Keep Pedalin’

Hi Folks 👋

Happy Canada Day to my Canadian friends; Happy 4th of July to my American friends, and Happy Summer to all my friends! 🥳 I’m drinking 33 acres of sunshine, what about you? 🍻

Ok hold those horses now…

Before you think that Nikita will ruin that beach body by drinking so many beers, don’t worry because I planned ahead and went for a long bike ride this morning! Actually, I have been riding a lot this week. 180 kms according to my Apple watch. I generally listen to podcasts when riding and really enjoyed this conversation between Tim Ferris and Chris Bosh. This particular quote by Chris really spoke to me:

Apparently it spoke to many other people too, and not only got retweeted by Chris himself but also inspired him to post it on his instagram. That is my not so humble brag of the week.

And while not as brag worthy in their recent performance, the SPAC markets do keep on pedaling along as they finish the first half of the year. The SPAC class of 2020 (aka the SPACs that completed mergers in 2020), ended the quarter with an average and a median price of $14.09 and $11.04 respectively. From a returns perspective, the average SPAC that completed merger in 2020 is down 3% on QTD and 3.4% on a YTD basis. The top 3 holdings for the Quarter were $CERE, $MPLN and $HPK.

For the SPAC Class of 2021, the average price was relatively lower at $12.98 and the median at $11.25. But unlike their 2020 peers, the average return was positive at 1.3% on a QTD basis (albeit only small). The top 3 names were $PLBY, $CLOV (thx to the short squeeze) and $SKIN (Goldman Sachs initiated coverage this week with a Buy rating and a PT of $31). Huge thanks to my friend Daniel for sharing these awesome charts!

Overall, June was a busy month for SPACs with 26 deal announcements, 28 mergers completed and 31 IPOs. 13 out of those 31 IPOs were announced in the last week alone. Out of the total 519 IPOs in the US market in 2021 so far, 362 have been SPAC IPOs. That is 70% of the total IPOs. Historically, that number used to be ~14%. In total, there are 577 SPACs outstanding currently, of which 426 are searching for a target.

There was another interesting chart that caught my eye - redemptions for SPACs that completed mergers in June. As Tornike notes, this is the number of shares that were redeemed for $10 prior to the deal closing. The top 4 names on the list - $TALK, $LVOX, $ORGN, and $MYPS - with redemptions over 50% are barely hanging on around $8. The minute that magical $10 rug is pulled out, the poor ones go free fallin’ post deal close.

On the bright side, the SPAC VIX has declined from 21% on March 4 to a record low of 2.3%. While that is an indicator of less volatility, it is primarily because the retail investors substantially withdrew their participation in the asset class post the March blow up. Hopefully with the SPAC market recovering (and crypto flailing), the retail investors will come join the SPAC summer soiree soon and liven up the VIX a bit, as some volatility is healthy!

On the merger votes for the last week, it was a bit of a mixed bag, with warrants continuing to outperform on a relative basis. 9 out of the 10 merger votes were approved. The $NSTB (Apex) merger vote got delayed. They need minimum $300M in their PIPE commitments, and they were able to extend their deadline with $410M in PIPE commitments, and have until August 31 to close the deal.

As I mentioned last week, the Space sector continues to garner positive attention as we get closer to the Jeff Bezos’ Blue Origin space flight on July 20th. And now, with Richard Branson even ahead of Bezos in the “who-gets-to-space-first” game by 9 days, the sector is already taking off, and $ASTR from the list above was a strong beneficiary this past week. Apparently, Branson is not competitive at all and thinks that in addition to Virgin Galactic, SpaceX and Blue Origin, there is room for about 20 more space companies. I’m assuming a lot of them will be taking the SPAC Flight rather than the regular IPO Flight. We shall see.

And with that, let’s see what the third quarter brings. Will the SPACs continue pedaling or will they take off like Branson & Bezos? I will be pondering over that question with a cold one.

Have a great week ahead! 🍻

-Nikita