public shareholders are entitled to a pro rata portion of the Trust Account, there is a possibility that the per-share value distributed could be less than the initial $10 IPO price, particularly if creditor claims take priority over shareholder distributions, although the Sponsor has agreed to be liable for certain claims that reduce the Trust below $10 per share (with exceptions).

The competitive landscape adds another layer of complexity to the outlook. DTSQ must compete effectively for attractive targets against other SPACs with potentially greater resources or deal-making experience, as well as against private equity firms and the appeal of traditional IPOs. The success of DTSQ hinges entirely on its ability to identify, negotiate, and close a transaction that creates value for shareholders within the remaining timeframe.

Conclusion

DT Cloud Star Acquisition Corporation represents an investment proposition tied directly to the outcome of its search for a business combination target. With a substantial amount of capital held securely in its Trust Account, currently exceeding the initial IPO price per share, the company offers a degree of downside protection based on its potential liquidation value. The current trading price below this cash-in-trust value highlights the market's skepticism regarding the likelihood or terms of a successful merger, but also presents a potential value opportunity should a transaction materialize or the SPAC proceed to liquidation.

The core narrative for DTSQ is one of a race against the clock. Management is actively pursuing a deal, likely focusing on the dynamic cloud and technology sectors, where identifying a strong target with a defensible technological position is key. However, the competitive pressures within the SPAC market and the hard deadline of October 26, 2025, are paramount considerations. The company's ability to leverage its sponsor's network and execute efficiently will determine whether it successfully merges with a promising business or liquidates, returning the Trust value to shareholders. For investors, the focus remains squarely on the progress of the business combination search and the strategic response to the ticking deadline.