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In this link they call it the "extra kiss".
As I mentioned from day one, they get all potential upside and no risk. If gxii goes to $12 on excitement of the deal it is just a little extra for them.
https://www.calamos.com/blogs/investment-ideas/watch-cmnixs-eli-pars-on-the-extra-kiss-spacs-can-provide/
As Pars explains, the CMNIX team gravitated to the strategy in the last year as SPACs have enjoyed new popularity as a means of funding acquisitions. The fund’s board recently expanded its authority to invest up to 10% in the strategy from its previous limit of 5%. As of 9/30, the strategy represented 4.5% of the fund.
“We like to buy SPACs at the $10.00 issue price or lower. At these prices, we don’t feel like there is a lot of downside other than the risk related to the time value of money,” explains Pars. “We can participate in the upside optionality of the stock if the SPAC does a good deal. There’s also the theoretical cheapness of the structure, with the shares and warrants paired together. The warrants could be $0.40 to $0.50 of value on a $10.00 SPAC.
“So, we’re just trying to create those cheap options and then trade the book around. Ideally, we’re buying SPACs at $10.00 or less, and trading out of them at $10.50 or $11.00. With this sort of strategy, we think we create a risk/reward profile that’s pretty similar to what we’re getting from the fund’s convertible arb strategy.”
Pars provides an update on the marketplace since he last commented on SPACs in August (see this post), including:
Some issuers have been overfunding the trust. “Instead of $10.00 at maturity, you can get $10.10 or $10.20, which is real money. When you’re talking about the returns of Market Neutral, which is a 3% to 5%-type strategy, that extra kiss there is helpful.”
The amount of warrant coverage has increased some.
Some issuers have shortened the terms from 24 months to 18 or even 12.
There have been opportunities to buy below $10. “We’ve had success buying some SPACs that haven’t traded well on day one, [enabling us to buy] at $9.85 or $9.90.”
He makes a distinction between CMNIX’s interest in SPACs versus de-SPACs. Once a SPAC announces and closes on an acquisition, the closing is called a de-SPAC. “At that point, it’s a small cap equity with a very different risk profile than what we’re looking to do in the fund,” he says.
Some of those deals can be profitable and trade much higher than $10. “That’s not the kind of volatility we’re looking for, we would have been out at $11,” Par says. “You could look at it and say, ‘Wow, you could have ridden it all the way up.’ But that’s not what we’re trying to do with this strategy. We’re trying to create cheap options with very minimal equity risks.”
The use of SPACs is the latest example of the fund’s use of opportunistic strategies over its 31 years, Behan notes, and reflects the team’s desire to continually add value.
Agreeing, Pars says, “This is really driven because we think we can make money at it…It does offer the benefit of allowing us to invest money in a different asset class. But that’s not the motivation behind it.
“The motivation behind this,” he continues, “is to make money. We think that if we sat down with every investor and walked them through how we’re doing SPAC trades, they’d look at it and say, ‘Yeah, I want you to do that.’”
And of course 175 million warrants overhang at the top, and then comes Mark confirming a necessary reverse split to get the stock on the nasdaq.
Folks don't realize the triple whammy niocorp will get in the next few months.
1. the high redemptions will lead to little of the trust fund cash coming to the company.
2. at the same time niocorp is forced to give to the gxii founders 47,650,427 shares at closing and give to the gxii founders an additional 35,226,202 shares after certain price targets.
3. niocorp is on the hook to pay approx $15,000,000 in gxii fees to pay for the merger
The money niocorp does receive will come from yorkville who will be selling its discounted shares to retail on a downward spiral basis.
It doesn't look good for the year. 85% spac redemption
https://www.stifel.com/Newsletters/InvestmentBanking/BAL/Marketing/SPAC/2022/SPAC_Mailer_2022YE.pdf?trk=organization_guest_main-feed-card_feed-article-content
De-SPAC redemption rates soared, signaling a more challenging market throughout 2022
— Average redemption percentages maintained on average the same level throughout the year, from 86% in Q1 to 88% in Q4
— On an annual basis, 2022’s 85% average nearly doubled 2021’s 45% average, and far exceeded the 38% and 65% rates
observed in 2020 and 2019 respectively
— The high redemption rate environment posed challenges for SPACs seeking to complete a business combinations, as less
cash remained in the trust account to satisfy the respective minimum cash condition for each transaction
And well the other you mentioned, Bnp Paribas Arbitrage with 1.2 million shares, Their name says enough to know that they are in gx for arbitrage.
