While some traders and investors haven't embraced the opportunity that special purpose acquisition companies -- or SPACs -- have brought to the table in 2020, I know James "Rev Shark" DePorre and I have enjoyed them. Many of the names with a letter of intent or pending merger have made for fantastic trades, but I've also advocated using several names as an aggressive "cash alternative" or better put, an aggressive conservative position that I felt would hold up well, if the market faltered, but ones that also offered upside.
I offered four ideas a little over a week ago.
Thursday, after the close, one of those names, Social Capital Hedosophia II ( IPOB) announced it was in talks to bring Opendoor to market through what's called a " reverse merger." This approach usually involves having a publicly traded shell company buy a private company -- such as Opendoor -- and allowing the private company's shareholders to trade their shares for a majority of the shell company's publicly traded shares, gaining control and voting rights.
Opendoor describes itself as a "revolutionary way" to buy and sell your home. You inquire about the sale of your home, they give you an instant offer, then you decide if you want to accept or list your home (sell to them or possibly list with them).
The announcement pushed IPOB's shares to around $14 after hours. This is exactly the reason I will use these SPACs as aggressive conservative positions. Stashing a few hundred shares rather than leaving it in cash, presented a 20% to 30% return.
The concept is simple in that buying $10.50 to $11.50 and looking to sell off a large chunk on the announcement, if there is a 15% to 40% pop. Obviously, you want to pay attention to the deal as it may be something you want to continue to hold more than a minor position, but that's definitely something each individual investor decides based on their risk.
My focus will be to shift those dollars into another SPAC. I continue to like the other names listed in the piece last week. Speaking of that, it's worth noting that the Pershing Square Tontine Holding Units (PSTH.U) have split into shares ( PSTH) and warrants (PSTH.WS). My position is the Sept. 18, $20 - $22.50 call spread. I intend to exercise the long side, which will equal 100 shares plus 11 warrants for each spread. It appears the short calls will expire worthless; however, that can change over the next week.
Another add for me is Tortoise Acquisitions Corp II (SNPR.U). SNPR is the follow-up to Tortoise Acquisitions Corp ( SHLL) . Notice the theme with the tickers. Clever. SHLL is buying Hyliion, rival to in the electric vehicle truck market to Tesla ( TSLA) , Nikola ( NKLA) , and Hyundai. My tendency is to follow management that has a past track record for success. That's what drew me to IPOB as well as the other names mentioning last week.
Given SNPR is newly listed today, a buyer needs to enter this position with the idea of patience in mind. The unit will consist of one share and 1/4 warrant redeemable at $11.50 per share, so a buyer of 100 units can split that into 100 shares and 25 warrants in about two months. This is another one I plan to split.
