Today's Best SPAC: DMY IV

Summary

• 8 new SPAC IPOs today.
• T-bill downside and equity upside.
• Here’s my favorite of today’s.
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Summary

Buy DMYQ.U, the best new SPAC opportunity, after its $10 IPO this morning. Units will be available in the secondary market by noon. If you have a problem finding them, just ask your broker (instead of asking this author).

SPAC

$300 million dMY Technology Group, Inc. IV (DMYQ.U) trades for the first time on Friday, March 5, 2021. When you buy a unit, you get a share of equity, upside in the form of a fifth of a warrant that you can exercise later for $11.50 and downside protection in the form of $10 of trust value. They describe their target as,

Companies that have created, or enabled the creation of, compelling mobile app experiences with significant growth in segments such as gaming, entertainment, education, work productivity, e-commerce, financial technology, and health and wellness, as well as companies developing disruptive and key enablement technologies for consumer-facing apps in these segments, such as artificial intelligence ("AI"), machine learning ("ML"), cloud infrastructures and quantum computing, as well as environmental, social and governance ("ESG")-focused businesses and companies developing satellite and space rocket technologies.

Management

CEO Niccolo de Masi is one of the most experienced and successful SPAC sponsors of all time. He is in the very top tier of SPAC sponsors. He was named CEO of Glu (GLUU) in January 2010 and subsequently also served as chairman. Investors did extremely well under his leadership.

When he got there, shares traded for around $1. Today, Electronic Arts (EA) is buying the company for $12.50 per share in all cash. The deal is scheduled to close sometime in June.

Niccolo was hired as president of products and solutions at Resideo (REZI) in February 2019. Investors have made about 24% since then.

History

dMY is my favorite SPAC sponsor. Their prior deals have earned them a lot of confidence. dMY Technology Group, Inc. (DMYT.U) deSPACed Rush Street Interactive (NYSE:RSI). IPO investors got a share and a half of a warrant for $10. Today, the shares are at $16.16 and the warrants are at $4.52, so IPO investors made over 84% on our original investment.

dMY II (DMYD.U) closed at $16.05. They are deSPACing Genius Sports.

dMY Technology Group, Inc. III (DMYI.U) is in talks to deSPAC IonQ to make one of the very first public quantum computing companies. Investors are likely to include Silver Lake, Michael Dell, and Bill Gates. Shares last traded at $12.66.

Downside

Your downside is protected by $10 of cash in their trust.

Upside

In the past, this sponsor has made investors almost 10x our money on GLUU, over 80% on the first dMY SPAC, over 60% on the second and over 25% on the third so far. The average SPAC performance is over a 50% return. The sponsor's corporate history goes back further and has an average return of over 500%.

Conclusion

Your potential risk is pennies and potential reward is dollars. Today is the best time in months to buy SPACs and this is today's best. If you own only one SPAC, it should be this one.

Analyst’s Disclosure: I am/we are long DMYQ.U. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

https://seekingalpha.com/instablog/957061-chris-demuth-jr/5549358-legal-disclosure

Comments

[William Rilling]

Not sure you’ll see this. Wife Peggy CHRISTY was going through her Dads old files & came across this set of DEMUTH STEEL PRODUCTS. I somehow lost your email, we exchanged info about your Dads/Grandfathers Co. & talked about it’s relationshipship with Marietta Concrete.

I’ll forward photo of it if you respond to [e-mail]

[Chris DeMuth Jr.]

Done!

[Gtoz]

@Chris DeMuth Jr. So the stock and warrants should now be tradeable separately, 52 days after prospectus. I own DMYQU. You previously said in the comments, that when a merger is effective, the stock and warrants will automatically be separated in my brokerage account. You also said that premerger, once separable, to separate the Units into Stock and Warrants one has to actively advise his brokerage to do so. If I expect this thing to go through to a merger and hold my units until then, why should I bother to separate them now? You have said often the trade is in the warrants. So I could still just buy some extra warrants.
Also, I noted now that GENI (dmyIII or DMYI) is trading that the warrants dropped 6% today while the stock change was negligible. Why the dichotomy? I have no data on warrant volume, so suspect it could just be low volume, no limit trades. Do you agree or could there be something else in play?

[SPACtotheFuture]

@Gtoz
If there's an arb opportunity between warrants and common shares...take advantage. Pretty simple and fairly common occurrence. Common shares closed at $21.56 implying warrant value of $10.06. Warrants closed at $8.80...so trading at a nice discount. Could warrant discount indicate the market expects the common stock to fall? Sure...but this isn't NKLA, QS, or CCIV...all of those were trading WAY over the SPAC valuations and warrants traded at signficant discounts for good reason, IMO. More than likely its an arb that will close shortly.

