#beststocks #SPACstocks #stockmarket
Best SPAC stocks to buy now with INSANE GROWTH POTENTIAL [TOP 3]
The history of US stock market has shown that SPACs which are backed by large banks such as Goldman Sachs and Credit Suisse have a high probability of completing a SPAC merger within the 24-month period. The three SPAC stocks mentioned in this blog/ video are the best SPAC stocks to buy now with high growth potential stocks. This blog will provide a breakdown of these best stocks to buy now and give the travelling trader analysis on each one, both from a technical chart analysis and fundamental perspective.
What is SPAC
A special purpose acquisition company (SPAC) is a company with no commercial operations that are formed strictly to raise capital through an initial public offering (IPO) for the purpose of acquiring an existing company. Also known as “blank check companies,” SPACs have been around for decades. In recent years, they’ve become more popular, attracting big-name underwriters and investors and raising a record amount of IPO money in 2019. In 2020, as of the beginning of August, more than 50 SPACs have been formed in the U.S. which have raised some $21.5 billion.
How a SPAC Works
SPACs are generally formed by investors, or sponsors, with expertise in a particular industry or business sector, with the intention of pursuing deals in that area. In creating a SPAC, the founders sometimes have at least one acquisition target in mind, but they don’t identify that target to avoid extensive disclosures during the IPO process. (This is why they are called “blank check companies.” IPO investors have no idea what company they ultimately will be investing in.) SPACs seek underwriters and institutional investors before offering shares to the public.
The money SPACs raise in an IPO is placed in an interest-bearing trust account. These funds cannot be disbursed except to complete an acquisition or to return the money to investors if the SPAC is liquidated. A SPAC generally has two years to complete a deal or face liquidation. In some cases, some of the interest earned from the trust can be used as the SPAC’s working capital. After an acquisition, a SPAC is usually listed on one of the major stock exchanges.
Advantages of a SPAC
Selling to a SPAC can be an attractive option for the owners of a smaller company, which are often private equity funds. First, selling to a SPAC can add up to 20% to the sale price compared to a typical private equity deal. Being acquired by a SPAC can also offer business owners what is essentially a faster IPO process under the guidance of an experienced partner, with less worry about the swings in broader market sentiment.
SPACs Make a Comeback
SPACs have become more common in recent years, with their IPO fundraising hitting a record $13.6 billion in 2019—more than four times the $3.2 billion they raised in 2016. They have also attracted big-name underwriters such as Goldman Sachs, Credit Suisse, and Deutsche Bank, as well as retired or semi-retired senior executives looking for a shorter-term opportunity.
Examples of High-Profile SPAC Deals
One of the most high-profile recent deals involving special purpose acquisition companies involved Richard Branson’s Virgin Galactic. Venture capitalist Chamath Palihapitiya’s SPAC Social Capital Hedosophia Holdings bought a 49% stake in Virgin Galactic for $800 million before listing the company in 2019.
In 2020, Bill Ackman, founder of Pershing Square Capital Management, sponsored his own SPAC, Pershing Square Tontine Holdings, the largest-ever SPAC, raising $4 billion in its offering on July 22.
Best SPACs to Buy Now
In the US stock market, we can leverage profit from SPACs in many ways like stock, warrant, etc.
For Every SPAC, there is the flow of price of SPAC
1. There is the pre-merger part where the SPAC is trading near the 10 USD default pricing. In very few exceptional cases there are 20 dollars like bill Ackman’s which is starting at 20USD but most of them start at 10USD.
2. There is the pre-merger announcement phase where the price is just stagnating between 10USD could go a little bit over a little bit or under.
3. There is little incentive for the SPAC to go below ten dollars because those shares are redeemable from the company at 10USD/share that is part of the SPAC agreement.
4. There is an announcement phase where after a merger is announced the stock can run up two to five dollars usually somewhere in that range ,we tend to see a retracement after that and
5. Then when the merger goes through we tend to see a price jump and this can vary depending on the company profile and status.
For example, Peter Thiel-backed Luminar Technologies Inc. briefly touched an all-time high within days of emerging as a standalone company as investor excitement over developers of laser-sensors that enable autonomous driving (lidar) ramped up. Shares of Luminar more than doubled since it completed its reverse merger with special purpose acquisition company Gores Metropoulos last week, trading above $38 Monday afternoon. Luminar warrants also hit a high, rising more than 200% over the same time, to more than $15.
Best SPAC Stock to buy #1
Gores Holdings IV, Inc. (GHIVU) 11.46+0.02 (+0.17%)
Gores Holdings IV, Inc. intends to enter into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization, or related business combination with one or more businesses. The company was founded in 2019 and is based in Beverly Hills, California.
GHIV is trading at 11.46 USD and as we already know that 10USD is the default pricing and there’s little incentive for it to go below 10USD it might go a few cents below in the interim, when it comes to SPAC you don’t bet against two people Chamath Palpatia and the other one is Alec Gores . They have recently
announced that they are doing a merger with UWM (united wholesale mortgage) , this is the number two mortgage lender in the company .After rocket mortgage, this will be in fact be the largest SPAC merger in history at just over 16 billion dollars.
For Alec Gore’s track record with SPAC here are just a few companies like
1. Twinkie, which is hostess brands trading at almost 14 USD , went to a high of almost 17USD so 70% profit ,if you bought it at around 10USD
2. Vera Mobility Corp and this one are also trading near 14 USD with a high of 17 USD which is again 70% if you held it at the max of 17 and ended up selling it at the top.
