Editors note: This article was corrected on Jan. 11 to correct information about the size of the initial public offering.
LM Funding America (NASDAQ:LMFA) typically flies under the radar, but thanks to some SPAC merger news, LMFA stock is up nearly 200% on Friday. So what do investors need to know about the company? And why are LMFA shares soaring?
To start, investors should know that LM Funding America is a specialty financing company that helps fund non-profit community associations. Importantly, LMFA stock does not actually represent a blank-check company. Instead, LM Funding America announced on Friday that it is sponsoring a SPAC through one of its subsidiaries.
With that in mind, here is what you need to know about LM Funding America and LMFA stock:
- LM Funding America calls Tampa, Florida its home.
- It primarily operates in Florida, although it also has operations in Washington, Colorado and Illinois.
- In those states, LM Funding purchases the rights to delinquent accounts, providing funding to community associations in return.
- Essentially, LM Funding America steps in to help funding community associations like condominiums and cover attorney fees in situations of owner delinquency.
- Today, LM Funding America filed an S-1 with the U.S. Securities and Exchange Commission to launch its own blank-check company.
- LMA Acquisitions will start trading on the Nasdaq Exchange as a result.
- Importantly, the new SPAC plans to target companies in the financial services and financial technology sector.
- Once LMA Acquisitions starts trading, it will use the ticker LMAO.
- The company plans to raise $75 million through offering 7.5 million units at $10 each.
- Each of these units contains one share of common stock and one warrant that entitles the holder to purchase a share of common stock at $11.50.
Why LMFA Stock Is Soaring
Beyond the broad enthusiasm in the SPAC space, it is not entirely clear why LMFA stock is soaring on Friday. However, one potential answer lies in the target of LMA Acquisition.
Importantly, the soon-to-be-public blank-check company plans to focus on fintech. Just yesterday, Chamath Palihapitiya announced that Social Capital Hedosophia V (NYSE:IPOE) would take fintech SoFi public. As investors processed what that meant, and particularly the potential within the fintech space, IPOE stock has been on fire. As Palihapitiya outlines, legacy banks have been on their way out since the financial crisis. Now, fintech startups are the future of finance, making deals like the SoFi SPAC merger huge.
For investors today, that means LMFA stock may be rising high on similar enthusiasm. Keep a close eye on this SPAC merger news.
On the date of publication, Sarah Smith did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Sarah Smith is a Web Content Producer with InvestorPlace.com.