Call me a skeptic, but if it sounds and looks too good to be true, then it probably is. And if it’s Graf Industrial (NYSE:GRAF), investors should be ready to write a “blank check” with potentially larger losses when blindly putting their faith into a purchase of GRAF stock. Let me explain.
Graf Industrial may be the poster child for algorithm-driven, text-filling, next-generation fake news beginning to turn the internet into a seemingly stinky pile of crap. It’s a thing. Just ask or better yet, listen and watch the excellent investigative journalists at Vox discussing the new and scary era of fake writing. Nevertheless, for those considering GRAF as an investment, be warned.
With caveats in place and to play the part of devil’s advocate in an optimistic way, what is all the fuss in GRAF about? Shares did explode higher by about 50% in the last couple weeks. Moreover, Graf Industrial is NYSE-listed and has a market cap of more than $400 million. That’s good, right?
Make no mistake, GRAF is no Apple (NASDAQ:AAPL) or Amazon (NASDAQ:AMZN). Still, the company’s valuation isn’t so puny as to flash glaring and blatant micro-cap alarm bells and whistles, which always deserve extra due diligence. But who or what is it that GRAF does or is supposed to be in the process of doing?
Nothing Special About This SPAC
Graf Industrial is a blank check or special purpose acquisition company or SPAC. And right now GRAF is ready to affect a deal that’s going to save the planet from dirty plastics with “the target” company, one whose business is polypropylene recycling. Well, maybe.
Word on the Street, or at least what’s being plugged on StockTwits from investors promoting positions built on the wings of promise, the deal could be with privately held PureCycle Technologies.
Yeah, so what? Well, read on.
You may not have heard of it, but PureCycle Technologies does appear to be making the right moves toward a cleaner environment. The company has in fact already received special recognition from Time.com for its plastic repurposing. And Graf Industrial could, just maybe, be a recipient of that good work.
Back to our algorithm-driven story angle, a couple of automated stories tied to GRAF’s pending deal do appear to steal a descriptive line or two regarding recycled resin and virgin qualities straight from PureCycle’s website. Yet, if true, it could potentially prove a big win for early investors. And without judging, that’s more credible given today’s undeniable thirst by Wall Street for other recent SPAC deals to hit the market such as DraftKings (NASDAQ:DKNG), Virgin Galactic (NYSE:SPCE) and Nikola (NASDAQ:NKLA).
I suppose investors should stay tuned for July 31? That’s the deadline for when a definitive agreement is to be announced, but not guaranteed and pursuant to which the target and Graf Industrial would become a new publicly traded entity.
GRAF Stock Daily Price Chart
Source: Charts by TradingView
Do all gaps get filled? Technically, and in the case of GRAF, that is the reality of the day or more aptly, the past week and change. Following a short-lived rally which saw GRAF climb from obscurity of around $10.50 on “barely open for business” activity to a high of $15.88 on volume of 1.55 million shares, the stock has sunk over several straight sessions. And for all intents and purposes, shares have filled the gap on the price chart.
In the world of technical-based chart trading, not all gaps are equal. There’s volumes written on the subject. But at the end of the day, there are no guarantees of what a gap or a filled gap means regarding future price action. There are only indicated odds and money management.
Bottom-line, and as this month’s now filled gap relates to GRAF in trading to come, could this be a technical opportunity? Will it prove a platform for a new and improved combined company and a much stronger stock holding in the weeks and months to come? And might investors have the added bonus of feeling good about having a stake in a company which serves to make the world a better place over an even longer horizon?
I’ll leave you with that and again, a warning against blindly putting too much faith in one company.
Disclosure: Investment accounts under Christopher Tyler’s management do not currently own positions in securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.