Also, GENI was DYMD

[Gtoz]

@SPAC to the Future Appreciate the quick response and attention to detail. My faux pas on GENI having been DYMI (..I being the 3rd now going with IONQ, D is the 2nd, details are important). I have www.dmytechnology.com/... bookmarked and wish they had a sign up email for latest news.

[bazooooka]

@Gtoz You can just hold and they will separate automatically post merger. Some brokers will still charge you and other brokers do it for free. Maybe wait and see and only call in if you see a charge you'd like to contest. As for the trading the units and the sum of the parts often can diverge so that really is just noise.

[steppm2003]

Does the trust and warrant still apply today? 4/8/21

[Chris DeMuth Jr.]

@steppm2003 yes.

[LoStInvestor]

Ok Chris, I have a ticker question for you here. Please don't shun me! It's not related to buying the security.

I bought this thing the other day, but seeking alpha doesn't appear to have added it as a useable symbol yet, they only have D/T/I. Do you know how/when that happens? I want to have it in my portfolio so that I get any updates or articles about it and can see it in daily performance.

[Chris DeMuth Jr.]

@LoStInvestor,

I ask [e-mail]...

They ignore me...

I ask [e-mail] again...

They ignore me again...

I ask [e-mail] again...

They let the matter season for a week or so...

Then they add it.

[Chris DeMuth Jr.]

$RSI updated slide deck https://bit.ly/30uxA6Y

[Chris DeMuth Jr.]

Rush Street Interactive Announces Fourth Quarter and Full Year 2020 Results http://bit.ly/3bDlVJA

[Bartleby]

De Masi has no credibility. I’ve followed GLUU for years and listened to every one of his quarterly conference calls. He was always over-promising and under-delivering. Can’t trust a word he says. I would not invest in any endeavor that he is involved with. Be careful. Whatever he says, take it with a grain of salt.

[Chris DeMuth Jr.]

@Bartleby thanks for commenting. I appreciate getting a different perspective.

[ashvenka]

@Chris DeMuth Jr. ....bought some on Friday. On another note, CNBC announced that "Flipkart" is having talks with SPACS...any idea which one?. www.cnbc.com/...

[Chris DeMuth Jr.]

@ashvenka not sure but it would be a big one.

[RuleNum3]

What...no TL/DR for this one? :)

dataEngineer

[Chris DeMuth Jr.]

@dataEngineer I should bring that back... flipped it into a summary to not let TL;DR overstay its welcome but will revive.

[isurfdoyou]

Thanks for opening my eyes to SPAC's. The main points I learned from you were don't overpay and to use limit orders. If you had your limit orders in this week you were handsomely rewarded. Good sponsors with a track history goes along with it.

[Chris DeMuth Jr.]

@isurfdoyou exactly.

[John Rhodes]

Sold a pinch of XOM LEAPs I’ve been holding and enjoying. 

(Way more behind that...)

Redeployed to this speculation at about $10.25 and it’s nice to get in so early.

Market pressure pushed this one down a little, it feels like. General market pressure re: tech, I mean.

I don’t think it’ll be hard to hit 10-20% gains in short order, with high IRR. Feels like the “trick” will become, hold or sell?

Oppt’y costs. Always oppt’y costs.

Thanks for the spotlight on this one. Another asymmetric bet...

[Chris DeMuth Jr.]

@John Rhodes you're welcome. My favorite time to put money to work in a while. I put more to work Friday than in a long time ($17 million in this and another >$3 sprinkled around here and there).

[John Rhodes]

@Chris DeMuth Jr.

That's a good sized bet and I see why you've placed it. +1

My bet is far smaller... but it's not $0.00 either.

We do what we can, how we can, when we can, eh?

Have a great weekend.

[Chris DeMuth Jr.]

@John Rhodes you too.

[Alientrader]

How do you reconcile the fact that as an investor in this SPAC, I would not know what percentage of the company my SPAC would own after the pro forma valuation is done upon closing the deal. I speak from personal experience, having been devastated by the closing on CCIV. It seems to me the only way you can be assured of a favorable return is to trade the position before the merger vote is done. If I really liked the company after merger, couldn't I just buy it then, without months of analysis and anxiety?

[Chris DeMuth Jr.]

@Alientrader,

If I really liked the company after merger, couldn't I just buy it then, without months of analysis and anxiety? Yes.

[SPACtotheFuture]

@Alientrader
Comparing cciv to just about any other SPAC is a mistake. A winning SPAC strategy is to buy units near $10....not to speculate on rumors that have led to a SPAC trading at 5x cash without a LOI. Not all merger votes are sell the news events that burn the longs...because at most merger votes the SPAC isn't trading at $60.

