Special Purpose Acquisition Companies (SPAC) have been a great alternative to the traditional IPO process for companies who want to go public. The year of 2020 was a big year for SPAC mergers, with companies such as Draftkings, Quantumscape, and Utz going public through the so-called blank check companies. Even in previous years we’ve seen companies such as Virgin Galactic merge with a SPAC.
Companies that go public can often see their stock’s price decrease after a brief period after it was made available to retail investors. That causes many people to target these companies for shorts, hoping the price continues to decrease. But investors must be wary of redemption rights.
SPACs tend to offer redemption rights for shareholders who originally invested in the company, with those investors being able to sell their shares in the newly merged company. When these shareholders sell their shares back to the acquisition target company, the number of shares available to purchase decreases, causing a short squeeze and soaring prices. Although redemption rights and other factors contribute to the volatility of SPAC stocks, the blank check companies often face pressure from short sellers.
Here are the most shorted SPACs lately.
Atlas Crest Investment Corp.
Coming off a $3.8 billion merger deal in March with the aerospace company Archer, Atlas Crest Investment has over 18 percent of their outstanding shares shorted, according to Stock Market MBA. Out of their 50 million shares, over 9 million shares have been shorted.
Their stock reached an all-time high of $18.60 in mid-February, then dropped by over 45 percent within a two-month span. Since then, prices have struggled to stay above $10, except in early June when it reached $10.72. That was when Archer unveiled their new eVTOL vehicle named “The Maker.”
Archer recently filed a $1 billion countersuit against Wisk Aero, a company backed by the world’s largest aerospace company, Boeing.
Altimeter Growth Corp.
Altimeter Growth’s $40 billion merger with ride-sharing company Grab was delayed until the end of the fourth quarter, so it has been even more of a popular target for short sellers. Out of their 50 million outstanding shares, over 16 million of them have been shorted, amounting to over 32 percent of outstanding shares. Their stock reached an all time high of $18.10 in January, then decreased by over 40 percent since then. Earlier this month, the stock reached an all time low of $10.22.
VPC Impact Acquisition Holdings
VPC Impact Acquisition is very active in acquiring companies, recently agreeing to a merge with Kredivo, the top digital consumer credit platform in Southeast Asia. They have acquired multiple fintech companies lately, including Dave, a banking app, as well as Bakkt, an intercontinental exchange.
With over 20.5 million outstanding shares, approximately 33.89 percent of them have been shorted, equating to over seven million shares shorted. Their stock reached an all time high of $22.53 in February, having decreased by over 55 percent since then. Prices have struggled to stay over $10 for the last three months.