As they say, one day doesn’t make a trend. However, when it comes to Paysafe (NYSE:PSFE) and following an ugly debut, there’s no revisionist history that’s going to make the past of PSFE stock simply disappear.
Let’s take a look at what’s happened and occurring right now, both off on the price chart of PSFE. And, we’ll look at how investors can play more safely in today’s market environment.
We’re a woke nation these days or trying to be, depending on where one looks. Right? But that deserved appeal for social justice doesn’t reach Wall Street’s SPAC market and investors who may be seeking reparations in shares of PSFE. At a minimum, it’s not going to happen today and increasingly, appears unlikely anytime soon.
The Debut of PSFE
On Wednesday, shares of blank-check outfit Foley Trasimene were re-engineered into Paysafe or PSFE stock. Specifically, PSFE debuted on the NYSE as the result of a SPAC. Yup, one of those.
A year ago the SPAC acronym would likely have generated some head scratching when spoken. What’s a s-p-a-c-k? Today, special purpose acquisition companies have become a hugely popular and intoxicating, but often toxic investment. And yesterday’s near 11% slamming in PSFE speaks as much.
ChargePoint Holdings (NYSE:CHPT). Opendoor Technologies (NASDAQ:OPEN). DraftKings (NASDAQ:DKNG). QuantumScape (NYSE:QS). Those incredibly popular and heavily traded stocks are just the tip of an iceberg of SPACs which entered the market in 2020. And problematically, most have broken ranks with prior animal spirits and are down significantly from their peak valuations.
This year has continued upon those trends. The SPAC floodgates are still wide open and PSFE is the most recent and increasingly common stock casualty in the group. What’s to blame? Multiple decompression for growth stocks? A rotation out of concept plays and into value stocks whose rubber is already meeting the road? Too much SPAC supply? I’ll gladly stand to the side and let the reader pick and choose.
Bottom line, whatever an investor believes is responsible for pressure in PSFE is up for debate. Today and most importantly, Paysafe’s mission statement could be to save the world rather than a novel fintech sporting a terrific horse and jockey and it simply wouldn’t matter. It is what it is.
PSFE Stock Daily Price Chart
Source: Charts by TradingView
If investors simply must know more about the Paysafe narrative InvestorPlace’s Sarah Smith does a great job of breaking it down for you. Spoiler alert, it may sound like PSFE has the earmarks of being the next big thing. Pop the champagne!!??
The concern here continues to be what the PSFE’s price chart has been warning since its days as ticker “BFT” when shares failed uptrend support. And that’s of more downside to come in PSFE stock.
Today and technically, the observation is shares have turned decidedly more bearish in the near term. Wednesday’s debut as PSFE broke what I’ll label as neckline support in a continuation head and shoulders pattern. If we’re correct, a conservative measured reaction out of the bearish formation would complete near $10.75 to $11.00 while filling a significant bullish gap in BFT’s former uptrend.
Play it Safe
At the end of the day PSFE may go on to become one of the best thingamajiggies offered by Wall Street. And maybe, just maybe, over the long run it might become a storied investment not unlike Apple (NASDAQ:AAPL) or Tesla (NASDAQ:TSLA). Right now though and if Paysafe investors simply can’t wait to pull the trigger on a buy decision, I’d strongly caution to play safe with an ironclad defense first and wishful thinking second using a stock collar.
One variation of this fully-hedged strategy which can prepare investors for the worst, as well as the possibility of better days ahead is the October $15 put /$25 call combination.
On the date of publication, Chris Tyler holds, directly or indirectly, positions in DraftKings (DKNG) and its derivatives, but no other 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.