We discovered what we fancy one of our best speculative plays in a long time. We see the potential for a ten-bagger in the cards over the next year. We are banking on being able to cash in on early winnings (plus some of our initial investment) and letting the rest ride.
This is a truly special situation surrounding an under-followed and complex merger. This leads to an information arbitrage (“InfoArb”) opportunity for us and our members until news breaks that we think will make other investors understand what we deduced from our analysis ahead of the market. One of our favorite InfoArb angles is investing in seemingly complex stories that become easy to understand.
We are not going to tell you this idea is a risk-free investment choice. In fact, it is a play for the hardcore risk-taker à la Jesse Livermore or Andre Kostolany who can think about the world in terms of probabilities. To be honest, it is an even coin flip. It’s either a total loss in the worst case, but at least 5-times your original investment with a win. This is not a pick for amateurs!
Asset Class – Warrants/Units
Industry – Hot Technology
Catalysts – Merger consummating will lead to instant re-valuation of warrants and units
Summary of Circumstances That Could Lead to Big Gains
- The company is a shell in the process of acquiring a sexy, yet profitable, technology company.
- The acquiree has impressive customers and stakeholders including Silicon Valley behemoths
- After reviewing merger documents and analyzing process requirements, we feel the chances of a merger consummation are higher than what is implied by the the valuation of the publicly traded warrants.
- The acquiree is conservatively valued in the transaction and has a good chance to get overpriced if its growth trend continues as a public company. The warrants that we are targeting have multiple years until expiration.
- As always, we temper our analysis with caveats. In the case that the transaction falls through the warrants will likely expire worthless.
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