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Why Paya Holdings Inc ($PAYA) Will Be The Next Stock To Experience A Squeeze.

Sep. 20, 2021 9:06 AM ETNVEI, MA, V
Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Summary

  • Paya, Inc. is an American payment processor service that operates in North America.
  • The company provides online payments processing as well as products for face-to-face and telephone payments.
  • Paya’s services include integrated solutions for B2B payments, and the company claims customers in the education, government, healthcare, and utility sectors, as well as non-profit corporations. By the numbers, Paya.
  • Paya entered the public markets less than a year ago – in October 2020. But where the stocks above chose IPOs, Paya used a SPAC transaction to go public.

This will be my first article ever, so bear with me if it isn't the most pristine. That's how strong I am towards this company...

Although relative newcomer to the market Paya Holdings Inc (hereafter referred to as PAYA) has seen it's share price beaten down since merger. The story of the companies success to date couldn't be more optimistic. To quote: "despite posting beats on the top-and bottom-line in its latest quarterly report. Paya reported its 2Q21 results in August. Revenue was up, by 25%, to $63.9 million, outpacing the consensus estimate by $3.09 million, while gross profit came in at $33.8 million, up from $26.2 million the year before. Non-GAAP EPS of $0.11 came ahead of the Street’s forecast by $0.03. The company also clocked a ‘payment processed’ volume of $10.7 billion for the quarter, up 36.8% yoy." 

So why is the share price down? Earlier in the year (2021) Spac/de-spac plays had fallen out of favor with the larger public. Thus leaving this company at the mercy of shorts. Incredibly, Q3 brought in a favorable shift towards Spac/De-spac plays, making the current depressed price of PAYA attractive for strategic investors. No wonder there's a strong buy consensus from Analysts. Speaking of Analysts, week by week, more begin to cover the ticker. 

Onto what everyone is here for: Institutional ownership in PAYA is extremely high. Currently at 101.65% high. Which shouldn't and isn't possible. It is more than likely error caused by updating positions across different platforms. What it does tell me is that PAYA currently is nearly 100% owned by institutions thus boosting confidence in the performance and future of this stock. As well as effectively and significantly lowering the float. Why is a low float important? I will let you answer it yourself, to give yourself objectivity to counteract my obvious confirmation bias, see: $SPRT ($GREE), $IRNT, $OPAD. Spac/De-spac low float plays have made a return, garnering public and institutional interests alike.

Quote: "Since PAYA was originally a SPAC, it has warrants. A warrant is basically a call option with a strike price of $11.50 and a 5 year term. As stated in their S1, PAYA originally issued 17.7mil warrants (which would eventually dilute into the stock), however last week they dropped the news that they would be calling for a “cashless redemption” of the warrants at a ratio of .26 shares per warrant, and changing the dilution from the long established 17.7mil to 4.6mil." The results were released, and PAYA ended up recouping more warrants than expected. Protecting it's low float while more importantly showing investors the company is strong and without need of cash via dilution. 

Analysts have PT ranges generally between $15 and $18. My PT is $20. Just as my PT for $SPRT was 20, back when it traded at $6. One thing I've picked up on throughout the year while playing these squeeze stocks is on patterns and setups. Around 11% of the float is currently shorted. However my estimations brought me to ~9m available shares. With ~14m shares shorted. Over 100% shorted. I'm no expert and this is certainly not financial advice. The CTB remains low due to there being no real demand for shares yet. PAYA goes relatively unnoticed on all accounts whether it's the news or social media. The moment the frenzy begins, I'm sure there'll be a significant shift in the Ortex data presented. One that will reflect just how advantageous the position current holders are in right now.

The juicy part: There are clearly a large amount of naked shorts here. That I'm certain. The ticker has had a low amount of volume for awhile. I've tracked it over a month. And routinely witnessed it's price swings over the pass two weeks- 20 to as high as 40cents in either direction, while only receiving <800k in trading volume. It's been consistent enough to reassure me of just how low the true float is here. And make me smile thinking about what will happen once this gains wider recognition, and the trading volume increases into the millions. What will happen when PAYA becomes the inevitable "meme-stock" as have most of the tickers with this setup. What will happen when news coverage sheds light on Paya Holdings Inc, or, when popular forums like WallStreetBets begin discussing it. Speaking of Reddit forums, WSB has a strict rule of only allowing stocks with a market cap at $1.5b to be discussed there. PAYA is currently sitting at $1.43b. 

Will there be much better written articles than what I have written here today, regarding PAYA and it's potential, that remains to be seen. My PT is $20, a 78% increase. I believe this to be just slightly above conservative. 

Analyst's Disclosure: I/we have a beneficial long position in the shares of PAYA either through stock ownership, options, or other derivatives.

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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