The Ball is Back In the Court
Salut tout le monde! 👋
I wish I was writing from Roland Garros today but alas, the virtual season is still in effect. However, what an incredible Men’s Singles Final at the French Open today. Tsitsipas v Djokovic. Ahhh!! The 22yo Tsitsipas started out strong and took the first two sets, escalating it to nail biting territory very quickly. But then Djokovic took the next two, and as we all saw, ultimately the final fifth set as well. And with that, he joined Rod Laver and Roy Emerson as the only men to have won each of the 4 grand slams at least twice. Très, très, très incroyable! But I feel Tsitsipas equally gave it his best, and I am for sure a Tsitsifan. Here are some of the highlights from the epic match.
Ok, so what happened in the SPAC Open this week? Seems like they are also on a rebound. Crypto and Meme stocks were crushing SPACs like Tsitsipas and winning sets in the last couple of months but now SPACs have refuelled and feels like the Gatorade and Protein bars are kicking in. SEC is like the stern coach and mostly focused on improving the backhand. (get it?!) Slowly new IPOs are coming to the market, the deals are closing and as discussed last week, the merger vote trade is working.
There were 8 deals on the merger voting list last week, and all of them were approved and traded higher sans one. Below are the weekly returns, and its worth noting that the warrants outperformed the commons from a return perspective.
$SSPK (the Cannabis SPAC that acquired WeedMaps) was the best performing with the commons up ~12% on the week and warrants up ~24%. It will begin trading under the new ticker $MAPS on Tuesday (June 15th). While I cannot say that I have tried the product myself, I do believe that they have got a solid business in helping people get stoned. It’s basically a Shopify for the weed industry. Someone on twitter summarized their business like this:
Cannabis + Tech + SaaS = 🚀 💸 🥦
And that’s really it! A profitable, high-margin, fast growing ad tech business focused on Cannabis sales. Weedmaps is an online marketplace for cannabis consumers with over 10 million monthly active users and over 18,000 business listings. It also offers a cloud based SaaS platform to the cannabis retailers and brands by offering them an end-to-end operating system whereby they can access more customers and scale their business. It is also the only company in the Cannabis space that doesn’t actually touch the plant, which makes for a much higher trading volume on the Nasdaq as it can be owned by traditional investment institutions looking for the exposure to the industry.
WeedMaps, which began in 2008, has already built a moat by penetrating ~90% of the very fragmented California market (which accounts for 50% of its revenues), and with the cannabis market in the US projected to double over the next five years, it should continue to scale rapidly. Unlike the EV SPACs, it is not only revenue generating but also profit generating. The business grew its revenues at a 40% CAGR over the last five years and is projected to do $165M in sales this year and $35M in EBITDA. Weedmaps’ growth story is predicated on increasing their pricing and the number of paying clients. They project a 23% revenue growth in 2021 followed by 40% each in 2022 and 2023. With the stock already almost double since the merger announcement, the market is clearly very bullish on them. I may or may not get stoned, we shall see.
For this upcoming week, we have 4 merger votes on the roster. And you can already see the price is starting to get bid up as the sentiment turns positive and more people enter the trade. So I have included the merger votes for the following week as well.
I have been a fan of the $FTOC deal and picked up some last week when it was trading around par. $FRX has some scandal brewing around it on twitter, where people are speculating that post the merger close, it will be short squeezed. That’s one popular way to go to the moon these days. Jeremy Tarica, the CIO at Forest Road has been very active on twitter in the last couple of weeks trying to promote people to vote and getting celebrities to endorse the deal. I guess its in keeping with the entire get-a-beach-body-in-10-days industry. Or Squeeze-me-short-cuz-I-gotta-go-to-the-moon!
Ok, I actually have to go do a real work out cuz I ain’t for sure getting a beach body for free. Have a wonderful week ahead folks. And of course I am joking. I ain’t going for a workout. I am going to get some drinks to celebrate Djokovic’s win!