How can a pre-merger SPAC trade over $20?

[Sig]

Went short 2000 shares of CCIV today.
The name went way up last week on expectation it is "merging" with Lucid, a sexy name.
I have seen SPACs going way up on deal announcement, which makes sense, but a SPAC trading at $40 before any announcement is like an IPO is trading at 4x before an IPO-price is even announced, implying traders are saying I will pay 4x wherever you price it. Understanding crazy sentiment can do damage, hedge half of the position and doing it at a reasonable size.

Sounds like you're already taking this to heart, but don't forget the old advice that the market can remain irrational far longer than you and I can remain solvent!

 

[blueraincap]

Sounds like you're already taking this to heart, but don't forget the old advice that the market can remain irrational far longer than you and I can remain solvent!

Also shorted STPK albeit a smaller size. After some reading and thinking, the whole SPAC structure seems to benefit the sponsors, IPO subscribers, and PIPE investors, odds are stacked against the secondary investors, I am happy to bet some money against the structural disadvantage. It is a bubble with structural problems and a deal-led timeline built-in.

 

[Sig]

Also shorted STPK albeit a smaller size. After some reading and thinking, the whole SPAC structure seems to benefit the sponsors, IPO subscribers, and PIPE investors, odds are stacked against the secondary investors, I am happy to bet some money against the structural disadvantage.

I would tend to agree with you, might do a little of that myself. Another thing to think about is that this play is an indirect bet on VIX, as deal flow usually dries up when there is a lot of market volatility. So maybe you could even short some VIX and take advantage of the decaying term structure there in order to hedge the continued irrationality of the SPACs.

 

[blueraincap]

I would tend to agree with you, might do a little of that myself.

There is an academic paper by some prof (more on law side) that documents how SPACs lose values post-deSPAC. It is not that I trade based on what those dudes say, but its contents mostly confirm my disbelief about the structure.