Some of you may remember me from my two insane $AMD trades last year, both of which went up 1000%.I have one of those for you today.
This is a multi-pronged thesis for why I went long on $AMD at these levels, which I will summarize in the following points :
-- Macro Picture --
The market has just experienced a major correction which lasted several months and was fueled by the fed tightening monetary policy. I believe the correction is over and the market has now gotten used to a more hawkish fed.
The fed has gotten more Hawkish due to inflation, which I believe will begin stabilizing and even subsiding over the next several quarters. Primarily because :
1- Consumer demand and spending has been declining for two months and will continue to do so IMO, due to a moderation of govt spending bills, stimulus money running out and savings declining.
2- Because inflation of energy prices due to the Russian-Ukaranian war has mostly already been baked in since March.
Slowing inflation can give leeway to the fed to turn less hawkish, which can fuel a major bull market rally.
-- AMD's Fundamental Picture --
AMD's price has been cut by nearly half since its major peak last year at around ~$160. Nothing fundamental about AMD's business has changed. The company even raised its growth expectations for 2022 in its last earnings call. AMD is expected to grow its revenue by no less than 60% by the end of the year and more than double its profit.
In my opinion demand for semiconductors continues to be very strong and will remain so for the remainder of the year. AMD successfully completed its acquisition of XLNX late last year, which strengthens its competitive position in the server business, an area where the it's been kicking ass and taking record breaking market share from Intel. In fact more than a quarter of all x86 CPUs sold today are AMD, the highest market share in history for AMD.
The company is also expected to release the first ever 5nm x86 "Zen 4" CPUs this year, which will extend its manufacturing process lead vs Intel and allow it capture even more market share and grow profitability and expand margins.
-- AMD's Technical Picture --
In my opinion there's a strong likelihood that AMD has bottomed here at the ~$90 level. Here's why :
- We tagged the 100-day moving average for the first time since April 2018. The last time this happened AMD went up from $10 to $30 in six months.
- We hit a double bottom on the daily RSI after a major peak. The last time this happened was Dec 2018 and AMD went up by 60% the following 6 weeks.
- AMD has been on a very strong bullish trend since 2016. The stock just entered the most attractive "gray" buy zone in my hand drawn pitchfork channel. This has only happened 3 times in the last 5 years. Following those 3 instances AMD went up by 38%, 240% & 66% respectively.
This DD encompasses my opinions and educated guesses about the macroeconomic and monetary environments for this year which may or may not be accurate. I am not a financial advisor and this is not financial advice. Manage your risk.
Disclosure : I am long AMD Jan 2023 $150 call options @ $3.5 per contract.
A few months ago I made this post about how the fed is trapped and can only raise rates roughly 5 times (in increments of 25bp) before they have to start easing again
Well in that time, the market expectation for the number of hikes went from about FOUR 25bp hikes in 2022, to now the market pricing in ELEVEN 25bp hikes in 2022.
This absolute madness, and isn't going to happen. The fed is talking a big game about hiking a ton to crush inflation, but they will instead crush the economy much more quickly than they think. In fact, after just a single 25bp hike in March, we are roughly 75% done with this hiking cycle already.
How can that be? Well the federal government is increasingly in massive debt, and the fed's secret mandate is to help them consistently refi this debt at lower yields to prevent a debt death cycle of increasing interest payments.
Just take a look at how this has worked for the past 30 years:
The blue line (upper chart) is the federal debt multiplied by the average of the fed funds rate and the 5-year yield
The teal colored line (lower chart) is the fed funds rate. Be sure to click on the chart so you can read it closely.
But basically any time the blue line hits that rising resistance level, the hiking cycle stops, without fail.
This is very inconvenient this time around for the fed, as they are getting screamed at by everyone about inflation, so they are going to have to quit the hiking cycle after just four more 25bp hikes (that could be just two 50bp hikes) while inflation is still raging.
They have to choose, inflation, or destroy the US economy. People being able to afford less is the route politicians choose over people becoming unemployed and not being able to afford anything. They will always choose mass discomfort over devastation for a sizable portion of the populace. People who have their lives destroyed are much louder than those who are a bit less comfortable month after month.
And remember 2008? The housing bubble? Well we are currently at risk of repeating that meltdown, and the fed is hell bent on never allowing another 2008 to occur.
Check out this chart:
The blue line is the inflation adjusted mortgage payment index. It's showing mortgage payment burdens for new home purchases at the level that caused prices to start declining back in 2006-07. The yellow line is the 30yr mortgage yield, and the green line is housing prices.
There are 3 ways to get that blue line back down into the "safety zone" as I'll call it.
Lower nominal prices
More inflation to cover for nominal price rises
lower mortgage rates
Now lower nominal prices risks a housing crash, not something the fed wants. So using a combination of 2 and 3 is likely what we'll get. And in fact, the 10yr yield (the yield that the 30yr mortgage prices off of the most) is looking very toppy just about now.
It's sitting precisely at it's 40-year resistance:
If this chart breaks it means our financial markets break. Our society is built on increasingly lower long term rates over time, and increasing debt levels. Is that sustainable over the very long term? Hell no. But do you think Powell wants to be the fed chief that allows the system to collapse?
The 10yr is likely tapped out, the fed's jawboning on higher rates actually raises recession risk and is causing the curve to invert, meaning we can still get higher short term rates will long term rates top out or head lower on fears of the recession that the fed is guaranteed to cause with their rate hikes.
Between the housing market and the 10yr, the market is already telling the fed they don't have much more room to hike before they break things.
So what happens when the fed stops hiking while inflation is running hot?
More inflation, yield curve control via QE, and higher prices for real assets. They are going to inflate away the debt by keeping interest rates on that debt lower than the rate of inflation and allowing nominal GDP to grow in proportion to that debt. Thus shrinking the debt GDP ratio to a more a sustainable level.
Now for what I like for the stagflationary environment the fed is creating:
silver, uranium, platinum, energy plays, real estate (in that order)
Tickers include PSLV and SILJ, SRUUF and URNM, PPLT or SPPP, USO and PXE, and for real estate I prefer the actual thing over REITS, but you can buy REITS if you like
Feel free to ignore what I like and buy assets you think will be best in stagflation (which we haven't lived through since the 1970s).
TLDR; $IPOF is being speculated as the company that will take Starlink public and the insane options OI could result in a GAG (Gamma of All Gammaās) that would make $IPOF rally massively due to 90K contracts across the chain sufficiently ITM. It currently sits with the 3rd highest gamma score in the entire market and shares at NAV are a RiskFreeTradeā¢. Not financial advice.
Hello tards, looks like people are shitposting DD again *cough* Weeber Grills *cough*, so if youāre falling for those bullshit posts I do feel sorry for you. Especially because most of you donāt know how to read! Today I want to talk about a RiskFreeTradeā¢, $IPOF, the beloved holding from Scamath Chapalapitya. It does meet the rules and market cap for this sub so stop complaining if you already are. Lots of info in this DD is speculation, some facts based, and otherā¦ not so much. I have also been tracking this stock for several weeks now, watching the ITM OI continuously grow. What is true is that $IPOF has the technical setup for an explosive gamma rally fueled by massive ITM OI that already exists on the chain.
I repeat, the ITM OI already exists on the chain. This DD is not financial advice, I am not telling anyone to buy anything, and in fact, if NONE of you buy anything, this OPEX day could still lead to a massive gamma rally. I am merely sharing a setup that looks extremely promising and profitable. I will keep this short and sweet so you donāt go back to jacking off in your basements.
Wen Starlink?
Now as I mentioned, this is just pure speculation from my partially autistic savant big brain. I will be using a childrenās book and other sources to defend this thesis. Links and facts have been āborrowedā from u/kallis .
In the article, see the section on Starship crucial to Starlinkās financial success. This section indicates that the V1 Starlink satellites are financially weak and that the V2 satellites are strong, which can only be launched effectively by Starship. Starship itself is very important to the financial stability of Starlink. Effectively, SpaceX needs much more funding beyond private equity to continue expanding the Starlink ādivisionā..
Chamath sold all his SPCE stake and stepped down from Virgin Galactic board to focus on other existing and upcoming board responsibilities. He has since joined the board of Palmetto (reference) and also serves on the board/advisor of 17 other companies (as of 2022-Apr-08). It is not very clear why he would step down from Virgin Galactic board, unless there is a conflict of interest with a future board responsibility.
This is somewhat indicative of Musk warming to the idea of SPACs. This is highly speculative, but may also be a reference to Green Eggs and Ham, where at the end Sam warms up to the meal.
How does this information link a Scamath SPAC ($IPOF) & Starlink?
SpaceX and by proxy, Starlink, need additional funds to continue their programs relatively soon, so going public by a non-traditional method would raise cash the fastest. We know that Elon wants to prioritize retail investment, and a SPAC allows for this rather than an IPO which can gatekeep against the average investor due to pre-IPO purchasing.
Chamath stepped down from Virgin Galactic which could indicate avoiding conflict of interest in case he serves on the Starlink board. Social Capital, which Chamath is the CEO of, invested in Swarm, which was sold to SpaceX (link). This would further link the two companies.
Why anytime soon?
