Category: SPAC

SPACs for Tax Selling Bounce Opportunities

by Fred Fuld III

A tax selling stock is a stock that is currently selling for a low price but was trading at much higher levels earlier in the same year, or even earlier years.

When the year end approaches, many investors utilize a strategy commonly referred to as tax harvesting , which is the selling of stocks at a loss to offset any gains that may have been made during the year.

Because of the heavy selling, the prices of stocks that have dropped substantially tend to sink far more than what would usually take place during the rest of the year. Then in January, with the strong selling over with, these stocks can recover somewhat.

So traders and investors are on the lookout for tax selling bounce stocks that are trading at much lower prices, hoping for a bounce in January, once the tax selling is over.

One type of stock that has been significantly hit were the SPACs, the special purpose acquisition companies that were so popular a few years ago.

These vehicles, also known as blank check companies, made it easy for private companies to go public. Some of the more well known SPACs include DraftKings (DKNG), down 49% year-to-date, and Virgin Galactic (SPCE), down 66%.

Unfortunately, the returns haven’t been so great, with many of them experiencing losses of over 90% from their highs.

Here are some additional SPACs that are down over 50% year-to-date. You will notice that several of them are electric vehicle companies.

CompanySymbolYTD Return
ArrivalARVL-96%
Shift TechnologiesSFT-93%
IronNetIRNT-92%
Ree AutomotiveREE-91%
CanooGOEV-82%
BuzzFeedBZFD-80%
LucidLCID-77%
AppHarvestAPPH-77%
WeWorkWE-75%
SoFiSOFI-73%
Lordstown MotorsRIDE-59%
FiskerFSR-54%
PolestarPSNY-50%

A couple things to remember. There is no guarantee that these stocks will bounce back in January, as there is usually a reason the stocks dropped so much in the first place.

Also, timing is everything with these tax-selling stocks. Sometimes the sellers are done selling in mid-December, sometimes they wait until year end.

Hope you get a bounce in your portfolio.

Disclosure: Author didn’t own any of the above at the time the article was written.

Worst Performing SPACs: Are They Dead or Will They Rebound?

by Fred Fuld III

A SPAC is a Special Purpose Acquisition Company, also known as a blank check company. It is a company created specifically to raise money as a publicly traded company in order to finance a merger or acquisition opportunity within a set timeframe, usually two years.

They have no operations but go public with the intention of merging with or acquiring a company with the proceeds that were raised from the SPAC’s initial public offering. The SPACs are generally sold at $10 a share or often in $10 units which includes of one share of common stock and one or more out-of-the-money warrants or a fraction of a warrant. The units, stocks, and warrants usually start trading on either the NYSE or NASDAQ.

Probably the most famous SPAC (which no one remembers the original name of but most remember the new name after the merger) was Social Capital Hedosophia (former symbol: IPOA). This is the company that merged with Richard Branson’s Virgin Galactic (SPCE), the space travel company.

Unfortunately for most investors who invested in these SPACs, the investment hasn’t turned out well, especially when measured from the stock’s high to todays price. Many came out at $10, then started dropping and never looked back. Other SPACs jumped way up in price, then later tanked way below the original $10.

For example, Romeo Power (RMO), a southern California manufacturer of lithium ion battery modules, came out at $10 a unit. Some poor soul paid 38.90 a share right after Christmas in 2020. What a Christmas present.

The stock is now trading at 44 cents a share. This is a drop of 98.9% in share price.

Another example is a company called Ucommune International Ltd (UK), a provider of agile office spaces in China. An investor paid 241.40 a share on a split adjusted basis a couple weeks before Thanksgiving in 2020. Happy Thanksgiving. The stock is now 3.71 per share, a drop of 98.2%.

To explain how the split worked on this stock, there was a 1 for 20 split on April 22, 2022. That means that if you had 100 shares to start with, you would end up with only 5 shares. So the investor who paid the high price, if had a 100 shares, actually would have paid 12.06 per share, for a total of $1206. However, after the split, he would have only 5 shares at 3.71 per share, or a total value of only $18.55.

So here is a list of SPACs that have fallen dramatically.

SYMBOL LOSS
RMO 98.9%
UK 98.2%
LOTZ 96.6%
MILE 95.4%
DAVE 95.1%
UPH 94.8%
RIDE 94.5%
SFT 93.9%
IRNT 93.0%
NKLA 92.8%
MNTS 92.2%
GOEV 90.7%
GMTX 90.4%
SPCE 88.6%
ATIP 88.3%
MAPS 88.3%
VIEW 86.9%
ME 85.4%
LVOX 84.7%
BBAI 70.6%
MYPS 64.6%

Disclosure: Author didn’t own any of the above at the time the article was written.

What is a SPAC and Why Should You Care?

by Fred Fuld III

If you haven’t heard the term, SPAC, as an investor, you should at least be aware of what it is. SPAC stands for Special-Purpose Acquisition Company, which is a company created specifically to pool funds in order to finance a merger or acquisition opportunity within a set timeframe, usually two years.

SPACs are sometimes referred to as corporate shells or blank-check companies. They have no operations but go public with the intention of merging with or acquiring a company with the proceeds that were raised from the SPAC’s initial public offering. The SPACs are currently sold in $10 units which includes of one share of common stock and one or more out of the money warrants or a fraction of a warrant. The units, stocks, and warrants usually start trading on either the NYSE or NASDAQ.

Probably the most famous SPAC (which no one remembers the original name of but most remember the new name after the merger) was Social Capital Hedosophia (former symbol: IPOA). This is the company that merged with Richard Branson’s Virgin Galactic (SPCE), the space travel company.

The most recent SPAC transaction hitting the news is the merger of the SPAC called Diamond Eagle Acquisition Corp. (DEAC) with DraftKings (DKNG), one of the world’s largest daily fantasy sports contest and sports betting provider.

Here are a list of SPACs that have announced mergers:

SPAC Symbol Buying Business
8i Enterprises Acquisition Corp. JFK Diginex blockchain
Act II Global Acquisition Corp. ACTT Merisant sugar substitute
Arya Science Acquisition Corp. ARYA Immatics cancer immunotherapies
Diamond Eagle Acquisition Corp. DEAC DraftKings fantasy sports
Far Point Acquisition Corporation FPAC Global Blue airport sales tax refund kiosks
Gordon Pointe Acquisition Corp. GPAQ HOF Village Pro Football Hall of Fame
KBL Merger Co. IV KBLM CannBioRx Life Sciences biotech
Legacy Acquisition Corp. LGC Blue Valor digital marketing
Leisure Acquisition Corp. LACQ Gateway Casinos gambling
Monocle Acquisition Corporation MNCL AerSale Aviation Aftermarket
Mudrick Capital Acquisition Corporation MUDS Hycroft Mining gold & silver
Nebula Acquisition Corp. NEBU Open Lending automotive finance
Proficient Alpha Acquisition Corp. PAAC Lion Financial Group financial services
Pure Acquisition Corp. PACQ HighPeak Energy oil & gas
VectoIQ Acquisition Corp. VTIQ Nikola zero emissions trucks
Wealthbridge Acquisition Limited HHHH Scienjoy China streaming video

Although the SPACs are a way of getting an early investment in currently private companies, they do carry risk.

Happy investing!

Disclosure: Author didn’t own any of the above at the time the article was written.