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September 13, 2021
Welcome to the SPAC Research weekly newsletter.

Low Float Stock Squeezes
SPAC investors have likely noticed an interesting phenomenon lately -- lots of deals that struggled to gain traction on announcement have experienced rapid price appreciation post-closing. Take a look at the chart below of the highest price spikes for SPAC deals that closed in the past four months.
Only one of the eight stocks above is really a household name with an obvious momentum story -- Lucid Motors (NASDAQ: LCID). The natural question to ask is: why would a stock's price move up after deal closing if it wasn't received constructively on announcement?

One reason is that we know short interest in SPACs has risen dramatically in the past few months. (Of course, short interest is notoriously challenging to measure at a given point in time, and especially so for SPACs where shares that have been borrowed may have been redeemed by the lender, effectively collapsing the borrowed short position.) A high short interest can make a stock susceptible to short squeezes and has almost certainly contributed to the price action in question.

Another straightforward answer is that shareholders that exercise redemption rights are no longer looking to sell stock at $10.01 or whatever value remains in the trust account. If a $250mm SPAC experiences 50% redemptions, its float will drop from 25mm shares to 12.5mm shares. And theoretically if there were 13mm shares worth of fundamental ownership demand, it would now be enough to overwhelm any remaining sellers.

We wanted to visualize this phenomenon, so we plotted it below with the chart's x-axis representing the redemption ratio for each deSPAC over the past four months and the y-axis representing that SPAC's highest trade since deSPACing. (We used the passing of the deal's redemption deadline as the starting date for deSPACing.)
You can see that lots of SPACs have had at least momentary price spikes above $15 or so. But aside from a number of 0% redemption deals that were already trading at elevated prices, only deals with extremely high redemption rates have traded to $20 or above. And four out of five deals that traded to $30 or above had more than 90% redemption rates!

Long-time SPAC investors will remember that we've seen situations like these before. Back in 2019, we covered a handful of low-float stock rallies among deSPACs. And later that year, the exchanges adjusted their initial listing requirements to restrict listing status for companies with less than 1 million freely floating shares.

But there's a lot more collective attention on SPACs than there used to be. Even in cases with a float above 1 million shares, a high-redemption deal closing may be enough of a Schelling point to galvanize an inflow of buying interest and spark a (temporary) rally.

Redemption ratios are a useful proxy but are clearly not enough on their own to predict susceptibility to price squeezes. A large SPAC can experience high redemptions and still maintain a big share count. And many shareholders may be weak-handed and ready to jump ship upon any negative price momentum. So we changed the chart above to feature the SPAC's actual float at closing (in millions of shares) on the x-axis. And we kept the SPAC's recent highest print on the y-axis.

The shape of the chart is similar but you can see that deals with a float of a few million shares or less really represent almost all of the biggest post-closing runners that we've seen.
There's one more variable we want to examine: volume. Huge float turnover has been a hallmark of many of these aggressive moves. So we took the average daily trading volume for each deSPAC in its first week after closing. Then we divided it by that company's float size after closing, for a measurement we're calling the "ADV/Float Turnover Ratio". A stock that traded 25 million shares in its first week after closing would have an ADV of 5 million shares (that is: 25 million divided by 5 trading days). And if its float is 2 million shares, then its ADV/Float Turnover Ratio would be (5 million divided by 2 million), or 250%.

You can see the ADV/Float Turnover Ratio on the x-axis (with a log-scale) below, plotted against the maximum percentage increase since closing.
Unfortunately, the above isn't predictive. But it's fascinating to see just how powerful the relationship is. The largest movers have all seen huge daily float turnover immediately after deSPAC.

It's hard for large players to take advantage of the squeeze phenomenon. After all, a million-share position that's looking to sell into a squeeze will have a significant impact on stock price. But it's worth watching these factors closely. We'll be monitoring float sizes and trading volumes, as well as more challenging-to-measure options activity in the coming months as we try to understand the price action in the deSPAC market.

News From the Past Week

Deal News
  • Highland Transcend Partners I Corp. (HTPA) announced a deal to acquire Packable, a technology-led e-commerce marketplace enablement platform. The deal reflects an enterprise value of $1.6bn and includes a $180mm PIPE anchored by Fidelity Management & Research Company, Lugard Road Capital and Luxor Capital. The transaction is expected to close in several months.

  • Novus Capital Corp II (NXU) announced a deal to acquire Energy Vault, Inc. a company creating gravity-based, grid-scale energy storage solutions with proprietary technology. The deal reflects an enterprise value of $1.1bn and includes a $100mm PIPE led by Prime Movers Lab, with participation from SoftBank Vision Fund 1 and Saudi Aramco Energy Ventures. The transaction is expected to close in Q1 2022.

