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Short interest increased significantly since January
Hedge funds bet on falling prices at SPACs that are about to merge
Even after the merger, SPACs are a popular short-seller targetSPACs, i.e. special-purpose acquisition companies, are trendy. The number of companies that use such a stock exchange vehicle to shorten their way to the stock exchange has increased over the past few months. And a large number of the newcomers to the brand got off to a very successful start. That piqued the interest of shortsellers.
Hedge funds with short bets on SPACs
The financial analysis company S3 Partners has determined that the volume of bets on falling prices at SPACs has increased significantly in recent months. The dollar value of short bets on SPAC shares has more than tripled since the beginning of the year from 724 million US dollars to 2.7 billion US dollars, the experts said.
Some of the stocks attacked belong to the SPACs, which have risen sharply in recent months, as the “Wall Street Journal” reports. One of the most popular targets is a SPAC, which is supported by venture capitalist Chamath Palihapitiya. The company called Social Capital Hedosophia is planning a merger with Social Finance Inc (SoFi) in order to bring the startup to the stock exchange in a short period of time. SoFi is valued at $ 6.5 billion. According to S&P Global Market Intelligence, 19 percent of SPAC shares were sold short before the merger.
And the SPAC, which is supposed to bring the electric car maker Lucid Motors to the stock market by merging, Churchill Capital, is apparently popular with shortsellers: The short interest in the SPAC, supported by Michael Klein, a former investment banker, increased to around 5 percent in March than doubled, the WSJ continues to write.
Even after the exhibitions, SPACs remain a target
But not only the SPACs, where a merger is still pending, have been targeted by shortsellers, already completed exchanges are also targeted by experienced short sellers. The hedge fund Muddy Waters recently made a short position in XL Fleet, a provider of fleet electrification solutions. The company went public through the merger with SPAC Pivotal Investment Corporation. And the bet on falling prices has paid off, because Muddy Waters had published massive allegations against XL Fleet, the speech was that the company reported a significantly higher order backlog than actually existed, and the return on investment for the company’s products probably negative. “We do not see that this company has a future,” Carson Block, founder of Muddy Waters, said on his video channel, and XL Fleet shares came under severe pressure as a result.
Similar share price developments have recently been evident at Lordstown Motors, where the IPO via SPAC took place in the summer of 2020. Here it was Hindenburg Research who announced a short position on the Electric car-Startup to have opened. At the same time, the shortseller announced that they had evidence of incorrect company information about orders and production capacities and that the company was therefore considered to be a “SPAC for electric vehicles with no sales and no salable product”. The reaction of investors was predictable – Lordstown Motors shares fell sharply in value.
Finanzen.net editorial team
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