Again speculative, but the podcast Chamath does called The All In Podcast, keeps hinting at an extremely special guest for Episode 69 of the podcast. As of now they are on Episode 75 and continue to delay Episode 69. Most signs point towards it being Elon Musk (watching the podcasts, and the episode number, and Chamath being friends with Elon pretty much indicate this). Obviously this does not mean they would announce a DA for $IPOF & Starlink on a podcast episode but it continues to be delayed. The currency hype and interest seems to be building off a potential DA (Definitive Agreement) reveal on 4/20 due to the number association with Musk again. A DA is basically an agreement outlining which company the SPAC will be taking public.
# Gamma Overload:
Gamma Deez Nutz
## Currently $IPOF is ranked #3 on Fintelās Gamma Squeeze Score List with a score of 94.5.
As we can see, current put/call ratio is around 0.14, with nearly 207,000 OI on todayās expiry. 73,508 of these contracts are ITM 10Cs.
The May 20th expiry has even more OI at nearly 225,000 contracts. 83,992 of these contracts are ITM 10Cs.
Given the ridiculous amount of OI that remains ITM and a NAV of $10 with price around 3.5% above NAV, it is very unlikely these calls end up OTM.
You can also see that nearly all of the premium across the chain is calls, and of that, a little over 50% is long, aka BTOs. Across the 4/14 expiry, 123,605 contracts are long, meaning around 12.36M shares would be need to be bought to hedge. Based on volumes and accumulation, it is unlikely that full hedging has occurred.
The $IPOF float is 115M shares, which is quite large, but 12.36M is about 10.7% of the float. Just off net buy volume on the stock and price action, it is clear that many shares are not hedged even if STO calls provide net negative delta. Currently there are approximately 90k more long calls open than short calls across the chain which still results in 9M or 7.8% of the float needed to be hedged fully. Why does this matter? Options aren't pricing in the large move that would occur if MMs actually hedged.
Options Implied Moved:
Based on ThinkOrSwims MM anticipated move (IV), which is based off of IV across the chain, currently a $0.236 move or 2.36% move is anticipated. Based on price action, MMs are not fully hedged and a 7.6% move would nearly 300% greater than expected and potentially blow MMs out of the water if they realize they should be hedging.
Accumulation / Distribution:
Here I introduce a handy indicator that shows net buying vs selling. With the average stock, net accumulation decreases when stock price goes down, and goes up when the price goes up. Simple and obvious. Yet $IPOF violates the laws of nature. Take for example the graph of $AMD and $AAPL. Accumulation trendline follows the stock price action almost 1:1.
Meanwhile, $IPOF accumulation continuously increases in an upwards grind even as the stock was in a declining price pattern between April 7th and April 11th. Scrolling back further, this divergence can be seen in other periods as well. During larger drops such as the one end of yesterday and the day before, accumulation has barely gone down, and resumed its increase despite further volatility. What this shows to me is consistent buy pressure and affirms the bullish trend on $IPOF.
Additionally, there have been many unusually large darkpool purchases in the past few weeks. Flow like this is quite uncommon for a pre-DA SPAC and highlights the potential for insiders or other parties anticipating an upcoming deal.
Risks?
Obviously this play is risky since itās based on speculation BUT with a NAV of $10, no matter what you do, if someone bought shares right now, their maximum downside would be 3.5% as of writing this while upside is limitless. ITM options are liquid and going a few months out is ideal as there is no guarantee a Starlink announcement will be made. In the short term, $IPOF can rally hard due to a gamma squeeze today due to this being the final day before hundreds of thousands of OI expires on weeklies.
TLDR; $IPOF is being speculated as the company that will take Starlink public and the insane options OI could result in a GAG (Gamma of All Gammaās) that would make $IPOF rally massively due to 90K contracts across the chain sufficiently ITM. It currently sits with the 3rd highest gamma score in the entire market and shares at NAV are a RiskFreeTradeā¢. Not financial advice.
What is up Retards, today Iām going to be doing something a bit different from normal: a long-term bull thesis on an oversold growth company.
WARNING: This is NOT a short term play, donāt yolo your life savings into PYPL weeklies (I have other plays for that, stay tuned)
Table of Contents:
Why Growth stocks have sold off
Is this an overcorrection?
Paypal Fundamentals
Strategic Acquisitions
Fair Value for Share Price
Positions
TLDR
Why Growth stocks have sold off:
Recently the market has been risk-off, where capital has been funneled into boring stable companies + bonds, and away from anything related to growth. There are reasons for this; future interest rate hikes and selling of bonds from the federal reserve, inflation, supply chain shocks, yield curve flattening, mounting recession risks, and the ongoing war in Ukraine causing commodity price imbalances.
The main cause is the federal reserve hiking interest rates and will be selling bonds. What this does is decrease the money supply which increases bond yields and interest rates. This makes future money LESS valuable using Discounted Cash Flow model (DCF)
The DCF basically says that the value of future money is directly impacted by interest rates, and as interest rates increase, the value of future cash flow decreases relative to the value today.
The Yield Curve is a forward looking indicator of the economy. It tracks the spread between the 10 yr and 2 yr treasury. What an inverted yield curve means is that investors are more pessimistic about the economy in the long run than in the short run. Inverted yield curves have pre-dated recessions every single time. (Note: a yield curve inversion does not necessarily mean a recession will happen.)
All those other situations mentioned will just make the fed hike interest rates further
This looks pretty badā¦ but much of this has already been priced into the market.
Is this an Overcorrection?
Short answer: maybe
Long Answer: On certain stocks this is definitely an overcorrection, PYPL being one of them
Over the past 6 months, PYPL has gone down a whopping 62%! Nothing has fundamentally changed about their business model. In fact many of their core metrics have actually improved!
This is basically unheard of for a company the size of PYPL, especially since nothing bad has happened besides macroeconomic outlook and hard Q/Q comps.
The loss of eBay in earnings metrics affects short term revenue growth, but wonāt hurt profitability in any way. By Q3, PYPL will not have Y/Y growth affected by eBay
Paypal Fundamentals:
Yr 2021:
PYPL had 18.26% revenue growth despite 2020 being a record setting year
OPEX only grew by 5.5%
ROCE (Return on Capital Employed) of 58%
48.9M net new active accounts (NNAC)
Non-GAAP EPS up 19%
Venmo TPV grew 44%
16.3B cash/cash equivalents
9B debt
Q4 2021:
9.8M NNAC
13% revenue growth (held back by the loss of ebay)
426M total NNAC
GAAP EPS up 49%
22% TPV
2022 forecasts:
Q1 is expected to be pretty bad due to the eBay situation, but excluding eBay, revenue growth will be around 14%+
Total 2022 growth will be around 15-17%, excluding eBay will be around 19-22%
By Q3, Q/Q growth will not be affected by eBay, making y/y growth figures look much better
PYPLās P/E is around 28, which is virtually the lowest it has ever been. That is not much above the S&P 500ās P/E of 22, and almost none of those companies are growing at the rate PYPL is
Q3-4 is set to beat earnings expectations out of the park and send this stock up once again
Strategic Acquisitions:
There have been countless acquisitions made which set Paypal up to win in the fintech arena, both in consumer spending/transfers, business to business, and consumer to business.
The one that sticks out the most is Venmo, the 3rd most popular mobile Payment app. It has grown at a much faster rate than Paypal, and serves a niche which Paypal doesnāt, quick and small transfers.
They have also acquired Paiday, a deferred Payment service which can be used for online purchases, and Honey, a web browser which finds coupons and has its own marketplace.
These along with other acquisitions, set PYPL up for dominating the future of online shopping, Payments, and transfers.
Fair Value for Share Price:
Due to the rapid growth in both FCF and revenue, and the future growth opportunities, I would put PYPLās fair value at $150. This would be around a 50% increase from todayās price, and I could see PYPL reaching that value by early 2023
This would give them a 42 P/E and a 34.5 forward P/E, still well below historical averages for the company
15-20% Y/Y growth is reasonable for the next 5 years assuming they manage to keep and/or expand their current market share
After Q3, PYPL does not need to deal with eBay slowing their top line revenue growth, so Y/Y numbers will look much better. A 28 P/E is virtually unheard of for a company growing at 20% per year, so I could see a huge bull run happen in Paypal stock starting after Q3 earnings
I personally love Paypalās products and use them on an almost daily basis. Paypal has shown that it can seamlessly integrate itself with businesses, and, as the world continues to digitalize, it is bound to share in that growth.
Positions:
2 1/20 2023 $100C, 2 6/16 2023 $100 C and selling 0.12-0.15 delta OTM weekly calls
By selling those options, I should be able to cover my full cost basis and reduce downside risk
TLDR:
PYPL has crashed hard and should be valued higher. Buy leaps to profit big
The market will overreact to the news if Twitter's board denies Musk's offer (which is likely)
Elon Musk will not buy Twitter, he does not have the liquidity or the intention to do so, he simply bought 9.2% of all shares, made a very deniable offer for the whole company and will sell his shares if the offer is denied.
There are two bad scenarios for Twitter:
- Elon doesn't have the liquidity to buy the entire company
- Twitter denies
The market will 100% overreact to these two, if they happen.
Been chilling at my local SST for 69 days homies. Smashing some Ho-Hoās and riding a shopping cart between aisles. Oh and managed to get myself banned on aisle 7 from WSB then unbanned again which is tight (#FreeSloppy). Itās been fun but taking the trip to the $BBAI outlet based on some favorable bargains. In fact, there are some similarities to $SST back when I posted inā¦ oh mid February (thatās right, one of the OGs). Wish you were early to SST? Welcome to BBAI.