  • Golden Path Acquisition Corporation (GPCO) announced a deal to acquire MC Hologram Inc, a Cayman Islands exempted company operating in China that focuses on the R&D and application of holographic technology, including LiDAR. The deal reflects a valuation of MC Hologram and its subsidiaries of $450mm. The transaction is expected to close by the end of Q1 2022.

  • Malacca Straits Acquisition Company Limited (MLAC) and Asia Vision Network mutually agreed to terminate their business combination agreement, citing an inability to close within the planned timeline.

  • Osprey Technology Acquisition Corp. (formerly SFTW) closed its acquisition of BlackSky on Friday 9/10/2021 with 32.4% of public shares remaining. Ordinary shares and warrants are now trading on the NYSE as “BKSY” and “BKSY/W.”

  • Sustainable Opportunities Acquisition Corp. (formerly SOAC) closed its acquisition of DeepGreen Metals on Thursday 9/9/2021 with roughly $27.2mm remaining in trust and approximately 2/3 of PIPE commitments as-yet unfunded. Ordinary shares and warrants are now trading on the NASDAQ as “TMC” and “TMCWW.”

  • Rice Acquisition Corp. (RICE) shareholders approved the company’s acquisition Archaea Energy and Aria Energy at a meeting Thursday 9/9/2021 with less than 1% of public shareholders exercising redemption rights. The transaction is expected to close Wednesday 9/15/2021 with ordinary shares and warrants trading on the NYSE under the ticker symbols “LFG” and “LFG/W.”

  • Qell Acquisition Corp (QELL) shareholders approved the company’s acquisition of Lilium at a meeting Friday 9/10/2021 with 35% of public shares remaining. The transaction is expected to close on Tuesday 9/14/2021 with ordinary shares and warrants trading on the NASDAQ as “LILM” and “LILMW” beginning Wednesday 9/15/2021.

New S-1's
  • Marblegate Acquisition Corp. (GATE) $300mm
  • Berenson Acquisition Corp. I (BACA) $250mm
  • Black Mountain Acquisition Corp. (BMAC) $250mm
  • Thrive Acquisition Corporation (THAC) $200mm
  • AEI CapForce II Investment Corp (AEIB) $100mm
  • Energem Corp. (ENCP) $100mm
  • Monterey Bio Acquisition Corporation (MTRY) $100mm
  • Super Plus Acquisition Corp $50mm
  • SILVERspac Inc. (SLVR) raised $250mm for an acquisition in proptech and fintech. Units contain one-third warrant coverage.

  • First Light Acquisition Group, Inc. (FLAG) raised $200mm for an acquisition of companies that provide technology-enabled solutions with high-growth, mission-critical applications in government and commercial markets. Units contain one-half warrant coverage.

  • Future Health ESG Corp. (FHLT) raised $200mm for an acquisition in smart health technology. Units contain one-half warrant coverage.

  • Banner Acquisition Corp. (BNNR) raised $150mm for an acquisition in healthcare, education and business services. Units contain one-half warrant coverage.

  • Bannix Acquisition Corp. (BNIX) raised $60mm in an upsized IPO for an acquisition of B2B enterprise software companies, particularly those operating in the customer engagement space within the telecom, retail and financial services sectors. Units contain whole warrant coverage.

Upcoming Meetings and Deadlines
  • 9/13/2021 GNRS Liquidation deadline
  • 9/14/2021 ACIC Archer approval meeting
  • 9/14/2021 SRNG Ginkgo Bioworks approval meeting
  • 9/14/2021 PACE Nerdy approval meeting (outside date 8/31/2021)
  • 9/15/2021 DEH Vicarious Surgical approval meeting
  • 9/15/2021 ROT Sarcos Robotics approval meeting
  • 9/16/2021 CTAC KORE Wireless approval meeting
  • 9/21/2021 FUSE MoneyLion approval meeting
  • 9/22/2021 AMHC Jasper Therapeutics approval meeting
  • 9/22/2021 LATN Procaps Group approval meeting
  • 9/25/2021 BRLI Liquidation deadline

  • Bloomberg reported that a group of executives and academics advising the SEC has endorsed more rigorous SPAC disclosure rules.

Disclosures: Site administrators may maintain positions in various SPAC securities and may trade in or out of those securities at any time without notice. Information from is provided for informational purposes only and should not be relied upon as the basis for any investment decision. Nothing on is a recommendation or solicitation to buy or sell any investment.