Hello everyone - For starters, I am going to post my two original DDs. The first one I posted in early September and the second I posted as an update to the September DD in October. Below is the September DD.
VIH is one of the most shorted stocks and currently sits at #7 on MarketWatch’s list (Short Interest - MarketWatch). VPC Impact Acquisition Holdings (VIH), based in the Cayman Islands, is a company that is involved with crytpo. Several months ago, VIH announced that it was merging with a company called Bakkt, a digital wallet app for crypto. The combined company will be renamed Bakkt Holdings Inc. and will list on the New York Stock Exchange. Public stockholders of VIH will hold 8% of Bakkt.
VIH falls under the category of a SPAC (special purpose acquisition company). SEC refers to them as “blank check companies”. A blank check company is a development stage company that has no specific business plan or purpose or has indicated its business plan is to engage in a merger or acquisition with an unidentified company or companies, other entity, or person. There is a lot that goes into being a SPAC but a big part of it is unlike an operating company that becomes public through a traditional IPO, however, a SPAC is a shell company when it becomes public. You can read more about SPACs here or if you prefer Reddit, try this.
Some SPACs including VIH utilize something called a PIPE to obtain funding. PIPE stands for Private Investment Public Equity. There’s a whole lot to them that you can read here if you want. This is important because as with most PIPEs, it is currently not allowed to be shorted based on the subscription agreement.
SPACs have this thing called a Net Asset Value (NAV) and VIH has a NAV of $10.00 which is calculated by dividing the total value of all the cash and securities in a fund’s portfolio, minus any liabilities, by the number of outstanding shares. However, this handy little filing from September 2020 puts it at the $10 already.
VIH filed an S-4 today indicating it will be holding an “extraordinary general meeting” soon (possibly this month). What I learned is that an EGM is any shareholder meeting called other than the annual meeting. Full disclosure - I expected this meeting would happen between September 7 and September 21 based on nothing but a hunch. I’m not certain we will hit that timeframe but I’m still anticipating this meeting to happen in September. In a conversation with Kolachie, he corrected me that an EGM does not always mean something substantial.
VIH has been trading under that $10 NAV since June 2021, in February it had a spike to $22.It has not broken out of the $10 NAV until September 2, 2021 and it has been steadily climbing. From September 3rd through September 9th, VIH was trading at or above $11. It has most recently settled back into that $10 range. In that same conversation with Kolachie, I need to note, it is important to know that it is 100% possible for these instruments to fall below their NAV in the secondary market though. It happens all the time with funds and some even offer regular redemption periods to allow investors to cash in at NAV when their market price is persistently lower. In other words, it is possible that the only way you have that 10$ price floor is if you buy shares and redeem them at a time when they are open for redemptions.
Yahoo Finance lists a float of only 19.24 Million shares, with over 6.34 million shares short. Yahoo puts the 3 month average at 1.22 million volume. Compare this to September 3 Yahoo Finance listed a float of only 20.5 Million shares, but with over 7 Million shares currently short. Yahoo puts the 3 month average at 604,000. 7m shares divided by 604,000 volume.
Ihor Dusaniwsky, Managing Director of Predicting Analytics at S3 Partners (specialists in short interest markets and data analytics) recently tweeted about how heavily shorted VIH is. I did not see anymore more recently.
The most important aspect of all of this is – SPACs can be redeemed for their full NAV prior to the special meeting.
This is where I start to get a little fuzzy. Why would a hedge fund bother buying up something like VIH? I do not have an answer for that. Maybe it’s fairly risk free for hedge funds to be involved in this type of situation. If you get a 1% return on a fairly safe play like VIH, rinse and repeat and you can get 10-12% returns from this process over the course of a year. Like I said, I don’t know if that’s enough to make it worthwhile.
I think VIH may be a future candidate as soon as this month. I’m less bullish compared to earlier this month, but with the success of IRNT I’m going to continue to keep an eye on it. It doesn’t look to be possible for VIH to fall below that $10 NAV. In that case, a hedge fund could see this as a pretty risk free 10% gain plus a short squeeze for us, all in a month’s timespan.