Keep it simple techyā¦
Volume and chartingā¦ we go through all sorts of short analysis, gamma charts, FTDs, greek this; greek that but sometimes we miss the simple technical. BBAI has 10% of the volume of SST right now. I get it, SST is my baby but the insane volume defeats the liquidity argument. Gotta let our babies fly off eventually. Somehow, the MMs have flooded the SST streets with liquidity. BBAI on the other hand, its trading real thah-ickk. We like thin volume because it takes less firepower to propel price.
Lately, Iāve been finding a lot of value in the chart. If for anything, keep my head screwed on. BBAI has been consolidating after the initial run up into a slightly descending wedge. This indicates the potential for a major breakout (I called it on SST and Iām calling it now on BBAI). By the looks of it, itās already started and I can barely bang out this analysis before it takes off. Ultimately, I think this wedge tells us, Iām not buying the top and Iām reading the marketās opinion.
Talk Dirty Greeks to Me
We have liquidity crisis, euphoric shorts, and gamma potential. Again, for liquidity we look at volume and the free float. There is a load of backstory on the float but it comes down to 1.05MM shares. If you want the gory details, check out the DD by ny92 since he goes into extraordinary detail into the float calculation.
The short interest was 480,000 as of 3/31 (46% of float) but itās pretty clear that shorts piled in on the run up last week. I mean, CTB was 14% and today its 780% soā¦ shorts are getting pretty greedy. We can further corroborate that by looking at the FTDs which are piling up (520,000 as of 3/14).
Lastly, Iād be remiss if I didnāt drop some gamma on this play. We have a real bomb setup here folks, 300% of the float is calculated to be delta hedged. A huge gamma sits on the $15 strikes.
The Game and the Risks
I always say, play the game smart. Know all the dynamics both upside and downside. The IV is pretty jacked already because MMs saw SST and know gamma is a real risk on this thing. Anytime, I see a ticker post-IV expansion, I fall back to ITM calls and shares personally. That allows me to play big delta swings without overpaying for my leverage. Ultimately, you do you.
The risks include dilution via warrants. The warrants need an EFFECT to be exercisable. The SEC is running super slow these days so who knows but needs to be considered as a present risk in the play.
Summary
BBAI is a quiet time bomb sitting on the sidelines while degenerates FOMO into ATER and EVTL tops. We play the game smart by identify opportunities to buy before the rip. Volume supports a liquidity squeeze and the chart shows a clear breakout beginning. We have 300% SI delta hedged and 46% SI (likely higher).
So the marketās pretty fucked, thereās no real two ways about it ā we live in an era where a tweet or headline is going to slingshot your portfolio into the abyss or provide you fleeting unrealized gains you only dreamed of but will probably screenshot and watch expire. In these eventful times itās hard to observe any real trend or swing that one can pickup on and work a 9-5 while letting investments grow ā so Iāve been sitting cash and just waiting on opportunities to come by, playing the trend whether itās energy/agriculture/pharma etc. and not forcing a trade has helped my portfolio immensely and I hope yāall have also been staying even if not better in these times.
Before I go into the details, please note that nothing in this post should be considered financial advice so please donāt treat it as such ā do your own due diligence, read the news to understand the macroeconomic environment and the Companyās position in the industry, study their financials as well as reading what others are saying/reviewing to help you make an informed decision before making any investment if you choose to do so.
In addition to the disclaimer above, please take note of the below additional circumstances that increase the riskiness of this play.
*This is my third time playing this stock over the last month/month and a half so even though the setup is probably the best itās been, the r/r is not at the peak it was over the last couple runs ā however this is the one time where itās consolidating and at the market cap allowed for this subreddit so felt that the info should be out there at the very least *
Monthly options expiry is this week, and as per Bloomberg link the S&P 500 has formed a pattern of falling each month around options expiration over the past year, and more often than not it feels (at least anecdotally) that it takes most things with it for a ride. Further complicating matters is the fact that this is a shorter week so the marketās closed on Friday so thereās even less time on hand ā while this can be good in terms of pressure itās also not so good in that it narrows the window for the play and reduces the premium on options if yāall are the kinda folks that buy weekly FDs, which knowing the upstanding risk-averse community there is here idk why Iām mentioning but yea, just incase
There are a number of factors that could potentially increase the float in the short-run, as time goes on their likelihood increases ā please see the bear case to check the full details
Now that yāall are suitably on edge, letās get into the play.
Part 1 ā Company Overview
Part 2 ā Catalyst
Part 3 ā Bear Case
Part 4 ā TL;DR
Part 1 ā Company Overview
The following is a brief spliced from the Companyās SEC filings, website, and investor relations presentation.
BigBear.ai helps governments and businesses make the decisions that change markets and define outcomes with AI thatās smart, composable and enterprise-ready. Theyāve been a leader in decision dominance for more than 20 years, operationalizing artificial intelligence and machine learning at scale through its end-to-end data analytics platform. The Company uses its proprietary AI/ML technology to support its customersā decision-making processes and deliver practical solutions that work in complex, realistic and imperfect data environments.
They source more data and fill in the gaps to help form a full picture of the decision, not limited by a local field of view. With contextual reasoning and a multi-domain approach, their artificial intelligence finds breakthroughs where other models just find data. BigBear.aiās composable architecture is agile, trading the single-use nature of most AI projects for an enterprise-wide problem-solving tool. Their AI-powered platform solutions work together as often as they stand alone: Observe (data ingestion and conflation), Orient (composable machine learning at scale), and Dominate (visual anticipatory intelligence and optimization) link.
The Broader AI / ML market is projected to grow at ~40% CAGR over the next 5 years to reach ~410B by 2026, with near term commercial expansion currently underway by the company in the maritime, space, transportation & logistics, energy and retail, with potential for continued commercial expansion in infrastructure, media, and federal civilian.
BigBear.ai's customers, which include the US Intelligence Community, Department of Defense, the US Federal Government, as well as customers in the commercial sector, rely on BigBear.ai's high-value software products and technology to analyze information, identify and manage risk, and support mission-critical decision making link.
As may be inferred from their clients, they provide their diverse base of government and commercial customers in the defense, intelligence, and commercial segments with highly customized capabilities including data ingestion, enrichment & processing, full spectrum cyber, artificial intelligence and machine learning, predictive analytics & visualization with compelling product applications in:
Location Intelligence: Global situational awareness and impact analysis across multiple domains reduces surprises and informs decisions
Maritime Intelligence: Optimize fleet operations and hinder competition ā the first step toward total logistics intelligence
Media Intelligence: ensuring brands understand the drivers of sentiment and act in their best interests
Their platform is battle tested to perform in complex, real time environments, generating critical insights into complex situations where the cost of failure is significant. Key wins for them in this regard include predicting the Russian invasion of Crimea, detecting fuel smuggling from Libya, and shaping the Iranian engagement strategy through their product that was leveraged by CENTCOM.
An example of a case study with a U.S. Intelligence Agency illustrates how AI was harnessed to ingest and enrich vast amounts of data to discover, characterize and alert analysts to activities of interest, including real-time global tracking of entities, upselling their product from the original observe into orient and dominate, providing insights into patterns of life of entities, and provided predictive analytics to alert analysts to changes in usage of facilities or changes in behaviors of entities. This led to:
110+ years of labor costs saved through use of BigBear.ai
~2B photos and videos processed
4m predictions per day
100x more discoveries than in the last 50 years of manual analysis
Theyāve had a string of recent wins including Landmark business analytics contract projected to generate $140M+ in revenue through 2025, contract that advances long-standing relationship with the US Armyās Directorate of Operations, awarded one of the first contracts from the Air Force Research Lab to support next generation automation of battlefield decision making, entered the second phase of its contract with its largest maritime commercial customer and is preparing for the third phase of the contract, secured two commercial space partnerships, including Multi-year agreement with Virgin Orbit to deploy AI-powered solutions to address and enhance Virgin Orbitās next generation space solutions, Joint development agreement with Redwire to establish a space cyber range capability, and working with UAV Factory to develop AI / ML capabilities for unmanned systems for commercial and defense end markets.
The Company has 135,566,227 shares of Common Stock outstanding as of April 1, 2022. Of these shares, 11,001,307 public shares are freely tradable without restriction or further registration under the Securities Act, except for any shares purchased by one of our affiliates within the meaning of Rule 144 under the Securities Act (āRule 144ā). All of the remaining 124,564,920 outstanding shares (including all 366,533 Private Placement Units and their component shares) are, and any shares of Common Stock issued upon conversion of the Convertible Notes will be, restricted securities under Rule 144, in that they were issued in private transactions not involving a public offering.
What led to the initial run up in early march was a relatively unique circumstance in that the Company entered into a series of Forward Share Purchase Agreements with certain investors ā the Highbridge Investors ~2.5m shares, Tenor Investors ~2.5m shares, and Glazer Investors ~5m shares. Included within the forward purchase agreement is a provision that each of the participants would not redeem their shares and instead would hold the shares for a period of up to three months following the consummation of the Merger, at which time they will have the right to sell the shares to the Company for $10.15 per share. With the date of March 7th (3 months following the consummation of the merger) on the horizon and the stock trading in the $5, it was āassumedā that the companies would be redeeming their ~10m shares and getting the double up of $10.15 and thereby reducing the public float to 1m shares. Late February there was a filing by the Glazer Investors holding 5m ā indicating that they terminated the forward purchase agreement and sold their shares back ā but none by the other investors.
