SPAC Wrap: New Deal Duds, and QuantumScape Slammed by Short Seller Report

DEH and CHFW drummed up little investor enthusiasm for their SPAC merger announcements. SPAC IPOs remain parked and SPACs generally traded lower on the day. QS sold off on short seller report.

Author:
David Drapkin
Publish date:
Apr 15, 2021

Two new deals were announced this morning, which felt like a lot of activity relative to what investors have become used to lately. However, neither of those deals, were met with much investor enthusiasm:

- DEH traded up just 0.9% to $10.07
- CHFW traded down 0.3%, and remains below NAV at $9.85

Perhaps it was a little bit of a risk-off sentiment in the market as both of the SPAC targets, Vicarious Surgical + Surrozen, are speculative pre-revenue healthcare plays.

Fear not, this does not mean these deals won't pass or trade up on other company-related news (see dMYD), nor does it mean that all new DA's will trade poorly. Yesterday's winner, BCTG, continued to do well today adding another +6% to $12.84.

QuantumScape Falls on Short Sellers Report

QuantumScape ( (QS) - Get QuantumScape Corporation Class A Report) has been one of the most successful de-SPAC investments to date. The stock is trading +300% if you bought shares of the predecessor SPAC, Kensington Acquisition (KCAC), at the IPO price of $10. However, short seller Scorpion Capital released a scathing short report on QS today that sent shares tumbling over 12% to close at $35.85.

One of the points in the 180+ page report is a warning on potential selling pressure in the stock when a portion of insider shares are freed from lockup expiry next week (4/24). Certain insider shares are free to trade 150 days after the merger closed if the stock has maintained a share price of $12 or higher... which it clearly has.

A similar dynamic has happed with QS before. If you recall, QS did have a big price drop in January when shares of its $500M PIPE registered (making them free to trade), which presumably drove many PIPE investors to take a huge profit... the PIPE shares were bought at $10.

Aside from the more qualitative allegations hurled in the report, it's worth keeping an eye on this technical dynamic next week, the stock is trading at a huge premium to $10 and early investors and the sponsor stand to make a nice profit if they sell.

Going forward, SPAC investors should expect to see more regularly occurring short seller reports coming post de-SPAC as these newly minted public companies are setting up to be rich targets based on aggressive financial forecasts and technology promises.

Deal Rumor: D & Z Media Acquisition / Simplifi

Bloomberg reports that D & Z Media Acquisition (DNZ) is in talks to merge with online advertising company Simplifi. DNZ, co-sponsored by ICE, raised $287.5M in its SPAC IPO back in January. CEO Betty Liu is an experienced media executive and former Vice Chair of the NYSE.

DNZ's prospectus stated that the company intended to seek a target "related to media, education technology (“ed”), and other related industries." Reports are saying the deal could be valued ~$1.5B. DNZ traded up slightly 0.6% on the day, but is still sub-nav at $9.96.

Biggest SPAC Gainers

6.12% ~ $ 12.84 | BCTG - BCTG Acquisition Corp. (Announced)
5.73% ~ $ 12.36 | PSAC - Property Solutions Acquisition Corp (Announced)
5.70% ~ $ 13.16 | BOWX - BowX Acquisition Corp (Announced)]
4.98% ~ $ 13.90 | MUDS - Mudrick Capital Acquisition Corporation II (Announced)
4.84% ~ $ 9.97 | VHAQ - Viveon Health Acquisition Corp. (Pre-Deal)
2.78% ~ $ 11.46 | APXT - Apex Technology Acquisition Corporation (Announced)
1.65% ~ $ 10.48 | SVFB - SVF Investment Corp. 2 (Pre-Deal)
1.55% ~ $ 12.76 | FST - FAST ACQ CP (Announced)
1.54% ~ $ 9.90 | NRAC - Noble Rock Acquisition Corporation (Pre-Deal)
1.51% ~ $ 10.10 | PHIC - Population Health Investment Co Inc (Pre-Deal)

Biggest SPAC Losers

-7.96% ~ $ 10.06 | NBST - Newbury Street Acquisition Corporation (Pre-Deal)
-7.41% ~ $ 20.12 | CCIV - Churchill Capital Corp IV (Announced)
-6.85% ~ $ 12.37 | VIH - VPC Impact Acquisition Holdings (Announced)
-6.40% ~ $ 10.83 | THCB - Tuscan Holdings Corp. (Announced)
-6.18% ~ $ 13.51 | AGC - ALTIMETER GROWTH CORP (Announced)
-6.00% ~ $ 18.02 | SSPK - Silver Spike Acquisition Corp. (Announced)
-4.69% ~ $ 12.18 | TDAC - Trident Acquisitions Corp (Announced)
-4.68% ~ $ 10.19 | SPFR - Jaws Spitfire Acquisition Corporation (Announced)
-4.51% ~ $ 15.45 | NGA - NORTHERN GN ACQ (Announced)
-3.97% ~ $ 10.15 | HOL - Holicity Inc (Announced)