A SPACfolio for Throwback Thursday
It’s Throwback Thursday, and I’m pretty excited to share the “throwback” SPACfolio/Shark week email I sent to paid members of The Warrant Observer a few weeks ago.
But, before we get into more SPACfolio action, I had a relevant Warrant Observer question from a blog reader…”Is the passive SPACfolio your main warrant focus?”
Given SPACfolio/Shark Week, it might seem that way.
But, no. The SPACfolio is actually only one small part of what I and the other Warrant Observer members do. Some members prefer a passive approach, and some trade more than me, which is saying something.
Just to give a non-SPACfolio example, i’ll share an email I sent out earlier today to paid members, before I get to the Throwback Thursday SPACfolio action.
So, yesterday, I let our Discord know that PRPL/W looked like it was entering a buy setup, and $4.50 looked like a good spot to pick up some of the PRPLW. I was looking for a targeted move to $5.50 or $6.00 in the warrant.
Much to my surprise, when I got up this morning, I saw that PRPL had announced a secondary offering this morning, uh oh. I figured our $4 stop would trigger pretty quickly in the warrant. But, this was the email I actually got to send a few hours ago (and now it’s even higher):
A quick update from my email yesterday, on a very rainy day here in the DMV.
First, I obviously had no idea Purple Innovation PRPLW, would do a secondary offering the day after I sent an email saying it looked like a good spot to buy these mattress company warrants.
Normally, a stock/warrant sells off on a secondary offering. Not PRPL.
The common stock rallied 12% from where it opened this morning, which was about where it closed yesterday. And the warrant has traded up over 22%.
If you bought the warrant either when I called it out in the Discord yesterday, around $4.50, or you got it this morning after my email last night, you’re now sitting on a 20-30% gain.
I had thought the stock would churn back toward $22.00 and was looking for a move in the warrant to around $5.50-$6. Well, we’re there.
Moving higher into a secondary is rare, and moving a large percent into a secondary is even rarer.
The stock/warrant still looks higher, possibly running back into the $24-$26 range on the stock, and the $6-$7 range on the warrant.
I’d keep a close stop on though, and I’m definitely not opposed to just taking 20-30% in a day, or less.
Another one that is interesting here is FREE/W, or Whole Earth Brands. The stock and common sold off pretty hard after completing it’s acquisition of the sweetener company, but has put in a triple bottom now.
The common is stair stepping higher, has broken out of a base range, and the warrants can be had for just under $1.00. I think we’re seeing some sellers in the $1 area on the warrants who have “gotten back to even” and are unloading here.
The company just announced a stock repurchase plan to buy back approximately 7% of it’s float at current levels.
Whole Earth had both good and bad business segment news when it reported earnings last month, but as CEO Albert Manzone said in the earnings release:
“I believe we have the foundations to build a major force in what we like to call the ‘free-from’ marketplace. This is a rapidly growing, not to mention massive, segment of the marketplace that is on-trend and has extremely powerful secular forces supporting it.”
If you’re looking for a little diversity away from tech and digital (apart from our FMCI play) this may not be a bad place to pick up what may be some “cheap” warrants.
Sometimes it pays to be both good…AND lucky, LOL.
Now, Throwback Thursday. This email was originally sent to Warrant Observer members August 27:
Shark/SPACfolio Week – Day 4
Let’s go with a combo today…Shark Week and Throwback Thursday.
And that can mean ONLY one thing…Jumping the Shark!
It doesn’t get any more throwback than Happy Days.
So, the question is, are SPACS “jumping the shark” here?
Does the fact that Billy Beane is in on the action mean we’re done?
I’ve spoke to this in a few different places, but let’s revisit.
I believe the resurgence of the SPAC has filled an underserved niche, missed by the traditional IPO market. Companies that wanted to go public, but were in the $100M – $500M valuation range (and maybe a few hundred million higher.)
IPO’ing is expensive, burdensome, and pulls management attention away from growing the business.
For years, more and more companies of this size have avoided going public, or pushed it off, to avoid the IPO burden.
The SPAC has definitely made that leap easier for these companies.
And, the structure, though it will continue to evolve, is liked by everyone from the company, to the acquiring SPAC, to the SEC.
Most importantly, as warrant traders, as I’ve mentioned before, the genie is already out of the bottle from a warrant perspective.
Even if SPACs are jumping the shark right now, we have more warrants to trade than I’ve ever seen (ignoring OTC warrants). This should lead for some great warrant trades for years to come.
Now, let’s find a few more of those warrants that may be good fits in a Shark/SPACfolio…
Juniper Industrial Holdings JIH/WS
The team at Juniper did something sneaky earlier this year.
They did it right in the middle of the market bottom caused by the pandemic. Just as no one was looking, they added a new director.
And, talk about a throwback (sarcasm)…it was none other than our old pal…Dave Cote. Yep, those sneaky guys brought in a ringer.
For more detail on Cote, see last month’s Warrant Observer newsletter. If he can accomplish half of what he’s done with the Vertiv (VRT/WS) warrants so far (and, btw, that one is STILL a buy), then the Juniper warrant holders will be ecstatic.
When you look at who the CEO of Juniper is, Roger Fradin, it’s no surprise Cote is on board. Fradin is a former Honeywell guy who sold his electronic security and fire control systems business to Honeywell, and went on to run the division within Honeywell after the sale.
So not only do we get Cote, but one of his disciples. While working at Honeywell, Fradin managed the acquisition of over 60 companies during his tenure.
In addition to the management team, it also looks like the industrials may be turning a corner here, eg, our current involvement in IEAWW.
Juniper really seems like a no brainer to me as a SPACfolio play. They’re about as far from jumping the shark as you can possibly be.
SCVX Corp. SCVX/WS
How about a throwback theme…all the way to the beginning of the pandemic. Digital.
SCVX is looking to acquire a cybersecurity company that has the ability to vertically integrate cybersecurity offerings.
Any acquisition in this hot sector should cause a pop in the warrants.
Management is a combination of cybersecurity expertise, in the form of cyber expert Hank Thomas, and M&A expertise with CEO Michael Doniger.
I do like the combo of business strategy and subject matter expertise in the top management ranks of a SPAC. Often you find either all M&A guys, or all subject matter experts, who often cannot see beyond the “old” way of doing things.
You can end up with a buy of the “next company in line” joining what may be an already crowded public company field.
Let’s see if the SCVX team can find that vertical integrator that brings a new streamlined approach to cybersecurity for its customers.
Have a great Throwback Thursday evening…and try to avoid jumping any sharks!