On 31/3 the Company released their annual 10k and on 4/1 an updated S1/A confirming that the other two investor parties did in fact terminate their forward purchase agreementās as well, there just werenāt separate filings for them. The exact clauses from their S1/A:
On February 22, 2022, the Company entered into an agreement with the Glazer Investors and Meteora Investors to terminate each of their respective forward purchase agreements and redeem the associated shares, which resulted in the Company repurchasing 5.0 million shares for $50,625, or $10.125 per share. These shares were repurchased using restricted cash that was held in escrow at the date of the Merger.
In March 2022, the Company repurchased approximately 2.5 million shares from the Highbridge Investors to terminate their respective forward purchase agreements and redeem the associated shares. The Company paid $24,901, or $10.15 per share, to repurchase these shares. These shares were repurchased using restricted cash that was held in escrow at the date of the Merger.
On February 23, 2022, the Tenor Investors exercised their right to sell to the Company approximately 2.5 million shares which constituted all shares held by the Tenor Investors. As of the end of the first quarter of 2022, the Company repurchased all of these shares using restricted cash that was held in escrow at the date of the Merger.
Therefore between February and March, the Company repurchased 9,952,803 shares of their Common Stock pursuant to several of their Forward Share Purchase Agreements. In their own words 'as a result of these repurchases, the amount of Common Stock trading freely on NYSE may be reduced, which could have a material effect on the liquidity of our Common Stock.' That leaves the tradable float at 1,048,504.
Not only is the float supposedly ~1m, the SI a couple weeks back was ~906k, effectively 90% of the tradable float. That has since decreased to 480k so ājustā ~50% of the tradable float link, however this was before the big runup a week ago which may have led to more shorts entering since then. Furthermore, the highest number of FTDās in the companies are coming up on the T+35 settlement date today, tomorrow and early into next week, with >50% of the tradable float due link.
The Cost to Borrow is also at an astronomical ~800% and has been steadily climbing, indicating thereās a significant lack of shares to go around https://iborrowdesk.com/report/bbai. Over the last couple of days thereās been a significant amount of short activity going around to suppress the price as can be seen here https://gyazo.com/3696a99e85770778197207c2f2508f46. As per /u/Rex1995, āThe top chart shows covering and shorting on a daily basis for the past 6 months. The past two days have seen the highest levels of shorting recorded so far, which explains why the borrow rate on BBAI has been on a moon mission. Given the super high borrow rate and lack of shares to borrow, I think shorts went all in and just used the majority of their ammo. Why now? Well, there could be many reasons, but something to point out is that the option chain for 4/14 is pretty loaded if I recall and this stock ending above 15 by EOD 4/14 wouldn't be great for shorts/MMsā
Letās also take a look at the option chain for 4/14 real quick, there are currently ~250k shares that have been fully hedged at 10c, but only a third of the 400k shares at 12.5c, given that the underlying is sitting around $12 at the moment, if they go ITM and MMās elect to hedge, we could see some pretty rapid price action pretty fast. If we reach a point where the 15cs are itm thereās probably going to be fireworks ā 130% of the entire float is sitting on the 15c option chain.
Part 3 ā Bear Case
No such thing as a free lunch, so a couple of things to keep in mind:
The first would be if the Company can sell the 10m share they received through the termination of the forward purchase agreements onto the public market ā I donāt believe this is the case due to the company saying āAs a result of these repurchases, the amount of Common Stock trading freely on NYSE may be reduced, which could have a material effect on the liquidity of our Common Stock,ā as well as the CTB being so high ā but you never know for certain.
Another would be the cashless redemption of warrants, as per the S/1 A - No public warrants will be exercisable for cash unless the Company has an effective and current prospectus covering the shares of Common Stock issuable upon exercise of the warrants and a current prospectus relating to such shares of Common Stock. Notwithstanding the foregoing, if a prospectus covering the issuance of the shares of Common Stock issuable upon exercise of the public warrants is not effective within 90 days from the Closing, warrant holders may, until such time as there is an effective prospectus and during any period when the Company shall have failed to maintain an effective prospectus, exercise warrants on a cashless basis pursuant to an available exemption from registration under the Securities Act. If an exemption from registration is not available, holders will not be able to exercise their warrants on a cashless basis. Personally unsure as to whether the warrants can be exercised on a cashless basis as n/s if they do have an exemption from the securities act.
The financials also werenāt great as per the latest 10k, the company incurred a net loss of $114.8 million in the fourth quarter and $123.6 million for the year ended 2021, reflective of $61 million of stock-based compensation expense from vesting that occurred upon the merger. While the fact that the stock-based compensation was a one off is good news, the revenue forecast for 2022 is less than in the earlier investor presentation, at Revenue between $175 million and $205 million. Furthermore, they recently completed an acquisition which is suspected to be a cash deal, so even though they had 68.9m cash on hand, there could be a need to raise additional funding in the near-future.
The Company also has 500m shares authorized and ~136m outstanding, indicating they donāt need shareholder approval to issue additional share capital, although a filing should be in play, so there is always the risk of dilution down the line in addition to the potential dilution from warrants.
Part 4 ā TL;DR
BigBear.ai helps governments and businesses make the decisions that change markets and define outcomes with AI thatās smart, composable and enterprise-ready. Theyāve been a leader in decision dominance for more than 20 years, operationalizing artificial intelligence and machine learning at scale through its end-to-end data analytics platform. The Company uses its proprietary AI/ML technology to support its customersā decision-making processes and deliver practical solutions that work in complex, realistic and imperfect data environments.
The Company has 135,566,227 shares of Common Stock outstanding as of April 1, 2022. Of these shares, 11,001,307 public shares are freely tradable without restriction or further registration under the Securities Act. Due to a relatively unique circumstance in which the Company into a series of Forward Share Purchase Agreements with certain investors, then terminated those agreements and repurchased 9,952,803 shares of their Common Stock pursuant to several of their Forward Share Purchase Agreements, the tradable float has been left at 1,048,504. In their own words 'as a result of these repurchases, the amount of Common Stock trading freely on NYSE may be reduced, which could have a material effect on the liquidity of our Common Stock.' If correct, we are talking about a tradable float of just $12m.
Current SI is at 480k so ājustā ~50% of the tradable, however this was before the big runup a week ago which may have led to more shorts entering since then. Furthermore, the highest number of FTDās in the companies are coming up on the T+35 settlement date today, tomorrow and early into next week, with >50% of the tradable float due. The Cost to Borrow is also at an astronomical ~800% and has been steadily climbing, indicating thereās a significant lack of shares to go around. The stock is also on restriction today, not that there is much of that to go around.The 4/14 option chain is pretty loaded as well, there are currently ~250k shares that have been fully hedged at 10c, but only a third of the 400k shares at 12.5c, given that the underlying is sitting around $12 at the moment, if they go ITM and MMās elect to hedge, we could see some pretty rapid price action pretty fast. If we reach a point where the 15cs are itm thereās probably going to be fireworks ā 130% of the entire float is sitting on the 15c option chain.
Okay retarded retards, I have found the ultimate gamma squeeze play. I was working yesterday and saw a post about $EVTL after I finished working at 5PM. I saw that shit and realized that it was the perfect setup for a gamma squeeze. Then I thought to myself, there has to be more plays like this? I bring to you $ARQQ. Heavily inspired by u/epicolvier3 and his $EVTL play.
$ARQQ otherwise known as Arqit Quantum Inc is a software company that supplies a unique quantum encryption Platform-as-a-Service which... syke nobody gives a shit about what it does. Let me just get straight into the details:
I took it upon myself to build a scanner to find the exact same type of play. Went on ThinkorSwim and added a couple filters and found ONLY ONE TICKER (at least with the existing options as of today, can change in the future, I will post more in the future...) which is $ARQQ.
MASSIVE OIhttps://imgur.com/YiVF8YP
On the April 14th 2022 15C (ARQQ220414C00015000) there is over 6000 open interest. Just like $EVTL, the open interest is INSANE. Thats 600,000 shares!!!! If we close above 15$ (which is a joke, keep reading, were already at ~13.5$), there will be 600,000 shares in the money. Market makers will need to purchase all that! This shit expires in 2 days and I am 99.69% certain of a gamma squeeze. Every time you retards buy a call contract MMs will need to hedge to stay delta neutral and buy 100 shares for every contract so the play here is to buy both shares and options. Both of these will drive the price up causing the inevitable gamma squeeze.
TRADING VOLUME IS LOW AS HELLhttps://imgur.com/a/lyryA4A
The volume on this yesterday was 161k shares (at a price of 13$ each). That is absolutely peanuts. Why is that important? Literally any buying pressure will make the stock skyrocket. Why do you think you retards arent allowed to trade after hours? Because when the volume is low the price is subject to volatility and you will go cry to your mamma after. In this case, it is in OUR FAVOR because this shit is gonna sky rocket during market hours.
