CCG, AONC, MURF, UPTD - Why LZM Makes the Best Low-Float SPAC Pump of Them All

This week the low volume, low float SPACs came alive when Cheche Group Inc. (CCG) shot up to $200 from $11 in a day. That was followed up by an increase in interest in other similar stocks like American Oncology Network Inc (AONC), TradeUP Acquisition Corp. (UPTD), and Murphy Canyon Acquisition Corp. (MURF). One stock that some of the crowd has overlooked but might be the best of them all coming up this week is Lifezone Metals Limited (LZM). It moved up 37.5% on 524,000 volume on Friday, which is exactly what you want to see. When CCG shot up to $200, or the infamous AMTD Digital Inc. (HKD) shot up over $2,000 or the forgotten Addentax Group Corp. (ATXG) shot up to $600, these stocks did it on volume of only a few hundred thousand shares. You don't want to see millions of shares traded, regardless of the float. Whether that's in the form of algo bots flipping incessantly, shorts or naked shorts or investors with locked shares finding ways to hedge their position, stocks with high volume are very unlikely to spike 1,000% or more, with TOP Financial Group Limited (TOP) being the only recent exception. 

Here's another clue why LZM may be the best de-SPAC spiker of them all. As everyone who trades these types of stocks hopefully knows by now, SPACs come with warrants that usually have an $11.50 strike price. As they are not exercisable yet, they often trade well below their intrinsic value as the market believes that the stock price will tank by the time the warrants to become exercisable. They are also a function of supply and demand. While shares are locked for trading, warrants are often not. So investors in the blank check company who are desperate to unload their warrants will do so at any price just to get some money back. This is where you get such stark price discrepancies as you see below. 

Despite being several dollars in the money, the warrants of CCG, AONC, UPTD and MURF all trade at well below $1.00. This implies two things. Warrant holders are very desperate to dump their warrants at very cheap prices, they must also be interested in dumping their stock once they can post-registration. Second, no one wants to buy up these warrants for the supposed easy arbitrage because they think the stocks will tank well below $11.50. Think about it. If anyone was confident that these stocks could even hold $12.50 by the time the warrants can be exercised, the warrants would be worth at least $1.00 and warrant buyers today would see easy 3-9x upside. But no one wants to even bid them up to $0.50 for an easy double. 

LZM's warrants trade at $1.11. While that still is well below their supposed intrinsic value and still implies the stock will drop once the warrants are exercisable, this is a much more robust supply-demand dynamic than the other SPACs. LZM warrant holders aren't so desperate to sell at any low price, and there are people bidding up these warrants as they rose 48% on Friday. 

As LZM came out of its SPAC two months ago, this listing is far more mature than the others. It should already have its registration statement deemed effective by the SEC, and part of the reason the warrants are being bid up is the expectation that this will happen soon. However, no one will know when or if the SEC will accept LZM's latest amended F-1, and if the SEC doesn't approve it, how long it'll take before the next amended one is filed. 

As in other words, LZM's filing could become effective this week, or it could be weeks from now. If the latter, expect more low float volatility on it. LZM's shareholder letter shows that there are only 1.5 million shares in the float as the original shareholders and sponsor are subject to a lockup period while the PIPE Investors are at the mercy of the registration of their shares being deemed effective. 

But there's another tidbit in that presentation that greatly incentives an organized pump on LZM:

There are two trigger events at $14.00 and $16.00 per share respectively. If the daily volume-weighted average price of LZM equals or exceeds these levels for 20 trading days within a 30 trading day period, the sponsors get an additional 862,500 shares for each level. If 1,725,000 shares are released due to the earn-outs, at a $10 stock price, that $17.25 million worth of incentive to make sure that it happens. 

This is where the pump potential gets interesting. If the stock was to get pushed to $50 or more, there's a decent chance it can stay above $16 for at least 20 days and the earn out is triggered. Let's say on the final day the stock drops to $10 from $50. Even so, the trigger event is based on daily VWAP. So even if the stock tanks to $10 by the end of the day, the VWAP is likely over $16 thanks to the high price it was trading in the morning.

Do the math. There are currently 1.5 million shares in the float. If the earn out is enacted, 1.7 million shares are issued. The people potentially due for the earn out have an incentive that's greater than the existing float today. The only caveat to this is if the SEC deems the F-1 registration effective. And if management is interested in seeing the sponsors earn their earn out, LZM could easily drag its feet to ensure no registration statement will deemed effective any time soon. That would make LZM a prime target for a massive spike for next week and beyond.