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SPAC Pair Trade: Long DMY Technology III, Short SPAK


  • Short the SPAK SPAC ETF.
  • Long the first public quantum company.
  • Low risk / high potential reward.
  • Looking for a helping hand in the market? Members of Sifting the World get exclusive ideas and guidance to navigate any climate. Learn More »

Quantum Computing in 2020 – What To ExpectShort the SPAK SPAC ETF

In January I wrote that if you own the (SPAK) SPAC ETF you should sell it,

Last March, a diversified basket of SPACs yielded almost 10% to their trust value, never mind their (spectacular, as it turns out) equity upside. Their warrants have since more than tripled. But today a diversified basket of SPACs trade at over a 20% premium to NAV, many as of their first day in the secondary market. Great news for any of us participating in the IPO pop, but pricy for subsequent buyers. This ETF puts most of its capital in deSPACed equities. It is convenient, but dangerous.

If you don’t own it, it is a great short against any SPAC longs. It is one of my favorite hedges for 2021’s reopening.

Long the first public quantum company

dMY Technology Group, Inc. III (DMYIU) has my favorite SPAC sponsor; they have been wildly successful in both corporate M&A and in previous SPACs. After a big success with Glu (GLUU) up more than 9x, DMY’s first SPAC up over 80%, and their second up over 60%, they announced a third promising deal on Monday, March 8, 2021. Shareholders could get rewarded with an upside far larger than our risk.

The target, IonQ, is working to build the world’s most powerful computers at the beginning of the quantum age. They are backed by Google (GOOG) (GOOGL) and Bill Gates’ Breakthrough Energy Ventures. They made the only quantum computer on the cloud on both Amazon (AMZN), which is also an IonQ investor, and Microsoft (MSFT) platforms. They are on track to build modular quantum computers that can be networked as soon as 2023 leading to quantum advantage broadly within the subsequent two years.

This transaction advances IonQ’s mission, to solve critical problems that

This article was written by

Chris DeMuth Jr. profile picture

Chris DeMuth Jr., is founder of event driven hedge fund Rangeley Capital. Its strategy is to invest in mispriced securities with limited downsides and corporate events that unlock shareholder value. Rangeley exploits the seams between other hedge funds’ mandates.

Chris runs the investing group Sifting the World, in which he shares his best ideas, deep research, extensive resources and real time updates as investments play out. The group contains an experienced community that shares specialized knowledge when members have local knowledge of opportunities under discussion. Learn more.

Analyst’s Disclosure: I am/we are long DMYIU. 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.


Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (88)

Chris DeMuth Jr. profile picture
What Happens When ‘If’ Turns to ‘When’ in Quantum Computing?
Hi Chris - I like you analyses. Quick question - IoNQ warrants are trading at $19 a piece.. what do you suggest? Sell or hold? What if company calls the warrants? Please provide your thoughts!!!
Chris DeMuth Jr. profile picture
@Trying Things thanks for the question. Lots of new thoughts on that one, but nothing new to share publicly. When I have updates, I share them on StW here: seekingalpha.com/...
Konann profile picture
New QCaaS market assessments out. $1B by 2023, $4B by 2025, $26B by 2030.

Konann profile picture
Peter Chapman quote RE the IonQ inclusion on the Google cloud,
“This partnership expands the availability and use of quantum computing ten-fold and brings us that much closer to the first killer quantum application.”

rt94103 profile picture
"Is Google’s partnership with IonQ an indication of the viability of trapped ion models?

Go ahead Google, buyout the SPAC, I dare ya'.
Konann profile picture
IonQ and Softbank. Nice!

rt94103 profile picture
@Konann Fantastic.
Konann profile picture
Kinda interesting, just stumbled across this. Looks like IonQ (32) is second only to AWS (36) in positions listed for hire, globally. Putting that PIPE money to work!
Konann profile picture
@Konann IonQ now takes the lead, 36 versus AWS 32. New posts for IonQ are mostly "recruiting coordinator" and "senior paralegals". Big tech seems to have the edge for the time being, given their deep pockets.
Konann profile picture
Attended a quantum industry webinar a few days ago and one of the themes really stood out. That of an immediate and critical labor shortage leading to a perspective of near term consolidation, for talent.
Many academic and industry incubators are popping up. And IonQ is participating primarily in: www.eurekalert.org/...
But these programs will take a while to produce talent populations. Will IonQ seek an acquisition in the coming months? As per page 45 of the investor deck: "SPAC/PIPE will enable IonQ to expand its lead, consolidate the quantum market, and attract top talent as the central company in a growing industry".
More broadly though, all the "Q" industry players are in the same boat. So competition for the mostly privately held pure play companies is ramping up fast. I was hoping for more SPAC IPO's in the Q-space.....we may not get anymore unless some savvy sponsors sharpen their pencils. Large cap may be scooping them up soon.
Some additional food for thought:
rt94103 profile picture
@Konann "the central company in a growing industry"


Thanks also for the link, food for thought indeed.
Konann profile picture
@rt94103 Well I think "central" is a bit of an exaggeration. I'll settle for "substantial" though!
rt94103 profile picture
Trouble in Quantumland... (Perhaps this actually bodes well for IonQ's trapped ionized ytterbium atoms approach?)