I would argue the strategies Chris preaches actually require less research and analysis than trying to buy the target company after deSPACing when the valuation is, typically, significantly higher.

[hdh12]

@Chris DeMuth Jr. The only question then is what price he pays. These are not risk free.

[Mktneutralhedger]

I think new offerings should be put on hold. Too much paper to digest. Investors do not even have time to evaluate the companies already listed and the deals on the table .

[Chris DeMuth Jr.]

@Mktneutralhedger it is a lot.

[Bubrub]

Great shout Chris. Been scooping up the fire sale on LMACU, GMIIU, BTNB, PSTH , CCIV (holy hell CCIV is down a lot). Happy to add this new baby SPAC to the family. Hopefully it is still nearish the $10 mark on Monday, I can't tell as finding price data on it currently seems to be impossible, no website has it, including this one (should be some data if it has been trading since noon today on secondary market, no?).

[grendelbane]

@Bubrub

E*Trade tells me that DMYQ.U closed at $10.28 this afternoon.

There was at least one after hours trade at $10.26, and the after hours bid and ask has move up slightly.

I hope this helps.

[B00timer]

@Bubrub Yahoo has had it since it opened (as DMYQ-UN) finance.yahoo.com/...

[Bubrub]

thank you @grendelbane and @B00timer

[zip6485]

Chris,
What a day!
Mr. Market gave me a second chance to load up more warrants of IPOF and BTWN. Now I just sitting back, see what will happen.

[Chris DeMuth Jr.]

@zip6485 great to take advantage of such opportunities.

[mkonrad1282]

Hi Chris, been having a hard time wrapping my head around the mechanics of the trade. Decided to open a small position here based on your recommendation as an educational took. If a merger fails to go through, how do I redeem the trust value? And if a merger does go through should I expect to see 2 positions in my brokerage account, one being shares and the other being warrants? Thanks in advance and if you don't feel like getting into detail can you suggest an educational resource that would help get me up to speed? Cheers

[Chris DeMuth Jr.]

@mkonrad1282,

If a merger fails to go through, how do I redeem the trust value? If they liquidate, it is automatic. If you redeem, you simply ask your broker.

And if a merger does go through should I expect to see 2 positions in my brokerage account, one being shares and the other being warrants? Yes.

Thanks in advance and if you don't feel like getting into detail can you suggest an educational resource that would help get me up to speed? corpgov.law.harvard.edu/...

[mkonrad1282]

@Chris DeMuth Jr. Thank you!

[Chris DeMuth Jr.]

@mkonrad1282 if my ideas are of interest, please consider joining StW! seekingalpha.com/...

[Michael Dolen]

Bankable management doesn't mean you can bank on a SPAC these days.

Even better tech management than $DMYQ.U was $RTP. Despite Mark Pincus and Reid Hoffman names attached, that thing was a dud as soon as deal was announced.

Bottom line is that oversupply has made the SPAC greater fool game not so certain anymore.

[Chris DeMuth Jr.]

@Michael Dolen thanks for commenting. I think that I basically agree with you. That being said, just looking at my RTP investment, I'm not too dissuaded from that cautionary tale. It has been 169 days so far. It has returned 12%. If I can compound at that rate, I find the results pretty satisfactory. My downside is my opportunity cost. And if capturing a 25-30% IRR over the long-term helps me build relationships to get far hotter founder share opportunities along the way, often making 10-20x that investment, then that helps quite a bit too.

[Michael Dolen]

@Chris DeMuth Jr. Totally agree. When you are getting in at NAV makes sense. For the folks who bought RTP at $12 or whatever, they're SOL at least in the short term.

[Chris DeMuth Jr.]

@Michael Dolen yep.

[B00timer]

Only 1 comment on a new @Chris DeMuth Jr. SPAC article? (And it's ye olde ticker question!) The SPAC climate is certainly chillier than of late, and only a 25 cent pop on this one, I'm in for a few.

[Chris DeMuth Jr.]

@B00timer the Venn Diagram of "people who can't find tickers" and "people who don't read the summary" and "people who don't take a hint" has quite a lot of overlap.

[Travelbar]

@Chris DeMuth Jr. Haha. Good 1

[grendelbane]

I am beginning to feel like a member of the SPAC FORCE.

[Chris DeMuth Jr.]

@grendelbane ha.

[stackre]

Hi, I cannot bring the symbol up DMYQ.U
Help please

[Chris DeMuth Jr.]

@stackre thanks for the question. As per the summary, the best thing to do would be to ask your broker.