Social Capital Hedosophia V (NYSE:IPOE) has managed to return a bit of potential value to tomorrow’s investors in recent weeks. But in today’s market is what IPOE stock is selling actually worth buying? Let’s take a look at what’s happening off and on the price chart, then offer a well-aligned, risk-adjusted determination with those findings.
As the name indicates, Social Capital Hedosophia V is a mouthful. It also implies IPOE isn’t the sponsor company’s first rodeo either. And it’s not.
Under the leadership of well-known venture capitalist and early Facebook (NASDAQ:FB) executive Chamath Palihapitiya, IPOE is the fifth SPAC for “SCH.” And just like a Hollywood production with multiple sequels to its name, there’s obvious interest that’s helped support SPAC number five for Chamath & Co.
A Look at IPOE
So, who and what is IPOE all about?
It’s no Virgin Galactic (NYSE:SPCE). But that’s OK. The pioneering space tourism play with Sir Richard Branson at the helm was Social Capital’s first successful SPAC back in 2019. It’s up more than 120% from its initial public listing despite taking a beating the past couple months of nearly 70% alongside a broader risk-off rotation in SPACs.
IPOE stock is no Opendoor Technologies (NASDAQ:OPEN) either. Again though, that’s quite alright as it’s supportive evidence that can be used for IPOE’s bullish defense team. The thing is OPEN stock is the offspring of Social Capital Hedosophia II and a company disrupting the real estate market with its algo-driven platform. Those shares also remain firmly above the sponsor’s net asset value of $10 by 80%. As much, OPEN is further proof of the firm’s SPAC at-bats turning into bonafide hits.
Fortunately and where two out of three are strong odds of success worth betting on, IPOE isn’t Chamath’s third swing or SCH III either. That would be former blank-check IPOC which now trades as Clover Health Investments (NASDAQ:CLOV). At the moment, the tech-friendly Medicare Advantage insurance outfit’s shares are part of a sicklier group trading beneath the sponsor stock’s initial $10 per-share NAV.
On the surface addressing the performance of Social Hedosophia IV (NYSE:IPOD) makes sense as the number four precedes five. But Chamath’s IPOD remains without a partner to take public. That differentiates IPOD from SPCE, OPEN, CLOV and IPOE. And with deals harder to come by today after more than a year of record-breaking SPACs brought to market and risk aversion to the group currently elevated, looking past SCH IV is reasonable enough.
IPOE Stock and the Rare Bird
Now that we know what IPOE stock isn’t, but still appearing to be of interest from a spectator seat where bears having taken control of the broader SPAC field, what or who are we cheering for with Social Capital Hedosophia V?
IPOE is set to take Social Finance (SoFi) public. Sofi is a neobank. This means its only offers financial services digitally congruent with today’s mobile trending needs. And in sea of SPACs, where so many have been rightfully punished for asking anxious investors to look way down the road at what might be, SoFi is a rare bird. Bottom-line and where most of today’s recent SPACs have none to speak of, SoFi is set to turn a profit later this year.
There’s something else to be upbeat about regarding IPOE.
InvestorPlace’s Mark Hake, a guy who knows his way around the balance sheet, estimates IPOE appears undervalued. This is even at today’s premium to NAV. More favorably, his CFA tire-kicking describes why SoFi should be worth nearly $24 a share. That’s a hefty price hike of 57% compared to today’s IPOE $15.21 stock price. Nice, right?
IPOE Stock Weekly Price Chart
Source: Charts by TradingView
To be fair to the bears in control of the SPAC game the past couple months, there is a technical strike or two against buying IPOE stock today in anticipation of upside potential like Mark’s price target. It’s a symmetrical triangle formed between IPOE’s 50% and 76% retracement levels which broke to the downside this past week.
A second and nearby failure of the lower Fibonacci level warns IPOE’s NAV of $10. A chance for a full-blown 100% retracement of shares grows more likely.
The upside, other than a dangling carrot at $24, is chart patterns and associated dynamics change all the time and sometimes in the blink of an eye. In this instance, if IPOE stock holds the 76% support a promising higher-low weekly pivot could be confirmed.
What to Do
For now and investors looking at the potential positives in IPOE, but respecting SPACs have been spied trading to and below NAV, I’d wait for pattern confirmation like described above. That could happen as early as next week with a weekly candlestick following through this week’s high.
And should bulls begin to suit up and reclaim the price chart’s playing field, a July $17.50/$20 bull call spread is one favored, leveraged and fully-protected spread that looks well-aligned with the start of something bigger.
On the date of publication, Chris Tyler does not hold, directly or indirectly, 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.