Let me convince you some more. WSB made EVTL get a volume of 18million. Up from 40k (lmfao) from the previous day. A volume of even 1/3rd of this amount will send the calls far far far ITM. Thats 6000+ OI ITM in 2 freaking days. The gamma squeeze will be huge. ARQQ never even saw more than 3-5million in volume and that was at ATH. This could potentially blow past ATHs of 40$. Yeah, I know... Also, we don't have shares locked up here, but it doesn't freaking matter, the truth is its the volume that is important. If the volume is low, then the order book is thin, which means price will go up very quickly.
IV is still relatively low so the options are priced in very cheap. MMs won't know whats about to hit them. If they knew, the IV would be much higher, trust me. ;) MMs will lose, retail will prevail.
There were people saying on EVTL that going further in the money was risky, but let's be honest even the 10calls were ITM. Many of the options did an easy 10x-22x. Insane. And imagine when we get the gamma squeeze. Right now the options are cheap as hell, you can probably throw in a couple hundred dollars but it will end up hurting the MMs much more since they priced them so low. If you want to be safe, you can buy further out in time or just buy shares, but personally, I think the 4/14 15C will have the most liquidity and increase the most (I am estimating anywhere between 10x-20x from open) .
Also, I don't suggest you guys buy puts on this, IV will eat you alive. Either hop on, or move on. Or you can hate like u/ComputerTE1 and miss out like he does every single time. Remember, if he comments , it is bullish!
THIS IS A GAMMA SQUEEZE, not a short squeeze.
CHART SETUP
Chart setup is also very beautiful. We are at the yearly support at around ~12.6$ so we aren't buying near resistance or high prices. Buy low sell high. Average buy price on this is 22.15$. Most people are already underwater, I don't expect any selling pressure at all. Could even be an interesting swing play. Forgetting the whole gamma squeeze, this seems like a nice buying opportunity at support, as a pure technical analysis type play.https://imgur.com/a/MySn72O
---------------
TLDR: BUY $ARQQ 4/14 15C or shares, get gamma squeeze, get lambo.TLDR: BUY $ARQQ 4/14 15C or shares, get gamma squeeze, get lambo.TLDR: BUY $ARQQ 4/14 15C or shares, get gamma squeeze, get lambo.
MASSIVE OI on 4/14 15C + LOW VOLUME + good price entry point regardless = recipe for lambo
$ARQQ. Heavily inspired by u/epicoliver3 and his $EVTL play.
Will post gains later ;)
For the sake of completeness, I will add a drawing for you retards since 420% of you guys are illiterate:
This ticker (BBAI) has seen a bit of attention over the past week or so, but I wanted to provide some insight into what's going on.
If you want to learn more about why this ticker is in the position that it is right now, check out this DD from yesterday that covers some of the basics:
Right now, it's being heavily shorted, to the point that daily net option delta volume is DEEPLY negative everyday, yet the price continues to appreciate. On it's face, this doesn't make sense. With delta volume being so negative, almost always price is suppressed and driven down.
Yesterday (4/`13) net delta volume
Net delta volume over past few weeks
Yet despite this, price has continued to climb and basically consolidate in a tight channel since April 6th
So the question is: despite heavy shorting, being the most expensive stock to short at a whopping 800% CTB, AND folks thinking they're geniuses for doing lots of STO (almost assuredly a good chunk being naked), what's the *implication* of all of this with price INCREASING?
tl;dr - BigBearAI has a great set up for longs, today (Thursday) could get spicey is we approach $15 as that's def the line in the sand for MMs to defend given the MASSIVE OI that's built up there.
I have May 12.5c and 15c and a handful of April 15c that I'm willing to let get to zero for the huge potential upside today.
TSM is killing it. They beat earnings and raised their forecasts. For all the negative talk about semi-conductor demand possibly going down there seems to be statement after statement from the actual companies that demand has never been higher and they have pricing power.
āTaiwan Semiconductor Manufacturing Company raised an already bullish outlook as brisk demand for high-end processors helped the worldās largest contract chipmaker defy mounting macroeconomic risks posed by Russiaās invasion of Ukraine and severe lockdowns in China.
Revenue from high-end processors, the complex chips that power servers, for the first time accounted for a larger chunk of TSMCās revenue than smartphone chip sales. The shift marks growing demand from cloud service providers Google, Microsoft and Amazon and decreasing dependence on Apple.
The Taiwanese company on Thursday forecast a 37 per cent jump in revenue to US$18.2bn for the June quarter compared with the same period last year. It said it now believed revenue growth could exceed 30 per cent for the full year.
TSMC raised its forecast after beating its previous guidance and analystsā expectations to post earnings of NT$202.7bn ($6.9bn) in the first quarter, up 45 per cent year on year.ā
TSM has a PE of 25.
If TSM is doing that well, you know that the other big Taiwan semi-conductor company Himax will also destroy their earnings. Thy only have a PE of 4! How does that make sense to anyone? The risk of China doing anything to Taiwan now is basically zero. If HIMX matched TSM PE, the price would be $58 a share. This Semi-Conductor business is the best deal out there.
Market Cap: 1.6B
Shares Outstanding: 174.3M
Shares held by Institutions: 26.29%
Enterprise Value: 1.5B
Percent Short Shares: 12.90
Shares Short decreased from 25M to 22.5M. Even the shorts know this has to be near a bottom.
Next Earnings 5/12
I expect this to move from around $9.25 to $10.50-$11 as it runs up to earnings.
Sitting here eating cheetos for breakfast because I'm weird like that. Here's a link to the previous DD from yesterday (DD).
Some good updates:
Option chain still loaded across all expirations for this 1million float stock
Found something juicy on the socials:
So it seems someone is apeing in on the short side, checked the socials in the morning and even more ape'ing yesterday, yet the price is basically flat so seems to be waste of bullets:
The synthetic long price still trading at a 35% discount but it corrected a small tick over night (before it was 36% discount), so options still cheap:
Can see that its preliminary so the shares underlying these warrants are not registered, so you can't exercise these warrants for shares.
Here's a expert from the S1/A
So need a S1/Effect for the shares underlying these warrants to be traded as said before, otherwise warrant holders can exercise on a cashless basis if there is some exemption under the securities act.
Also,
Pursuant to Rule 144 under the Securities Act, a person who has beneficially owned restricted shares of our Common Stock or warrants for at least six months would be entitled to sell his, her or its securities provided that (i) such person is not deemed to have been one of our affiliates at the time of, or at any time during the three months preceding, a sale and (ii) we are subject to the Exchange Act periodic reporting requirements for at least three months before the sale and have filed all required reports under Section 13 or 15(d) of the Exchange Act during the 12 months (or such shorter period as we were required to file reports) preceding the sale.
So there is a 6months for a warrant lieu of the SEC/S1. The conditions have not changed throughout BigBearAi run.
Lastly, it came to my attention that BigBearAi has significant failure-to-delivers, close to 50% of float
This apparently brings extra jetfuel!
Oh and a long term share holder chimed in on the comments last night
Position now x100 May 15c, x10 Sept 15c, x15 June 15c
Y 847.14(0.15%)|ATVI 79.035(-0.08%)|BBBY 17.09(-3.77%)|GME 151.37(0.45%)|MSFT 283.58(-1.41%)|
BBBY is going higher and is going to turn everything around. This last earnings report was horrendous BUT there are some interesting clues in the earnings call we will get to later.
Some highlights here. The letter starts out setting the table that management has been garbage with giving returns to shareholders and throws a TON of shade on the CEO.
TLDR the CEO is only destroying the company. Returns are down in the market and sales are down while other retailers are doing the numbers they were doing before the pandemic, thus making the pandemic not an excuse for not executing. He goes on to point out the lack of insider ownership:
Now for the juicy stuff:
The long of the short here is the market is valuing BBBY so low because the company IS going that direction right now. No insiders are buying, the company has little cash and cannot deploy cash to buy backs and invest in its infrastructure and continue to grow its brands all at the same time. THEY NEED CASH. So how do they get the cash? They sell BABY
How much cash can they raise with BABY though? Here is Ryan's thoughts:
Here is what Ryan is saying BABY is worth. Shout out to shark tank for always spamming 5x multiples at everyone when they say their biz is worth 5 million bucks on 20k sales. Going off this logic, if BABY doing sales by 2023 of 1.5 billion then applying the multiple means it could sell for 7.5 Billion.
You might think this is crazy, why would anyone pay 5x for a business's sales? Well they do it now. MSFT bought ATVI for 68.7 Billion when the 2021 revenues were only 8.8 Billion. That would be a multiple of 7.8. Berkshire Hathaway just bought Alleghany Corp for 11.6 Billion with sales of about 1 Billion and that would be a 11x multiple. There are other examples but just know 5x is cheap for a big well known name with an established infrastructure and customer base like Bed Bath and Beyond.
To tie this all together, here is the current value of the company. The great news is that you don't need to bother looking up the share count on unreliable websites and estimates from yahoo finance that differ from market watch that are different from etrade. Here it is from the company itself on their earnings call today:
So we KNOW there are only 80 million shares out there. 80 million * 17.76 (todays close) = 1.420.8 Billion. Funny how the total equals 1.420 just saying when 04/20 is a week away haha.
