A Silver Lining to Last Weeks Market Correction

The stock market just had one of its worst weeks since last October. 

Energy and tech stocks have been leading the charge lower. As usual, there are lots of suggestions as to what the cause of the selling is this week, with everything from the short squeeze mess to potential future Biden regulatory orders.

I am just going to chalk it up to more sellers than buyers this week.

There is a potentially positive development from the selling though. This afternoon I see several Special Purpose Acquisition Companies (SPACs) that have fallen back towards the magic $10 level. 

Keep in mind that when you buy SPAC shares below the trust value, you are locking in as close to a guaranteed positive return as you can ever find in the financial markets.

Remember, there is a right way and a wrong way to trade SPACs.

We have not talked about the SPAC trade as much in recent weeks, simply because I could not find any trading under $10. 

SPAC speculation got so prevalent that just being a SPAC was worth a price bump of 5%, 10%, or even more. I have seen some SPACs that have no deal but a great story jump as high as $15 this year.

But in my experience, paying too much for a good story usually ends badly.

Two SPACs to Keep On Your Radar in February

Healthcare Services Acquisition Corp (HCAR) has traded as high as $10.52 since its IPO in early January. But the shares are now slipping back towards the redemption value of the trust at $10.

HCAR is looking to buy a business in the healthcare industry, with an emphasis on technology-enabled healthcare products and services. It is a business that could potentially offer high growth prospects that attract story buyers and pop the price a bit when a deal is announced.

The executive officers all have experience in either the healthcare or financial industry. They have the contacts to source attractive deals and the experience needed to run the company post-merger.

It’s time to add HCAR to your watch list, but please don’t buy it unless it goes to a discounted price. 

Cascade Acquisition (CAS) is getting close to the magic $10 level as well, after pulling back from its post IPO high of $10.41.

Cascade is looking to buy either a financial services company or a real estate tech & services company and they have a deep roster of talent involved in the company.

CEO Jay Levine is Chairman of the Board of Directors of OneMain Financial (OMF), one of the largest lenders in the United States with 1,800 branches in 44 states. 

Before OneMain, Mr. Levine was President, CEO, and a Director of Capmark Financial Group, a commercial real estate finance company, as part of its corporate restructuring from 2008 until 2011. 

Advisor Daniel Hirsch was an advisor on a SPAC sponsored by Trinity, which completed its initial business combination in 2019 with Broadmark Realty Capital Inc. (BRMK), an internally managed mortgage REIT.

Mr. Hirsch was a Managing Member for the Real Estate Group, Managing Director and Legal Counsel of Farallon Capital from 2003 through 2016. He was also on the board of the Macerich Company (MAC), a real estate investment trust investing in regional malls, since 2018, and is a Director of Playa Hotels and Resorts (PLYA)

These guys have the contacts and resources to get a deal done that can generate some excitement.

Again, investors that are interested in playing either of these two SPACs need to wait for the shares to be available at a discount.

If the discount is there though, both of these companies have the potential for significant price increases when a deal is announced. 

Be patient. Play it the way I have showed you. Profit.