3 SPACs With the Potential to Be Faux Hot IPOs

20 years ago, when I graduated law school, my first job was at NASD Regulation. Its what has now become FINRA, or the Financial Industry Regulatory Authority.

We monitored broker dealers and stocks, and also reviewed complaints from the public. If we were reviewing a complaint about stock manipulation, and we saw the company was a SPAC, the reaction was an “Oh” combined with an eye roll.

We all knew it. Very few SPACs were not manipulated by their issuers one way or another.

You had to be a very unsophisticated investor to be taken by a “blank check company.” Anyone who knew the Wall Street game knew SPACs were the playground of the hucksters (is that still a word people use?).

Fast forward 20 years and the former head of the NYSE is now leading a SPAC in search of an acquisition, and Richard Branson’s Virgin Galactic just went public via another SPAC.

Times have, as they say, changed.

New Patterns, New Opportunities

With the legitimization of SPACs have come new tradeable patterns that were not generally available with the old manipulated SPACs.

We saw one of these patterns, the Faux Hot IPO, just last week with Virgin Galactic (SPCE, SPCEWS). Anyone could have bought the stock or warrants pre-IPO and flipped them into the IPO a few days later for a nice 20-50% gain, depending on whether you were in the common or warrants.

What is a Faux Hot IPO? In simple terms, it’s a SPAC that has just completed its acquisition and is now trading as the new company.

It’s “faux” because the shares of the original SPAC are always available for purchase, even though they are locked in a tight price range by the SPAC structure. (For more details check this out.)

With the Virgin Galactic Faux Hot IPO done, the question is who’s next?

These three SPACs stand a good chance of capturing the crown of next Faux Hot IPO.

The Eagle Flies Again

Readers of the Warrant Observer Newsletter will be familiar with Jeff Sagansky and his Eagle SPACs. The second recommendation out of the newsletter was a purchase of his Platinum Eagle warrants.

Platinum Eagle became Target Hospitality and we locked in an almost 60% gain in the warrants, THWWW.

Before acquiring the lodging company that became Target Hospitality, Platinum was in talks with FanDuel (later acquired by an Irish gambling company).

Now Double Eagle Acquisition (DEAC, DEACW) appears to have pulled another chair up to the blackjack table. DEAC is apparently in talks with DraftKings to take the company public.

Given the widespread popularity of DraftKings, this would definitely make for a potential hot IPO. I’m keeping an eye on the Double Eagle warrants, which jumped on the DraftKings rumor.

If the acquisition is announced, we’ll likely see another leg higher in the warrants. And then, we’ll decide how to play the IPO as we determine the probability of the deal closing.

Far Point (Not the Star Trek Station)

Who knows, maybe Tom Farley, former head of the NYSE, has a Star Trek thing like me. But I’m guessing Far Point Acquisition (FPAC, FPACWS) is a play on his name, combined with the name of the sponsor of the SPAC, Daniel Loeb’s Third Point.

I’ve been patient with this one for a while, but I think now is the time to put on a few warrants here around $1.20. I didn’t want to pay up ($1.50 or over) for this premium SPAC.

But, as we get into the final innings of play, this one is definitely worth a lottery ticket trade.

Any announcement of an acquisition should double the warrants from the current $1.20 range. And, I find it hard to believe Mr. Farley and his team won’t find a suitable candidate to acquire.

Working in the fintech area, a hot sector with a lot of potential targets, the possibility of a Faux Hot IPO is pretty good.

This is one that could look like the Virgin Galactic warrants, moving higher after the announcement of an acquisition and never looking back.

Consider getting into the warrants now, even before the Faux Hot IPO stage.

A Dearth of Tech

Turning from a SPAC warrant that should be bought now, let’s talk for a moment about a SPAC that literally just came public itself.

Apex Technology Acquisition (APXT, APXTW) warrants and common started trading this week. The SPAC is seeking a software or internet technology related company to acquire.

Management is composed of some heavy hitters, including Jeff Epstein, former EVP and CFO of Oracle, and Brad Koenig, a died in the wool investment banker from Goldman.

The Apex prospectus makes for an interesting read. It includes some pretty staggering facts on the fall off in tech IPOs in the U.S. the past few years.

As well a recognition that the tech companies that do go public via IPO are already much larger than their historical counterparts (less appreciation for public investors, more for angel and venture funds).

If Apex selects the right tech company, with a compelling story and in a hot sector (cybersecurity? AI? maybe even blockchain?) it could lead to one heck of a Faux Hot IPO.

I’ll be keeping a close eye on this one in the coming months.

Any of these three SPACs could be the next winner in the Faux Hot IPO stock warrant pattern.

Jump on our email list and we’ll keep you posted on what we’re watching. Or join us at the Warrant Observer membership and get detailed info on what we see as the next big opportunity in the warrant market.