Quantum Computing’s Reproducibility Crisis: Majorana Fermions

"The controversy over Majorana particles is eroding confidence in the field.
Microsoft hopes to use Majorana particles to build a reliable quantum computer: the particles should make for exceptionally stable quantum bits. The scientific excitement around them is on a par with gravitational waves and the Higgs boson."

Konann profile picture
@rt94103 Microsoft is the only one pursuing Majorana "Topological" architecture. One step forward & two (or 3) back?
Moore's Law is being re-written and accelerating in many radical ways. And its still very early in the game!
Konann profile picture
Very Important announcement from $DMYI/IONQ. Two headlines in one actually. It was one aspect of the IonQ merger that was lacking. Strong on hardware, weak on software.
IonQ now partnered with Zapata, a quantum enterprise software company providing applications for data analytics. Near term, this opens many doors for revenue generation.
Long term, their announcement of integrating with IBM's Qiskit open source software developers kit opens wide doors to the multitude of software developers who would want to create their own applications.
Konann profile picture
Some interesting reads, as the big boys are flexing their muscles. A little light on near term impact, as IBM/Cleveland clinic deployment a year away. And the Google/Zoom story was an accident. But as these news stories begin to populate the media, they should serve to lift all Qboats.


Konann profile picture
Excellent post Chris.The entanglement of qubits for the purpose of networking over short distances(think rack mounting machine clusters), to long distance transfer (think quantum internet or Sat communication) can be generally thought of as Quantum Communication. As a sector, this has massive upside. The computational sector is just the beginning.DMYIU is creeping towards NAV, VERY tempted to buy more, except I need to keep a good stash of dry powder for expectations of more new "QSPAC" offerings in the near future!A good summary read on the Qnetworking/communications here:en.wikipedia.org/...
Chris DeMuth Jr. profile picture
@Konann thanks for the link.
Konann profile picture
@Chris DeMuth Jr. I think it's interesting that Mr. Chapman is suggesting 2021 deployment of the networked systems, something he had previously referred to as a more down the road event.I think that's because the competition is heating up....because the customers are lining up quickly. From the investor deck, "....even modest speed advantages will let customers win more in the market and may even expose additional currently-unexploitable arbitrage opportunities."So the quantum race is not about "Quantum Superiority", but about who can serve the greatest number of customers...who will likely be repeat customers.For any companies that wish to be competitive in their specific sectors, quantum data analytics is not a maybe-do....it's a must do, ASAP.And whereas software development has been limited to individual custom written applications, plug & play data analytic platforms are now starting to be released.apnews.com/...
Chris DeMuth Jr. profile picture
@Konann very interesting. Thanks. -C
Chris DeMuth Jr. profile picture
Quantum computing’s next trick? The power of networked clusters https://bit.ly/3df89Mu
rt94103 profile picture
Good stuff. Another angle for next-gen AI server farms, supercomputers, exascale and the coming wave of quantum is Vicor, $VICR. Their "gold bricks" power all the top performing equipment.

Power Supply Management in Quantum Computers

Chris DeMuth Jr. profile picture
@rt94103 thanks for the link.
Ramon Vredeling profile picture
Good article on IonQ and why to buy/not to buy (just yet). Published March 16, 2021.
CR144 Research profile picture
Which ticker I should buy: DMYI.U or DMYI ?
kthor profile picture
@CR144 Research

it's the same but the difference is DMYI is just stock and the DMYI.U is with warrant and if you're still confused just buy DMYI no U
CR144 Research profile picture
@kthor What is exercise date for warrant ?
dpwroc profile picture
...I was only able to find a ticker related to this company as DMYI (lll units / DMY Technology Group) at Schwab, or anywhere else, other than SA, which shows it as DMYIU...

To your knowledge, is this the same equity which you are speaking of. This is a very interesting company, for sure. Looking to enter Quantum.
dpwroc profile picture
@dpwroc ... NM Just answered my own question...

Units Vs. Stock, have you any reflection to impart on qualitative similarities and differences between the two, helpful for stock purchasers of this?
dpwroc profile picture
Nick4130 profile picture
I have been dabbling in SPACs a bit; thanks Chris! I am curious how you decide whether to favor the shares or the units... Sometimes there are pricing discrepancies where the warrants look cheap, but assuming they seem fairly valued, would you normally go for the units?
Chris DeMuth Jr. profile picture
@FOPlanner I have always only bought units. It is always based upon price. I then split them. If/when I exit, it is based on whichever is more expensive.
was starting due diligence on IonQ and started by coming across a statement from a new hire "I've long admired IonQ's co-founders, Chris Monroe and Junsang Kim, who are true pioneers in the field of quantum. I was blown away when I heard that Chris and Ken Brown used the Bacon-Shor Code for their logical qubit demonstration, as I've been watching their advancements since I was a graduate student," said Dave Bacon, VP. figured whats the point will take Chris' word for this one!
Chris DeMuth Jr. profile picture
@bent1012 I've long admired them, too.
Thank you for bringing this SPAC to my attention. IonQ does indeed look quite interesting!
thanks im long DMYI and DMYD. Great Team. Hold/buy now and you shall be rewarded. fast bounce back no doubt....watch
And yet another SPAC backed by the ubiquitous and always informative (or at least informing us), Bill Gates.
Chris DeMuth Jr. profile picture
@user1416 he has done extremely well with SPACs buying his companies.
Alina Dulimof profile picture
@user1416 check ATHN, merges with Heliogen
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