IPOF Stock Experiences Heavy Volume Despite No Merger News


  • Social Capital Hedosophia VI (IPOF) and the company’s warrants surged higher today.
  • This surge came on abnormally high volume.
  • Thus, speculation is building around whether a potential merger may be in play.
IPOF stock - IPOF Stock Experiences Heavy Volume Despite No Merger News

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One of the more interesting stocks to watch in today’s market is Social Capital Hedosophia VI (NYSE:IPOF). Today’s move of less than 1% in IPOF stock is notable. However, it’s this stock’s volume of more than 25 million shares trading hands (versus an average daily volume of around 3.6 million) that’s generating significant attention on social media.

This heavy volume could be indicative of something. Perhaps someone knows something the market doesn’t. Or it’s just a head fake.

But as a special purpose acquisition company (SPAC), IPOF stock is in need of a merger partner. This Chamath Palihapitiya SPAC is among the largest remaining blank check companies without a suitor to speak of. With a market capitalization around $1.5 billion, there’s significant capital waiting to be put to use to bring a private company public.

With SPACs comes inherent speculation. Investors buy these vehicles with the hope that some five-star private target will be acquired and brought public. The early bird gets the worm. However, as of late, these worms have become much less delicious to investors in this market. That’s because investors are focused on immediate profitability and cash flow. Growth is out, and stability is in.

That said, let’s dive into whether today’s volume could indicate something is on the horizon.

There’s Certainly Reason to Speculate on IPOF Stock

Like other SPACs, Palihapitiya’s IPOF fund will need to find an acquisition target by a specific date. For IPOF, that’s October 14. That’s the deadline set by this SPAC to either find a deal, or return capital to shareholders. Thus, for investors looking to play arbitrage on this fund, buying below face value prior to a return of capital could be enticing.

That said, Oct. 14 is still a ways off. On top of that, it’s a tough market out there for venture capital financing for unprofitable businesses (essentially what SPACs provide). Indeed, unless this market turns around, it’s hard to make the case that any sort of deal will be viewed positively by the market. Perhaps it’s all arbitrageurs out there to make a quick buck.

To be clear, I have no idea what’s driving today’s volume with IPOF stock. However, I do understand that this speculative vehicle will continue to invite speculators from time to time. Perhaps another surge higher is in the cards. But right now, I think it’s just too risky, and there are plenty of other ways to lose money in this market than dealing in SPACs.

On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.

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