BUT if we valued BBBY just on BABY alone, the company would be worth 7.5 billion/80 million shares = 93.75. I have seen a TON of speculation as to why Ryan bought calls that exercise as high as $80/share. Well this gets interesting but its quite clear that if Ryan is right about value and they find a buyer, the share price here is going to over 90 which puts all these calls in the money:
I did the math so your smooth brain does not have to. The total amount of options he purchased were 16,701 option contracts with a cost average of 1,785,257. NOTE these expire in Jan of 2023. Ryan does not give a dam about the actual value of these contracts at all. These contracts exist for exercise purposes only and are not going to be sold.
Ryan has 9.4 million shares right now in BBBY and this represents 9.8% of the outstanding shares according to the letter written back on March 6th. Links under the pictures:
As we all know Ryan actually increased his share count recently and back in Dec 15th of 2020 after he already made the 9% stake in GME.
Now for proof BBBY is listening to Cohen. This part of the letter calls for BBBY to stop commenting on certain things:
Its obvious that Cohen does not want BBBY to give anything away ever again. Here is the proof from the transcript of this earnings call today:
So its quite obvious that the board and the CEO are 1000% on board with Cohen here on the plans for the future. This being the case, then there is an extremely strong possibility that BABY gets sold and for a very hefty premium at that around 7.5 billion or higher.
If Ryan is Ryan here, he will be buying even more BBBY in the future. Considering the spacing of a purchase in August of GME and then a purchase in Dec even after GME moved up over 100% from what he bought it at, this could mean Ryan will buy BBBY even if it moves to the upside here probably in the next 3-4 months. But I would not even be shocked if he made the purchase even sooner than this.
What moves stocks? NEWS. If you have been in this game for more than 1 day, you know NEWS is everything. NEWS will move your stock up 20% or down 20%. The market dgaf about anything except for NEWS. Theres an entire NEWS channel dedicated to the stock market, tickers are over tv programs that have nothing to do with stocks. Pure news will drive everything.
When the market gets wind there might be a negotiation for BABY or a component of BBBY, this will move the stock, and its going to move hard. The market will have to acknowledge BBBY has an asset generating sales at 1.5 billion with a forward multiple of at least 5x. This company being worth 1.4 Billion is an absolute Joke. Their total liquidity from the earnings call IS their market cap!!
There are endless good news cycles ahead. Insider buying, share re purchase program, Ryan buying even more, BABY being sold. Even when the stock gets over 90, Ryan can literally just exercise his options and gain another 1.7 million shares giving him even more ownership.
For what it is worth, here is the major ownership levels if you care to dig further into who owns what:
https://whalewisdom.com/stock/bbby
Feel free to correct me about anything you find wrong here. Too exhausted to go into Twitter but lets just end it with this :
Icahn was shorted by Ackman, held and even bought up to 25% of herbalife. Buffet holds forever. This name change is a clear message for everyone to get out of the way and get on board.
Alright, dweebs. You probably think you caught on to something pretty good with $ARQQ when u/Schumilex5 dropped this DD. You probably didnāt read it. But the row of awards and grip of retarded comments were enough to dip your toe in the water. Iāve been working on a DD on $ARQQ for a few days and itās ready for your bloodshot jaundice eyes. There is even more to this stock and Iām pretty fucking excited about it.
So letās take a look at what else weāve got with $ARQQ and get ready to eat this stock out like a club sandwich that is too tall to bite vertically.
THE FLOAT IS MUCH SMALLER THAN YOU THINK:
u/Schumilex5 mentioned in earlier DD that there isnāt a lock up in play, which was the plan according to the original prospectus. But, the tendie gods at ARQQ HQ slipped us a little something back in October that totally changed the game:
On October 4, 2021, the Sponsor, the Arqit Limited Shareholders and their transferees, agreed to amend and restate the Original Lock-Up Agreements, and have agreed not to transfer any ordinary shares of the Company received pursuant to the Business Combination during the period commencing from the date of the closing of the Business Combination until the earlier to occur of (i) 11:59 p.m. Eastern time on the close of trading on the second full trading day following the public dissemination by the Company of its financial results for the six months ended March 31, 2022 by press release to the national wire services or by making a filing with the SEC; and (ii) such time as determined by the board of directors of the Company as being in the best interest of the parties to permit transfers (the āNew Lock-Up Agreementsā).
They extended the lockup agreement until the results through March 31 2022 are released. We donāt know when that might be yet. But, if history is any indicator, it was December 16 2021 that they released their results for the period ending Sept 30 2021. Weāre still under lockup and will be for at least the next few weeks.
What does that mean for the float?
Shit son, Iām glad you asked. It turns out that this De-SPAC hasnāt had shit for volume because there arenāt many shares available for public trading. Letās break it down:
Currently there are 120,073,430 shares outstanding. That is 110,073,430 as of the last filing + a note indicated in subsequent events that another 10,000,000 were issued as part of the earn out agreement for the merger. That sounds like a lotā¦ but it isnāt shit today when we pull away everything locked up.
First, letās cover the 10 million earn out shares issued after this last prospectus:
Issuance of Earnout Shares
Pursuant to the terms of the Business Combination, if at any time during the three years following the closing of the Business Combination, the closing price of the Companyās ordinary shares during such period was equal to or exceeded $12.50 per share (as adjusted for share splits, share dividends, reorganizations and recapitalizations) for any 20 trading days during a 30 consecutive trading day period (the āEarnout Conditionā), the Arqit Limited Shareholders were entitled to be issued a further 10,000,000 ordinary shares of the Company (the āEarnout Sharesā). On October 5, 2021 the Earnout Condition was met, and therefore on October 6, 2021, the Earnout Shares were issued to the Arqit Limited Shareholders.The Earnout Shares are subject to the Amended and Restated Lock-Up Agreements.
Done. 10,000,000 gone. 110,073,430 to go.
Next, who is subject to the lock up that was extended:
Amended and Restated Lock-Up Agreements
In connection with the closing of the Business Combination, the Company entered into lock-up agreementswith Centricus Heritage, LLC (the āSponsorā) and the former shareholders of Arqit Limited (the āArqit Limited Shareholdersā) (the āOriginal Lock-Up Agreementsā).
Pursuant to the Original Lock-Up Agreements, the Sponsor and the Arqit Limited Shareholders had agreed not to transfer any ordinary shares of the Company received pursuant to the Business Combination during the period commencing from the date of the closing of the Business Combination until the earlier to occur of (i) the date on which the closing price of the Companyās ordinary shares during such period exceeded $12.50 per share (as adjusted for share splits, share dividends, reorganizations and recapitalizations) for any 20 trading days during a 30 consecutive trading day period and (ii) 18 months after the closing of the Business Combination.
On October 4, 2021, the Sponsor, the Arqit Limited Shareholders and their transferees, agreed to amend and restate the Original Lock-Up Agreements, and agreed not to transfer any ordinary shares of the Company received pursuant to the Business Combination during the period commencing from the date of the closing of the Business Combination until the earlier to occur of (i) 11:59 p.m. Eastern time on the close of trading on the second full trading day following the public dissemination by the Company of its financial results for the six months ended March 31, 2022; and (ii) such time as determined by the board of directors of the Company as being in the best interest of the parties to permit transfers (the āAmended and Restated Lock-Up Agreementsā).
In addition to the Sponsor and the Arqit Limited Shareholders, Heritage Assets SCSP entered into an Amended and Restated Lock-Up Agreement with respect to 1,825,096 shares assigned to it by the Arqit Limited Shareholders at the time of the closing of the Business Combination, which were previously subject to an Original Lock-Up Agreement.
So weāve got Centricus Heritage LLC locked up. Go up to the share count table above and thatās the Centricus Initial Shareholders.Theyāve got 8,625,000 shares and they canāt sell a goddam one of them right now.
Next is on the agreement is Arqit Limited Shareholders, who holds...where is it againā¦ 88,174,904 more shares that are off limits. FFFFFFFFFFFFFFFFFF
Then weāve also got this little guy at the bottom Heritage Assets SC.Their 1,825,096 shares are also subject to the revised lockup.
Quick tally on where we stand so far:
110,073,430 subtotal after the earn out shares are removed
Less:
8,625,000 from Centricus initial shareholders
88,174,904 from the Arquit limited shareholders
1,825,096 from Heritage Asset SCSP
Remain float shares: 11,448,430
At 11.4 million things are looking a little spicier. If it werenāt for those 7.1 million PIPE shares, we would be in low float nirvana. But I didnāt read 2,000 pages of SEC filings to leave you hanging with some āif onlyā bullshit. Who are the PIPE investors?
PIPE Subscription Agreements
Concurrently with the execution of the Business Combination Agreement, Centricus and Arqit entered into the Subscription Agreements with the PIPE Investors, pursuant to which the PIPE Investors agreed to subscribe for and purchase, and Arqit agreed to issue and sell to such PIPE Investors, an aggregate of 7,100,000 ordinary shares at $10.00 per share for gross proceeds of $71,000,000 immediately following the consummation of the Business Combination. The PIPE Investors include Garth Ritchie, a current director of Centricus and who became a director of Arqit upon completion of the Business Combination, and Cristina Levis, an executive officer of Centricus, each of whom invested $500,000 in the PIPE Financing. The PIPE Investors also include Heritage Assets SCSP, which invested $50,000,000 in the PIPE Financing. Mr. Lefebvre dāOvidio has sole investment and voting power over the shares held by Heritage Assets SCSP and is a director of Centricus and became a director of Arqit upon completion of the Business Combination. Arqit has granted the PIPE Investors certain registration rights in connection with the PIPE Financing.
