Depending on where one looks, it’s been a good time to be invested. Still and in a market made up of stocks, a rising tide hasn’t lifted a mostly sunken SPAC space. Let’s take a look at three harder hit SPACs trading below their former net asset value price and whether second chance opportunities exist for today’s investors.
During much of 2020 and even into this calendar year, SPACs – or special purpose acquisition companies – were collectively the latest and greatest investment vehicle to hit Wall Street. From EVs to fintech or online gaming, a wave of newly-listed stocks touting hot growth stories in a risk-on setting meant fast money, big-time profits.
QuantumScape (NYSE:QS). Luminar Technologies (NASDAQ:LAZR). Opendoor Technologies (NASDAQ:OPEN) or Arrival Group (NASDAQ:ARVL) and many more. The gains were stunning. But unlike a broader market which continues to climb in 2021 backed by more defensive heavyweights like Microsoft (NASDAQ:MSFT), Caterpillar (NYSE:CAT) and Home Depot (NYSE:HD), payback in today’s less risk-tolerant environment for high and often non-existent multiple SPACs has been swift and punishing.
Amid today’s “baby with the bathwater” SPAC anxieties, let’s examine three slammed SPACs trading beneath their blank-check company per-share trust value of $10. There’s no arb value here. The sponsors merger’s into the latest-and-not-so-greatest have already happened. Still, with an eye on the future and back-up-the-truck situations on today’s price charts, promising opportunities for future capital gains look to exist.
SPACs to Buy: Nuvve Holding (NVVE)
Source: Charts by TradingView
The first of our SPACs to buy is Nuvve Holding. NVVE is a leader in vehicle-to-grid (V2G) technology. What’s more, global V2G is estimated to grow to $17 billion over the next several years. It sounds cool, but since its merger with sponsor Newborn Acquisition in late March, it’s been all downhill for NVVE stock investors.
Technically, more than just pined-for good tidings may have finally arrived for NVVE shareholders. Today’s price chart shows a bullish hammer forming this week roughly 10% beneath its prior net asset value (NAV). A weekly bottoming candle for this SPAC can be confirmed as early as next Monday.
Alternatively, if stochastics crosses bullishly first, investors may look to hop on board in anticipation of Nuvve’s likely follow through. Either way and without an options hedge, aborting with a fairly standard 7% to 8% stop and booking initial profits at three times risk, looks about right without putting getting ahead of ourselves and anywhere close to yesterday’s manic buying.
Hyliion Holdings (HYLN)
Source: Charts by TradingView
The next of our SPACs to buy is Hyliion Holdings. Hyliion’s Hypertruck ERX platform bills itself as a way to bridge the gap between fossil fuel big rigs and battery EV 18-wheelers. And none other than InvestorPlace’s Matt McCall has called the technology the “most realistic approach to a green roadway.” But investors have been seeing a path to red ink in their trading accounts.
In recent months, a weaker SPAC market, short sellers dismissing Hyliion’s technology and concerns Biden’s green economy won’t include natural gas have collectively weighed on shares. Today, however, investors may be close to putting a downtrend on the price chart in the rearview mirror.
Technically, HYLN stock recently failed a double-bottom attempt off its Tortoise Acquisition NAV listing price. But what surely produced a lot of towel throwing by aggravated Hyliion investors may clear the air for actual bottoming when nobody is looking.
Second-attempt type entries can be powerful events. And in HYLN’s situation, given this SPAC’s $10 level lines up with a downtrend line, investors won’t be guaranteed $10 as in days past. But taxable future profits look likely. I’d watch for HYLN to gain traction through its prior NAV, then position with a July $12/$17 bull call vertical.
SPACs to Buy: Clover Health Investments (CLOV)
Source: Charts by TradingView
The last of our SPACs to buy is Clover Health Investments. Brought public by Social Capital Hedosophia Holdings, the Medicare Advantage insurance company strives to pioneer a fundamentally different approach to the market vis-à-vis heavy investment in technology and partnering with physicians. It sounds promising, but thus far the deal hasn’t worked for investors.
Shares shed as much as 64% from a high reached immediately in front of its early January debut as CLOV. Today though, a Rx appears to be around the corner for bulls.
Technically, the SPAC has entered its seventh week of price consolidation. This is inside an engulfing candlestick which broke firmly below Social Capital’s NAV. With shares having already broken a downtrend line, this week’s first reaction above $10 and well-positioned stochastics bodes well for tomorrow’s buyers.
Look to go long CLOV as shares confirm a price recovery next week. To avoid potential stock-related health issues, a prescribed June $10/$12 bull call spread looks like a smarter fit.
On the date of publication, Chris Tyler doesn’t hold positions in any securities mentioned in this article.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. The information offered is based on his professional experience but strictly intended for educational purposes only. Any use of this information is 100% the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.