3. laser or luminar technologies is associated with Alec Gore’s the same guy this one went all the way up to 50 USD that is a 400% gain from the default pricing
There is a positive correlation between the size of the SPAC and the likelihood that it will go into a deal within two year period is a hundred percent and much smaller SPAC ended up being mostly failures. Money attracts money.
How to Trade GHIV SPAC Stock
We can trade GHIV SPAC stock is Bearish engulfing candle method which means that we might see some more downside or even go back to the 10 default pricing either way the method is cash covered put.So in this case, I am going to be selling the august 2021 ,10 put for 3.30 this is 330 USD per the put contract that I am selling which will lower my cost basis to 6.70USD.
If the price hits 10 USD or below I am willing to buy 100 shares per contract of that stock, but in this case, your cost basis is not ten dollars as you already collected 3.30USD for the contract as incentives. So your cost basis is actually 6.70USD
6.70USD= 10USD (basic price) – 3.30USD (incentive)
So, they have already announced an intention to merge with UWM and it will most likely comes to merger.As everything comes with risk and measured risk is always a better trading option.I will take a measured risk because 6.70 for a SPAC that will most likely go public and a SPAC management team that has a great track record of taking companies public GHIV stock price will raise around 10-11USD .It is a good bet for the long term.
Best SPAC Stock to Buy #2
Goldman Sachs Acquisition Holdings Corp II (NYSE: GSAH) 10.49-0.01 (-0.10%)
Is a special purpose acquisition company formed for the purpose of effecting a merger, stock purchase, or similar business combination with one or more businesses? The company is sponsored by an affiliate of The Goldman Sachs Group, Inc. and will be managed by the Permanent Capital Strategies (PCS) team within Goldman Sachs Asset Management (GSAM). GSAH II will employ Goldman Sachs’ full range of resources to pursue opportunities across a variety of industries.
GSAH II announced the launch of its $700mn initial public offering on June 29th, 2020.
GSAH II is a generalist vehicle, and while the team plans to evaluate opportunities in many sectors, they believe particularly attractive opportunities exist in the Diversified Industrial, Healthcare, Technology, Media and Telecom, and Alternatives Asset Management sectors.
Conclusion2: The research says that SPAC that are actually backed by big banks are more likely to actually finish the merger in two year time period. For example, the church hill capital SPAC is backed by Credit Suisse. The Goldman Sachs Acquisition Holdings are backed by Goldman Sachs.
GSAH is currently trading at around 10.58USD and also resting on the 21 ema which is an important support level for most of these momentum stocks.
GSAH1 was actually a company that turned into Vertiv holdings they took Vertiv holdings public through a reverse merger. This happened around pre-pandemic time, so it became a victim of Pandemic crash it went up to 13 and it was currently trading at 20 USD. So, you would have doubled your money if you got in at the 10 default pricing.
it’s so funny how these SPACs look unattractive around the default pricing but the minute that these spacks go to 13 or 14 bucks they become on everybody’s radar.
How to trade SPAC Warrants on GSAH
Goldman Sachs who are they purported to be merging with a company. This company SPAC has holdings between 700 million and a billion dollars which makes it a huge SPAC. So, I will hold it for long term. As we know that these SPACs have two years to make a deal, so instead of blocking the money for two years, we can go in and out of the deal. We can retrace and re-enter at the time of merger announcement and can watch profit rallies when going to final merger. That is when the stock is at retracement.
Best SPAC Stock to Buy #3
CHURCHILL CAPITAL CORP. II CL A (CCX U.S.: NYSE) 10.18+0.02 (+0.20%)
Churchill Capital Corp. II is a blank check company formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses. The company was founded by Michael Stuart Klein on April 11, 2019 and is headquartered in New York, NY.
Status: Churchill announced they are going to be taking Skill Soft public and this is the deals is looking to actually go through in January 2021.however the SPAC is currently trading at 10.18USD near the default pricing. This is likely because the market isn’t that excited about skill soft and about a skill soft merger.
This is the time to buy the SPAC stock of CCX to reduce the cost.
Churchill does have kind of a choppy track record meaning that it does have a few SPAC that are out at the moment but so far there is one that actually completed its merger and that is Clarivate which is currently trading at 30 so 3x your money if you got in at the ten dollar pricing .so although I am not that excited about skill soft SPACs but CCX is also 700 million dollars in size so it ticks off that box of being a large spec that will likely see the deal go through now.
We are trading SPAC warrants against one of the best SPAC stocks to buy now, and that’s CCX. All of these SPACs we are talk about are near their default SPAC pricing of $10 and are great values with high growth potential.
How to Trade SPAC Warrants on CCX
If you want to engage in a little bit more risk for higher returns on CCX, warrants are also an option.
Warrants are basically like options but instead of it being a contract between you and another Trader, warrants are a contract between you and the company .In this case the SPAC Churchill capital core2. Warrant gives you the right to buy shares of Churchill capital at 1150USD but the better option is to ride the price of CCX up and therefore the warrants in value will go up. Right now they’re trading at 1.63USD and if they just got to their previous pricing of around 3USD/ warrant you’re making 84% profit.
This is a lot more than you can make from a similar type of move in the underlying stock but keep in mind that warrants are more risky because if the deal falls through then the warrants can just evaporate and your initial investment can be gone to zero .So size accordingly and when we are very close to that merger date of January 2021.It could be delayed in the same way that LCA was delayed. For me personally I am going to be doing a mix of the stock and the warrants in case of CCX.