So I had an idea, but was wondering if anyone knew the specifics of how SPAC redemption works to see if this is viable or not.
So the theory is relatively simple, in order to redeem, you need to be a shareholder of record on the deadline day. Which means the NAV floor is removed at the close of trading 2 days before. For example, for GGPI, the record date is 6/17, so yesterday was the last day you could buy and still redeem. In order to play this, on 6/15, you go long GGPI on one account, and short sell GGPI in a different account. On the day after the floor removal, if the SPAC goes down, you cover the short and redeem the long, if it goes up, then you just close out both positions (or transfer one of the positions to the other account to net them out).
So the question here is, if you close out the short AFTER the floor removal, you are the short seller of record on deadline day. Can you still receive a redemption notice and be obligated to pay the NAV value in exchange for the shares?
Yes, we do have some ESSC and AGC experts in here.
Not sure but I submitted a request to redeem my ggpi shares for nav this am pm. I got a email response saying that the cutoff for redemption is 2 days before nav offer expiration which is fri 6/17. So I should of submitted redemption request on weds 6/15. The email did say their is still a good chance of the redemption being filled but not guaranteed
That might be broker dependent, but you can definitely redeem up until Jun 17 with some brokers if you are the holder of record on that day.
It is not wise to short a spac shortly prior to merger. If the shares you borrow are redeemed (and they most likely will be) your short will be closed at NAV price. And you might end up like this guy who tried to do this.
He shorted a few thousand shares and his borrowed shares got redeemed (unbeknownst to him). In an attempt to close his short he bought the same amount of shares in an attempt to close his short. So he ended up taking the loss in his short and long position.
Don’t do this unless you know what you’re doing.
Well, this is exactly what I wanted to know, thanks.
So the answer is yes, if you are the short seller of record on deadline day you can get a redemption notice even if you covered your position.
So this idea isn’t viable, at all.