IPOF/IPOD - Low risk trade with very high upside

Research & Analysis SPACs
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IPOD & IPOF are Chamath Palihapitiya’s most well known pre-DA spacs. If you’re unfamiliar with who Chamath Palihapitiya is he has the reputation for being the hero of the spac bull run of 2020 and thus has a cultish following similar to Elon musk (though not nearly as fervent). Chamath is a sleazy guy and he’s recently received some notoriety for some off-color comments he made regarding the Ughyurs in China. But if there’s one thing that Chamath is good at it’s being a salesman. Chamath is responsible for taking the following companies public:

  • SPCE - Virgin Galactic - traded in the $50’s at the peak of the spac bubble
  • OPEN - Opendoor - Got as high as $30 pre merger
  • CLOV - Clover health - This one disappointed investors but it still rose to the high teens for a brief time (I think it was short squeeze related)
  • SOFI - Sofi Technologies - Traded in the high teens to the low 20s for a long time

He was also in the PIPE for some other great performing companies such as Proterra, MP Materials, Desktop Metal, & Latch (the best saas company on the planet according to Chammy).
People who bought the spac commons & warrants made a killing if they bought them pre-da and folks have been chasing that high ever since. As a result despite spacs being in a long bear market (with a few notable exceptions) Chamath’s spacs still have a lot of interest and frequently shoot above the NAV (Net asset value) of $10 on random rumors and speculation.

Now on to the trades:
There’s a few strategies you can employ to make money off of the hype and allure surrounding Chamath and his spacs.

If you have a large account one strategy is to wait until IPOF/IPOD falls under or at NAV and then sell covered calls. There’s a lot more demand for IPOF/IPOD calls compared to most spacs and you can collect decent premiums (for spacs) with little to no downside to you due to the NAV floor. Feel free to check out the IPOF stocktwits page if you want to know the type of people that are buying your calls.

The other more interesting trade (with much higher upside) is to buy seemingly mispriced long-term calls on either IPOD/IPOF when either of them dip below NAV. This is good for scalping and if you get lucky you might be holding the options when IPOD/IPOF gets a DA (Definitive Agreement). Remember NAV is $10 so IPOD/IPOF don’t go much lower than $9.86 and usually hover around $10 unless there is new rumors or speculation.
The options that we have seen so far that have a good risk-reward ratio and can get decent fills are:

July 15 2022 7.5c - Can get fills from 2.45 - 2.55 - Breakeven of $9.95 - $10.05
July 15 2022 9c - Can get fills from 1.00 - 1.05 - Breakeven of $10.00 - $10.05 (Only for IPOF)

You might be able to get other expirations for close to extrinsic value but these are the only ones we have seen so far where you can get such good fills. Please reply to this thread if you can get good fills for different expirations.

Essentially the bet is that IPOF/IPOD will exceed $10.05 from today to July. Would you take that bet? I certainly would. IPOF & IPOD tend to move on even the most farfetched speculation (see below) and that is a good time to exit your positions. If you’re lucky the underlying will enter a DA with a “hype” company and your calls will print but otherwise it’s wise to sell these calls when IPOD/IPOF pumps on the latest rumor of the week.

Current & Upcoming Catalysts
Chamath has a podcast where he talks about current events and discusses companies and investments among other things (I’m not a listener so correct me if I have it wrong). Curiously, he has skipped podcast #69 for an unknown reason and it is causing the stocktwiters on the IPOF page to have a hopium fueled frenzy. The hope is that the target of IPOF & IPOD (they will need to be combined) is Starlink. The reasoning is that guest #69 is going to aired on 4/20 (assumed) and the guest will be Elon Musk (hopium) and that Elon tweeted “Green eggs and SPAC” a year ago. Also, Elon and Chamath are acquaintances apparently. Check out the stocktwits IPOF for more “DD”.

If this were to actually pan out you would have made a very profitable trade but otherwise you can book a modest profit by taking advantage of the hype and speculation.

