SPAC Spike Assessment - Buy Helbiz Warrants
In the recent market pullback, we have seen ex-SPAC smallcaps take a particular hard hit. One that stands out that looks on the verge of a massive turnaround is Helbiz (HLBZ). HLBZ has dropped from a September high of $41.88 to as low as $2.80 a few days ago. We think that it was manipulated downwards by funds on purpose in order to make a convertible debenture eligible for a floor reset to $2.50. Now that this has been done, the funds are ready to push the stock back up to make major money.
Looking at the price history, HLBZ is usually very seldom traded. But on February 2, 22 million shares were traded and the stock rose 25% from $3.06 to $3.82. These pump and dump patterns often see a stock return back to its low price on lower volume in the following days. However, the opposite happened for HLBZ. The stock saw a significant drop off in volume in the two days that followed, but the price actually rose another 5% to $4.03. All of that gain was achieved in the final hour of trading on Friday. The stock was actually at $3.65 at 3pm then ripped 10% in the last hour. This is a very encouraging sign to expect a continued run into this week. Pump and dumps die out in a couple of days. Instead, HLBZ saw a continued price increase and a reversal of initial weakness as Thursday's low was $3.36.
This is a similar pattern to DAVE, which pumped on January 13. Just like HLBZ, the volume over the next few days dried up, but the stock price stayed high. Soon after the second round of buying occurred which brought it to over $10. During this time the DAVEW warrants ripped from a low of $0.49 to over $2.
HLBZ's initial move on Wednesday was in reaction to a Form 4 filing from the CEO Salvatore Palella that showed his aggressive buying. He purchased 200,000 shares at $8.20 and 300,000 shares at $5.78, spending $3.4 million to add to his already large position of 14.2 million Class B shares:
The heavy insider ownership and continued buying by the CEO is really eating up the float. Yahoo Finance estimates the float to be 6.45 million but with insider ownership at 88.5% it makes sense that it's actually smaller than that. Finviz has HLBZ's float at only 3.8 million. Add in the short interest of 278,000 and that's not immaterial to a short squeeze. Funds likely pushed down the stock on small volume to get the floor reset they wanted, and now that they got it, they have no further incentive to keep the price down and will cover. They might lose the battle on the short position during a squeeze, but win the war as they have a very valuable convertible debenture feature.
The above list shows 18 recent ex-SPACs, including HLBZ, all with the warrants having a strike price of $11.50 and all having approximately 4-5 years until expiry. HLBZ has by far the cheapest set of warrants. Averaging out these 18 listings, the price of the stock is at $4.19 and the price of the warrants $0.84. All things being equal, HLBZW should be trading around $0.75 to bring the relative pricing between the stock and warrants in-line.
RDBX is the only other SPAC stock on this list with warrants priced below $0.40, and it collapsed on insolvency fears. How can a stock that is being sold off to below $2.50 because people are worrying that it'll go bankrupt have $11.50 strike warrants that are more valuable than warrants of a stock priced over $4 that has had heavy CEO buying at much higher prices? It doesn't make sense.
On the opposite end, you have BKKT which is trading just a little above HLBZ at $4.33, but has warrants priced at $1.63. It also has heavy insider ownership through ICE's ownership of Class V shares that will be converted into the Class A shares in the spring post-lockup period. How are these warrants five times more valuable than the HLBZ warrants? Both HLBZ and BKKT listed, pumped over $40 and collapsed at almost the same time.
Also consider how small the float is on HLBZ, especially compared to other ex-SPACs which usually went public with SPAC vehicles with larger floats and had significant PIPE deals attached to them. A small float lends itself to volatility and that volatility should be trickling down to the warrants. If anything, HLBZW should be trading above the average relative value between stocks and warrants as it has the best chance just by its very nature to spike to a high price and take the warrants up with it.
Imagine if HLBZ was to spike back to $20. With a float like this and how it has been trading recently, it's not out of the question. That would be a 5x return for buyers of the stock. But at $20, the warrants are worth $8.50 - the stock price less the $11.50 strike. That's more than a 25x return and this is what makes the warrants the ideal buy right now. They are lagging as the stock price rises. That won't last for long.
Disclosure: Long HLBZ, HLBZW
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