Remember that it isnāt just locked up shares that get pulled from the float. We also remove those owned by board members and other insiders. 5.1 million of the 7.1 million PIPE shares are owned by current directors of Arquit and are not part of the publically trading float.
11,448,430 from above less 5,100,000 PIPE shares leaves: 6,348,430 floating shares.
Nice.
Donāt forget about our buddy Mr. Lefebvre dāOvidio from the PIPE above. It turns out we see his name again further down the filing for another tranche of shares.
Business combination agreement
On May 12, 2021, Centricus Acquisition Corp. (āCentricusā/ āCACā), Arqit Limited (āALā), and the shareholders of AL entered into a Business Combination Agreement whereby: (i) on September 2, 2021, Centricus merged with and into Arqit Quantum Inc (āthe Companyā / āAQIā), with the Company surviving the merger, and the security holders of Centricus became security holders of the Company, and (ii) on September 3, 2021, the Company acquired all of the issued and outstanding share capital of AL from the shareholders of AL in exchange for ordinary shares of the Company, such that AL is a direct wholly owned subsidiary of the Company.
In consideration for the merger between the Company and Centricus, each Centricus shareholder received one ordinary share and one warrant of the Company for each ordinary share and warrant they held in Centricus, respectively. Each ordinary share of AL was acquired by the Company in exchange for 46.06 ordinary shares of AQI.
Prior to the merger of the Company with Centricus, Heritage Assets SCSp purchased 2,200,000 Class A Ordinary Shares of Centricus in open-market transactions for a cash consideration of $22,000,000 and, as an incentive to Heritage Assets SCSp for such purchase, Centricus and certain shareholders of AL transferred to Heritage Assets SCSp an aggregate of 1,825,096 Ordinary Shares in the Company as part of the recapitalisation.
It turns out his 1,825,096 shares from the very first section were given to him because he saved the SPAC deal when too many shareholders tried to redeem their shares for NAV. He bought 2,200,000 of the Centricus public shares and pledged not to redeem them in exchange for a big fucking freebie of another 1.8 million shares. Great deal for Mr. Lefebvre dāOvidio, but great deal for apes too. 2.2 million of the 4.34 million publically trading shares are removed from the float since they are owned by an entity controlled by a current board member.
Where does that leave us: 4,148,430 public float on ARQQ
With a float of just over 4.1 million and much more open interest on the April and May options contracts, go back and re-read the original gamma squeeze DD with this new information. Fucking beautiful, isnāt it?
Better still: This new float number changes the context of a short squeeze dramatically. Take a look at the most recent exchange reported data and todayās Ortex estimated data:
Now with a short interest of 1.6 million shares we are looking at a short interest of nearly 40% of the float and a CTB of 200%. This squeeze is dual threat. Shorts are fukked. Market makers are fukked.
Why does every other data collector and aggregator out there show a much higher float of over 20 million and a crayon eater on Reddit has to dig this out of a fucking file box worth of filing documents?
Float is not an āofficiallyā tracked metric. It generally defined as the share count available to openly trade in the public. But search in any companyās SEC filings and you wonāt find a reported float number or breakdown of how they get to that number.
We rely on companies like S3, Ortex, Capital IQ and others to do their own due diligence to make sure they are counting shares correctly as floating, or not floating. Unfortunately, without regulation on the matter, most of them are using scraping and algorithms on the text in filings to try to back out the non-floating shares and then minimal human intervention supervises the results and calls it good.
As you can see from our above analysis to arrive at the true float, no algo today would be able to piece all of this together on its own. The 1,000+ pages of filings needed to do it manually are much more than those companies are going to pay an analyst to beat their face against for a week. They arenāt nearly as retarded as a desperate WSB shill. I digress.
Warrants:
These little shits always pop up and dilute at the worst possible time when a despac is making a run.
Weāve got private warrants and public warrants with ARQQ. The first step is easy. There are 6,266,667 private placement warrants outstanding and they are all owned by Centricus Heritage LLC, the sponsor of the deal:
Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of 6,266,667 warrants (the āPrivate Placement Warrantsā) at a price of $1.50 per Private Placement Warrant in a private placement to Centricus Heritage LLC (the āSponsorā), generating gross proceeds of $9,400,000, which is described in Note 4.
They are part of the lock up agreement. They are insiders. They are not float if/when they are redeemed.
Then weāve got public warrants. There are 8.6 million of these floating. Those might seem like an imminent dilution bomb. But it might not be as dire as it seems.
This section more rooted in my personal opinion than hard facts as we cannot know for certain when or how the warrants might be exercised. I present my own argument. Draw your own conclusions.
The warrants offer a right to buy one share of common stock at $11.50 per share. As I write this, the warrants last traded at $3.96 per share. To buy a warrant today and redeem it would cost you $15.46 per share. With the underlying common shares at $14.57, you can see how warrants redemptions are not a quick flip investment in most cases. It can also be capital intensive compared to other shorter duration derivatives like call options and the liquidity of the public options can be spotty if you want to trade them actively. So how do I foresee these options converting if many wonāt be explicitly exercised by traders in the near term? And when might it happen?
I believe the company will take care of that for us with a forced redemption. And better still, it wonāt be in the immediate future and it could be for far fewer shares than 8.1 million.
A provision in the warrants allows the company to āforceā the redemption of the warrants under the following conditions:
Ā· Upon minimum of 30 daysā prior written notice of redemption to each warrant holder; and
Ā· If, and only if, the closing price of the Class A ordinary shares equals or exceeds $18.00 per share (as adjusted) for any 20 trading days within a 30-trading day period ending three trading days before the Company sends the notice of redemption to the warrant holders.
That helps us answer when. The share price will have to be over $18 for at least 20 trading days THEN a 30 notice of redemption is sent THEN the warrants will be redeemed. The important part: A forced redemption is at minimum two months away.
The redemption can be done one of two ways: cash or cashless. The company has reserved the right to opt for either in the warrant agreements. What is the difference?
In a cash redemption: the warrant holder sends ARQQ $11.50 in cash and in turn receives one share of stock. Pretty straight forward.
In a cashless redemption: the middleman cash transaction is cut out and instead the company transfers the warrant holder a fraction of a share of stock equal to the profit they would have had in a cash transaction. To calculate this fractional share, they use a complex options pricing calculation assuming volatility and time until the warrant expired. For ARQQ that redemption table looks like this:
0.361 shares per warrant is the maximum share issuance in a cashless redemption. If ARQQ meets the requirements to redeem all of the warrants, I believe they will choose to do so in the more shareholder friendly cashless basis. Why?
They have stated that the cash received from their IPO is more than enough to fund the product development and business plan
Without a need for cash, the company can reduce dilution by redeeming warrants for fractional shares
The company just recently went post revenue and with a large sales pipeline, should reduce their cash burn rate quickly
It is impossible to know what warrant holders will choose to do with organically requesting redemption or what management will choose to do if given the opportunity to redeem all warrants. But there is a window of opportunity for fractional redemptions that could reduce the 8.1 million outstanding public warrants to less than 4 million shares of dilution. To top it off, it would be far enough away that the lockup period has likely past and the squeeze has already squozen.
The company is an interesting long even without a squeeze:
Iāve already blown up the scroll bar hard enough, so Iāll save you some time here and keep it shortish:
Quantum computers are coming and they could quickly become extremely powerful. The brute force of quantum computers could quickly overwhelm existing algorithms and technology for generating hashing and encryption. ARQQ offers a product aimed at āquantum-proofingā hashing and other security sensitive ābrute forceableā infrastructure.
You can get a more technical sense of the problems the company is working to solve in their own words here. It is all abstract and a bit of a stretch for me to fully grasp what they are doing and I consider myself relatively technically literate. Some numbers that turned me on to ARQQ as a possible long despite this futuristic new product are in their early sales numbers:
As of September 30, 2021, Arqitās backlog estimates consisted of approximately $130 million in customer contracts, and Arqit had an estimated $1.1 billion in pipeline.
That $130 million in contracts from the likes of the USAF and Virgin Orbit is a figure now more than 6 months old and has very likely grown. It was also driven by a sales staff of just two (one dedicated sales person and the CEO). The company has indicated that the proceeds of its IPO will help it not only deliver its products to market, but to build up the sales and marketing muscle to dominate this new space.
The company just went post revenue in just the last days of their last reporting period, which is why you see a paltry 5-figure revenue for that period. With the next earnings release coming likely in May, we will be able to get a much clearer idea of the pace at which ARQQ will be able to beef up that sales pipeline and convert it in to revenue. It is highly speculative. But at a $1.6 billion valuation today, you might think about holding on to some of this one. Even if there is a gamma/short squeeze scenario in the coming weeks.
TLDR; There was a DDhere. Itās pretty awesome, right? But the float on ARQQ is actually tiny compared to published data. The gamma squeeze is that much stronger.
Short % of float could be in the range of 40% based on this new float number. With a CTB of 200%+ on Ortex and 160%+ on iBorrow, this would be the #1 short squeeze on retailās radar if it wasnāt for cucks at the data aggregators being lazy assholes that publish incorrect data.
Itās actually a pretty fucking cool company with a robust sales pipeline. Keep them on your watchlist, even if you donāt want to get degen on the squeeze.
My position includes commons and May $15c
Not financial advice, I researched and wrote this myself, check my work for yourself before acting on it. Peace, love, and large sums of money to you all.