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On the point of a potential combination of IPOF/IPOD, today’s price action and heavy warrant volume seems to be driven, at least in part, by some new language added to IPOD’s 10K (filed yesterday) suggesting the possibility of IPOD being merged into an affiliated SPAC.

Both are up about 10 cents today, to 10.17 (for IPOF) and 10.08 (for IPOD).

Their combined trust value would be about $1.6 billion, which opens up the possibility of a DA with a wider variety of private companies that would be comfortable going public with a minority of shares.

Keep in mind much of the pricing is going to be driven by a portion of the retail mob who is convinced one or both companies will be getting a SpaceX (or more specifically Starlink) or some other Elon-related DA due to the relationship between Elon and Chamath. Unless you are convinced there is something there (I am not), then starting a position in calls and warrants when the commons are 1% or 2% above NAV is not ideal. There are probably worse places than IPOF/IPOD common shares to park cash for a few months, though. Until Elon comes out and directly says he will never SPAC any portion of his companies, we will probably continue to see rumor-driven pops over NAV.

Be careful entering any position. Given recent SPAC history, unless this is truly a unicorn or memeable company (Elon-related, Discord, Impossible Foods, Databricks, Epic Games……or OnlyFans), a DA won’t move the common share price much.

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Reviving this thread as IPOF has had a big move (for a pre-DA SPAC) on Wednesday and Thursday.

A few things are interesting about this pump in particular:

(1) Chamath was spotted in NYC on Wednesday, but the big increase in volume and upward movement only came several hours after. It was not preceded by any new rumor or news piece (like Chamath leaving the SPCE board or the SpaceX stock split from March).

(2) There was a 1.2 million share buy last week above NAV.

(3) At 11:49 a.m. today, someone bought 1 million shares. Then at 3:51 p.m., someone bought 549,000 shares. Both purchases were at a share price of $10.38, well above NAV.

(4) Both Wednesday and Thursday were over 5x normal volume, with especially heavily volume coming late in the day and in AH.

This could, of course, be nothing. The share buys might be connected to hedging the 10c OI for April. Chamath is billionaire with plenty of reasons to have to visit NYC. But the strange pump in volume that wasn’t preceded by a definitive retail rumor/conspiracy theory is unusual and has me thinking there is some increased chance of a DA in the coming days or weeks.

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Just checking if any1 is in IPOF with shares/warrants or options? I’m picking up a few options for May, they’re cheap enough and trading at value currently, or close enough. These are mostly lotto’s on more rumors of a SpaceX merger, I may pick up some June instead.

This is a lotto for me specifically because I got major FOMO on this, even though I am quite doubtful. Rather scratch the itch with a small position and who knows, maybe we get episode #69 of Chamath’s podcast on 4.20, dropping a SpaceX DA

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I have large positions on 7.5c and 9c expiring in July, which are left over from big buys made back when underlying was around $9.90. Took profit on most of what I had before and am going to let what I still have ride.

I think a DA is seeming likely soon, but am not holding out hope for it to be Elon-related.

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Update for pre-DA SPAC degens:

IPOF had 28 million volume (a record) today. Warrants were also up 32%.

No tangible rumors out there to justify the sudden jolt.

We have said it many times (including in this thread)….but this might be a sign of a DA announcement coming.

I’m still in with the remainder of my 9c July position.

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Today now marks the 3rd day in a row of record-setting volume on the commons, with much of it coming on the MIAX exchange.

Warrants are still down 50% from the peak back on April 20th. That makes me think this isn’t someone trading based on a leak of information on a DA.

Draw your own conclusions…

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Do you think it could have been hedging? There are a LOT of ITM calls bought. Almost 70k expiring next week. over 100k expiring in July

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I doubt it was hedging. The 10c are barely ITM and the last several days has had tens of millions in unusual volume (which, interestingly, did not move the underlying much).

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