Phunware – A Classic Trade in an Unclassic Situation

I’m doing something I don’t usually do today to help explain what’s going on in Phunware (PHUN/PHUNW).

The stock is going through what normally happens with a warrant expiration, even though the warrants are still actively trading.

So, what normally happens? Here’s the thing I don’t usually do. Here is a link to a video in my Warrant Secrets course that goes over the Beach Ball trade. The video isn’t public so you’ll have to use this link.

You can also read this article that describes the Beach Ball trade that I posted a while back. A standard trade that I’ve used many, many times.

So why is this a classic Beach Ball trade, in a very unclassic situation?

Simply put, the cashless warrant exercise gave traders an opportunity to exercise their warrants and turn a great profit, which they did.

In doing so they hammered the stock. Pretty standard in a warrant expiration, though this one was unusual because of the cashless exercise, the SEC closure, etc. Everything I’ve covered here over the past few months.

So, why the bounce now? Because the drop in the stock, precipitated by warrant exercise sellers, has forced the price down so dramatically, the cashless exercise option is no longer profitable.

Result, the sellers of common stock, received from the warrant exercise, are disappearing. So you get a classic beach ball trade. Remove the pressure, and the ball pops back out of the water. (Read the article or see the video link above.)

What makes this one continue to be a nonclassic beach ball trade is the fact that the warrants still exist. They won’t really put pressure on the stock here, since they are exercisable (once the SEC approves the S-1) at $11.50.

I’ll try to put something up on the longer term impact of this on the stock once the dust settles a little more.

Apologies for the hurried nature of the post, but I’ve been busy trading PHUN/PHUNW today, so didn’t get a chance to put this together until now, and wanted to get it out before the close.