Also when you look at the data for Calamos their 533,506 share holdings in gxii did not change through January 26. They do spac arbitrage as do nearly all the institutional holdings in gxii. Calamos got in right after the merger agreement around $9.8
It is wishful thinking that institutions want to buy shares in niocorp. I am predicting 90 to 95% redemptions just like the majority of other spacs did in December. And as I have mentioned many times before the sponsors will still get their 20% of niocorp after the merger.
https://www.bloomberg.com/news/articles/2022-12-14/great-spac-crash-of-2022-deepens-as-investors-cash-out-in-droves
For firms that went public so far in December, an astonishing 96% of shareholders elected to redeem their stock on average. That’s on pace for a record spate of redemptions, according to data provider Boardroom Alpha.
That is correct. I think you would have to call the TA to find outstanding units. per the 8k
https://www.sec.gov/Archives/edgar/data/1826669/000121390021024908/ea140377-8k_gxacquisition2.htm
On May 6, 2021, the Company issued a press release, a copy of which is attached as Exhibit 99.1 to this Current Report on Form 8-K, announcing that the holders of the Units may elect to separately trade shares of the Class A Common Stock and the Warrants comprising the Units commencing on May 10, 2021. Those Units not separated will continue to trade on The Nasdaq Capital Market under the symbol “GXIIU,” and the Class A Common Stock and Warrants that are separated will trade on The Nasdaq Capital Market under the symbols “GXII” and “GXIIW,” respectively. No fractional warrants will be issued upon separation of the Units and only whole Warrants will trade. Holders of Units will need to instruct their brokers to contact Continental Stock Transfer & Trust Company, the Company’s transfer agent, to separate their Units into shares of Class A Common Stock and Warrants.
Sorry Walterc but that is wrong. There are different possible outcomes when dealing with a spac.
One outcome, the one Mark wants, is there will be few redemptions by gxii and the combination completes as planned. If that happens those of us who currently own 100% of niocorp will be diluted down to owning only 32%. That is a fact. Continuing Marks plan - comes a 1 for 10 reverse split. Disregarding the REE results, we get no benefit. In fact we are stuck with a fixed ratio and reverse split no matter how positive ree results are.
Another outcome, the one I believe will happen, is there will be about 90-95% redemptions. This will be a huge failure. There will be very little cash from the deal. Butt there will still be a huge giveaway of equity to the sponsors/fees, around 25%. Nearly all the money will come from Yorkville who will be selling on the ask to small retail investors for what can seem an eternity. This will bring us back to square one looking for a new plan.
Exactly.
Mark's plan is for our stock to get diluted from 100% ownership down to 32%.
Then since having too many shares force a 1 for 10 reverse split.
Then tell us his plan is set for 6 months, no matter REE results, or any other news.
Thanks Mark!
There are several:
A final example
Exos TFP Holdings LLC
69,000 in gxii
https://www.morgancreekcap.com/spac/
The Morgan Creek-Exos SPAC+ Fund (the "Fund") seeks to capitalize on the differentiated nature of SPACs to deliver a consistent return, an attractive risk profile, and the potential for upside, all while relying on a portfolio of Treasury bills or other cash-like collateral in trust in an effort to preserve capital.
Strategy
Seeks to maximize the value of portfolio options inherent in SPAC-related securities in order to drive upside.
Seeks to add incremental return via a proprietary algorithmic market making strategy.
Seeks to protect downside via the cash-like collateral held in trust by the underlying SPACs.
Targets 2x leverage with the ability to increase to 4x when market conditions warrant.
After acquisition is announced, the Fund sells out of the position to capture price appreciation driven by the deal.
If a deal is not reached, the Fund puts the shares back and receives the original investment plus Treasury interest.
Saba Capital Management, L.P
1.4 million shares in gxii
https://www.forbes.com/sites/jacobwolinsky/2022/08/26/sabas-boaz-weinstein-ambrus-kris-sidial-discuss-their-unusual-tail-risk-strategies/?sh=4f7316eb68eb
'Breaking down his SPAC strategy
Weinstein explains that buying SPAC shares for $9.70 each when you'll get $10 back a year later has an additional built-in yield of 3%. He added that the 3.5% yield was in addition to the yield from the T-bills, which today are higher because the Federal Reserve has been hiking interest rates."
Spac arbitrage is the reason institutions are in gxii.
