A woman looking out a window and OTRA and Comera Life Sciences logos
Source: istock, ORT Acquisition, Comera Life Sciences LinkedIn

OTRA Stock Short Squeeze: See What’s Happening Before the Merger

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May. 13 2022, Published 10:12 a.m. ET

On May 13, OTR Acquisition Corp. (OTRA) opened higher. OTRA stock rose after stockholders approved the merger with Comera Life Sciences.

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However, as has been the case over the last six months, many stockholders opted for a redemption. In OTRA’s case, almost 10.3 million stockholders opted for redemption, which is almost 98.4 percent of the outstanding float. On May 13, OTRA stock rose in pre-market on a possible short squeeze. The company’s outstanding float would only be about 168,000 after the redemptions.

OTRA stock has whipsawed.

OTRA stock was trading sharply higher in the early pre-market. However, the stock pared gains and was only slightly higher at the market open. In its updated SEC filing, OTRA said that “the Company has been made aware that certain holders of Class A Common Stock may request to change their election to have their shares redeemed, which the Company may allow. There can be no assurance, however, that such holders will request to change their election to redeem their shares or that the final number of shares redeemed will decrease.”

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What’s happening with OTRA stock?

The news of some stockholders reconsidering their vote on redemption dampened the bullish sentiments. Investors were expecting a massive short squeeze. The company hasn’t specified how many investors might want to reverse their decision to redeem the shares.

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What’s happening with OTRA is another example of how much SPACs or blank-check companies have been abused. There have been plenty of examples where the majority of stockholders opted for redemption and the stock soared on a short squeeze.

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This might sound counterintuitive since most of the stockholders opting for redemption ahead of the business combination show their pessimism towards the merger target. However, thanks to the times we're in, short squeezes have been a bigger price driver compared to fundamentals.

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The OTRA merger date is approaching.

OTRA expects to complete its business combination with Comera Life Sciences by May 19. The merger valued Comera Life Sciences at an equity value of $258.4 million and an enterprise value of approximately $151.3 million. As part of the merger, Comera Life Sciences would get $107 million in gross cash proceeds. However, it remains to be seen how much cash the company gets due to the massive redemptions.

Should you buy OTRA stock now before the merger?

There have been plenty of examples where SPACs soared on a short squeeze. In most cases, they have tumbled even below the SPAC IPO price of $10. Timing can be crucial with short-squeeze candidates. Those buying them at higher prices might never recoup their capital.

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GameStop and AMC Entertainment, which were the poster children of the short squeeze, trade at a fraction of their 2021 highs and might not reach those price levels anytime soon.

gamestop short squeeze poster child
Source: Getty
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According to Business Wire, Comera Life Sciences says that it wants to “transform essential biologic medicines from intravenous (IV) to SQ forms.” Through the approach, it wants to “provide patients with the freedom of self-injectable care, reduce institutional dependency and drive cost savings across the healthcare system.”

While the company is forecasting a massive total addressable market like most other SPAC merger targets, investors might be better off in a mature healthcare company given the current markets.

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