One example:
Calamos Market Neutral Income Fund
533,506 shares gxii
9.2% fund for spac arbitrage
https://www.calamos.com/funds/mutual/market-neutral-income-cmnix/
https://www.calamos.com/blogs/investment-ideas/watch-cmnixs-eli-pars-on-the-extra-kiss-spacs-can-provide/
https://www.calamos.com/globalassets/media/documents/transcripts/adding-value-through-opportunistic-use-of-spac-arbitrage.pdf
The big fund investors are only in gxii for arbitrage.
https://accelerateshares.com/media/mergermarket-spotlight-on-spacs-hedge-funds-fuel-feeding-frenzy/
"Few stay to the end. Ninety-seven percent of hedge funds either redeem or sell their shares before the SPACs in which they invest complete a business combination, according to a recent study of by New York University law professor Michael Ohlrogge and Stanford law professor Michael Klausner.
Initial investors in SPACs also receive warrants, which they can later exercise for a profit, Galley noted.
“The optionality is the beauty of the vehicle,” said Galley. “Once a blank-check company merges with its target, the downside for investors is all the way down to zero. That’s why we exit by then.”
The numbers I posted are straight from the s4. They include the planned Yorkville dilution
Mark's plan is massive dilution. Holders today will only hold 27% when his plan is complete. Wouldn't even wait for REE results to lighten the load.
279,393,227 NioCorp Common Shares outstanding prior to the Transactions
335,487,636 to non-redeeming GX Public Stockholders
4,769,574 to Others(1)
47,650,427 to GX Class B
34,230,920 upon the conversion of all Earnout Shares into NioCorp Common Shares
175,199,102 upon the exercise of all NioCorp Assumed GX Warrants
8,558,000 upon the exercise of all Lind III Warrants
9,958,253 upon the exercise of all NioCorp outstanding warrants (excluding the Lind III Warrants)
14,464,000 upon the exercise of all outstanding NioCorp options held by employees at the Closing
1,030,000 upon the conversion of the remaining face value of the Lind III Convertible Security(2)
19,198,500 upon the conversion of the NioCorp Convertible Debentures into NioCorp Common Shares(3)
17,278,203 upon the exercise of all NioCorp Financing Warrants into NioCorp Common Shares(4)
81,697,169 upon the sale of all NioCorp Common Shares issuable under the Equity Facility(5)
1,028,915,011 Total
The spac arbitrage funds that bought into gxii in the $9.80's in the last few months are only looking for this upon redemption soon:
S4:
based on funds in the Trust Account as of January 13, 2023 of approximately $303,560,016, the estimated per share redemption price would have been approximately $10.11.
Record date set for GX meeting:
Q: How do I vote?
A:
If you were a holder of record of GX Common Stock on? January 24, 2023, the record date for the GX Stockholder Meeting, you may vote with respect to the applicable proposals in person online at the GX Stockholder Meeting or by completing, signing, dating and returning the enclosed proxy card in the postage-paid envelope provided. If you choose to participate in the GX Stockholder Meeting, you can vote your shares electronically during the GX Stockholder Meeting via live webcast by visiting?. You will need the 12-digit meeting control number that is printed on your proxy card to enter the GX Stockholder Meeting. GX recommends that you log in at least 15 minutes before the GX Stockholder Meeting to ensure you are logged in when the GX Stockholder Meeting starts.
That was hilarious. Maybe I will get one too.
Good question. That has been my point also.
Low redemptions: we get severely diluted
High redemptions: we get little cash and some (25%) dilution.
I agree. Stock goes down on merger news. Mark was unable to produce results - miscalculated financing and did not anticipate the need for REES now for EV expansion. Everyone is making deals for future EV growth, but we were hunkered down for covid. And I have to answer 2 questions.
Unfortunately walterc you only follow wishful thinking. You already stated that financing abcd was not available and everyone should accept the spac. Even before REE results, even with scam spac history, even with Mark stringing along investors year after year.
We are on the tail end of a scam spac cycle. These are bankers getting around the rules to ipo. Spacs that did a merger last year are down on average 89%. Sorry facts do not lie.
Here are redemptions from December:
OSA 83%
GETR 94%
MLGO 99%
ZVSA 99%
LANV 97%
MRDB 99%
ECX 78%
MLEC 98%
https://spactrack.io/despac-screener/
See my answer below in red:
let me rephrase it Scooter. A question to you.
1) Is Niocorp a fantastic project that we are giving away to GXII? or
Mark has stated and everyone on this board knows that he was unable to get the financing. He can give any excuse he wants why plan abcd did not work but the fact is he didn't do it. Using a spac is a desperate move.
2) Are GXII shareholders redeeming because they think it is not a fantastic project.
GXII shareholders want their cash back and keep their free warrants, I repeat 84% redeemed in 2022. If they like this project they can buy in open market cheaper.
You cannot say that both are correct at the same time. You should make a choice.
You are putting lipstick on a pig. Sophistry will not work.
Also founders of GX that have interest to get more shares if the shareprice increases work in the interest of Niocorp shareholders ? Right?
You don't get it. founders paid $25,000 for their 20% ownership in the spac, or .003 per GXII share
I don't think construction will start anytime soon.
I expect 90% share redemptions. That will provide a gross of $30 million from the trust fund. Even worse Niocorp is required to pay $15 million in fees leaving a net of only $15 million.
This is based on 84% average redemption rate for de-SPAC transactions last year and 93% average for December. Spacs that merged in 2022 are down an average of 89% from their 10 dollar ipo.
Even worse we will have to issue 33,548,764 to the 10% that don't redeem and 48,645,707 to the founders. The founders could get an additional 35,226,202 earnout shares if price targets are met.
This is a piss poor financing package.
I agree. Mark sold 68% of the company. So future REE results will be majority owned by GXII shareholders. Sad but true.
Right on the money. It is a message board skill to pivot from the hype of financing plans ABCDTQ to stepping in a spac. Not all spacs are bad. This one is different.
Clearly I am not happy with the deal.
The 32/68 split with GXII is awful. Equity negotiated away when Niobf at low of .79 (not $$) and Without REE results
Spac will likely have high redemption rate. Will have to keep looking for money even after the deal. Defeats the purpose and will end up as a large convertible pipe, retaining 20% sponsor equity grab.
Unknown factors loom such as reverse split, warrants, Yorkville, and spac market with a dubious history.
I don't know. But they get to keep their warrants even if they choose to redeem their shares. That way they have no risk. Even Mark said in the video he has no idea how many gxii will redeem their shares.
I'm smart guy and now teddy b
Hah
Is that your risk analysis? Why not explain to your base what it means if we get 88% redemptions?
88 percent redemption. But you knew that right? It is close to the average rate. With your broad experience maybe you would like to explain our options when Dean's new spac turns the same trick.
Our soon to be elected new director Dean Kehler
has a poor track record from his first GX Acquisition spac
The more I look at these spacs the less I like. from $10 down to $1
GX Acquisition (the first one) started a merger deal with Celularity on Jan 8 2021
https://celularity.com/celularity-and-gx-acquisition-corp-announce-merger-agreement
$292 million in the trust fund
$80 million pipe agreement
for a total of $372 million in expected proceeds
GX Acquisition closes the deal and becomes Celularity on Jul 19 2021
https://www.evaluate.com/vantage/articles/news/snippets/celularity-goes-public-less-cash-hoped
only receives $138 million in cash proceeds including $83 million from pipe
And quoted from the link above: in May 2021
88% of GX investors ask to redeem their stock, including 73% at the time of the merger vote; GX has to seek to extend its Spac life
I agree with you that there is nothing wrong with a RS theoretically. And I understand it is necessary for NASDAQ. But would you acknowledge in reality there is a bad cloud over the idea? Investors frown when they see it. Too many companies used it in such negative ways to destroy shareholder equity. That is they dilute to oblivion and then force RS and repeat.
It is this dark cloud reputation, real or not, that can cause real damage in the marketplace. These are ideas. Pros and cons on both sides. My hope is that all shareholders are successful and especially your children/grandchildren will receive your gift.
I wish it would go up but realistically how can that happen with a merger in wait priced under a dollar.
Even more troubling why would gxii not redeem. The current Niobf price is below the deal price.
2 would be nice but don't you think the old gxii shareholders would be running for the exits with a 100% gain?
That was GX1. We are GX2
Yes the gxii shares can be redeemed for $10 and you still get to keep the warrants.
In fact as gxiiu shareholder you can vote for the merger so your warrants will stay alive and redeem your shares so you can eliminate any risk. This is a common strategy and explains why redemptions are so high with spacs right now.
The gxiiu units began trading March 22 2021 and still trade. Each unit contain 1 share and 1/3 warrant. 52 days later, if you owned 3 units or more you could call your broker and separate the shares gxii and the warrants gxiiw and they will trade separately.
If I may make a few minor corrections MaxzMillionz.
There are 15,666,667 warrants; not 10,000,000
You forgot the multiplier effect of 11.1829212
15,666,667 x 11.1829212 is 175,199,102 niobf shares
1 for 10 RS is 17,519,910 added to the 70M for a increase of 24%
That is correct. They are not cashless, although Niocorp could change that and allow cashless in order to limit dilution.
You have no evidence to back up your .89 claim. Is that because there is none or you want to keep it secret?