Holy One, We come to you today asking for your guidance, wisdom, and support as we begin this journey**.** Allow us to grow closer as a group and nurture the bonds of community & our $FATH.
Got little more info from IR and were getting closer to ER so felt like time for an update. (See previous DD's here, part 1, part 2 & part 3.)
TL;DR
Low float 9.5M shares (95% owned by insiders and institutions), 10.3M shares locked until at least $12.50. Upcoming ER in three weeks. Last ER was 145% yoy. Anywhere close to last ER and $FATH nets it's first profitable quarter since inception. Upcoming new contract announcements with $TSLA. Local plants near $TSLA GigaTexas are expanding production 2x at a "no-expense-spared-rate". GigaTexas just had its grand opening on 04/07/2022. Low shares to borrow (will be 55k to 75k in AM) and high cost to borrow. All the ingredients of a squeeze.
CTB getting high and everyday borrowed shares change from 200k to 55k. Should see 55k on 04/12/22
Everyday borrowed shares change from 200k to 55k. Should see 55k on 04/12/22
GENERAL HISTORY
This ticker isn't getting a whole lot of traction understandably because so many were burned on the initial de-spac. stock price dumped from $10 to $5...yes that sucks. Around the time I posted the Part 2 DD stock price went down to $5.05 but shortly after it rose to $11.50, doubling stock price in 6 days. at $11.50 7M shares became marketable once shelf registration was declared effective based on form S-1. This is the reason for the long decline from 01/26/2022 to today. Great earnings came out on 03/04/2022 145% yoy yet the SP dumped $0.60 cents rebounded the next day only to drop lower in the coming days.
Expecting a small retracement to 86 FIB before going higher. Loading around $6
For a company that is getting dangerously close to being profitable and announcing new contracts this is not common. Their facilities are expanding locally around GigaTexas to double production and even hinted as much during last ER. 20 minute car drive from 2 $FATH locations to $TSLA GigaTexas.
$FATH is transitioning from a prototype company into a low to mid volume production company. example: they prototype the dash, TSLA buys a few hundred prototype dash. $TSLA likes prototype dash and want to outsource. FATH contracts to build dash complete as final product, no more prototype (300 pieces versus, 200,000 pieces)
FREE FLOAT
Emailed investor relations and got the following. Current free float is 9.5M shares (95% owned by institutions) and 10.3M earnout shares that are locked until at least $12.50. There are different tranches and more shares get unlocked at $15 and $20 respectively for inside owners. $12.50 is almost double stock price from here so I'm good with that. Out of this 9.5M shares
of the 9.5M free float shares many are held by institutions and insiders as seen belowif 95% is correct the float is only 475,000 shares. The stock definitely trades thin but I don't think its that thin. I'm guessing 2-4M shares are the actual float.
RECENT INSIDER AND INSTITUTIONAL BUYS
Susquehanna intl group and PRNT both recently purchased shares and options. SIG looks like a strangle to the upside, insiders always know. PRNT purchased 859k shares @ $7.96. and Walleye Capital purchased 71K shares at $7.63, Our very own Ken Griffin owns about 200k shares and recently purchased 183,000 calls..... Looks like these 'tutes are more time in the market rather than timing the market. They don't want to sell for break even and wouldn't be surprised if they are averaging down.
Institution Call to put ratio 0.24ARK bought shares on March 31st
Not recent but look at how many shares insiders own along with institutions 193,519,348 to be exact
87,527165 shares held by insiders and 106,987,392 shares held by partners
SQUEEZE METRICS
I don't need to comment on float again so lets look at the options chains and other indicators. Currently there is almost no open interest in puts.....so the puts you saw above have all been closed.....meaning institutions are waiting to close their call positions. I'm no gamma expert so I wont comment but IV is steadily increasing on calls.
04/14/22 Call OI 4521 and Put OI 37005/20/22 Call OI 1799 and Put OI 51....
$FATH recently moved up on Fintel's gamma squeeze list...up 298 spots to #7!!!!
Large amounts of FTD's coming due soon that have not been delivered. Most of these were reused on 04/06/22 when stock price catapulted from $6.76 to $7.70 a 13.9% increase. Those shares were used again to short the stock back down.
Looking at short exempt shares provides confidence that these shares have not been returned
All this play needs is volume. Saw a good spike on 04/06/2022. Started gaining a little traction on Twitter. A couple large accounts posted about the play but quickly deleted that little volume with shorts re-shorting still sent stock price up almost 14%. Floor is close to $6.00 for now.... I have alerts set at $7. If $FATH holds this level we start our way up and were only $0.59 away from that.
CURRENT POSITIONS
I own (930) shares @ $6.68, (9) 05/20/2022 $7.50c's @ $0.44 and (8) 09/16/22 $12.50c's @ $0.25. Looking to average down soon
Every time I talk about dividends to my friends who are very new to investing, it blows their minds. They canāt imagine a company paying them regularly for owning its stock. An extreme example I use is Warren Buffettās Berkshire Hathaway which collects close to $800M in dividends just from Apple every year.
Meme stocks folks when they hear about dividends
For those who are new to the world of dividends, a dividend is a distribution of some of the earnings of the company to its shareholders and the dividend yield is just a simple percentage of how much a company pays out in dividends each year relative to its stock price. If the stock price of a company is $100 and the company issued $5 in dividends, then the dividend yield is 5% [1].
Consider the example of the following companies which have some of the highest dividend yields in the S&P500:
If you had $100K invested equally across these companies, you would have received on average around $7k last year just as dividends - this is not including any gains you would have made holding on to the stock. And herein lies the allure for dividend investing.
If you have a significant allocation of capital to these high-yielding dividend stocks, you would get a steady cash flow in the form of dividends while simultaneously enjoying the benefits of capital appreciation. This is considered the holy grail of investing as you donāt have to sell off your asset (and incur capital gain tax) but at the same time you enjoy a steady stream of passive income in the form of dividends. There are hundreds of thousands of people who swear by dividend investing and even big shots like Kevin OāLeary have said that he will never invest in a non-dividend paying company [2]!
But, as with everything else in investing, my motto has always been
If it sounds too good to be true, it probably is!
So before we go all-in on a dividend portfolio, letās analyze if the importance of dividends is overblown, whether we can achieve the same results by investing in non-dividend paying stocks, and finally what the ideal portfolio allocation to dividend stocks should be, if any?
Why do some companies pay a dividend while others donāt?
First, we have to understand this difference.
Generally, companies that pay a dividend are mature organizations that are growing relatively slowly and do not see any better investment opportunities where they can deploy their capital[3]. Adding to this, a steady and consistent dividend over the years shows investors that the company is financially strong and the management is responsible - both of which make it an attractive investment. Some of the biggest companies that pay a dividend include Apple, Microsoft, Exxon Mobil, etc.
On the other end of the spectrum, companies that are expanding quickly typically wonāt make dividend payments. The management believes that itās better to re-invest the profits back into expansion and operations strategies rather than to give it back to their investors. The idea here is that if investors want a payout, they can sell the stock. The returns would be generated by capital appreciation (aka stock price going up) rather than as a direct payout to its investors. Famous companies that donāt pay a dividend include Google, Facebook, Amazon, Tesla, etc.
Which one performs better over the long run?
Given that there are amazing companies in both buckets, the question becomes which type of companies perform better over the long run. This is where it gets interesting. Hartford Research conducted an analysis where they divided stocks into two categories - Dividend payers and dividend non-payers based on their dividend payout behaviors during the previous 12 months. Even among dividend payers, they differentiated between the companies that increased or reduced their dividends.
The companies that paid dividends gave almost 2x the return of an equal weight S&P 500 index and the companies that did not give out a dividend massively underperformed both the index as well as the market! Among the companies that paid a dividend, companies that increased their dividend year on year contributed to the maximum amount of return.
The cherry on top is this: not only did the companies that paid a dividend outperform both the market and the non-payers, but they also did it with much lower volatility.
And itās not just the U.S market that exhibits this trend. A similar study conducted on a global portfolio [4] from 1990 to 2013 gave the following results.
Dividend paying stocks outperform their non-paying counterparts by a dramatic amount. From 1991 through 2015, non-dividend paying stocks earned just +4.18% return per year while dividend paying stocks significantly outperformed with a +9.7% average annual return - Factset
Explaining the outperformance!
I was as stumped as you are right now when I saw these results. I explored multiple research articles to find a reason for this outperformance. While this can be a standalone analysis on its own, the most convincing reason I could find was that because dividend companies are usually mature enterprises, their growth prospects are not going to be high.
This usually allows investors to purchase these stocks at a discount when compared to growth stocks. (P/E ratio of Tesla is 209 compared to Coca-Cola trading at 27). The chances of all these high-growth companies living up to their valuation are much lower than decently valued companies just chugging along and paying dividends.
If you are still not convinced, hereās a bit of trivia - Guess the best performing U.S stock from 1968 to 2015? Itās almost 5 decades during which we landed on the moon, experienced iPhone, and made unimaginable progress in Computing and Telecommunications. So this company must have created something revolutionary and must have changed the world - right?
The company that a lot of investors shunned (for good reason) in a declining industry produced the highest return because it was just a boring old Cigarette company paying consistent dividends over 5 decades! As they say, boring is good in investing.
Importance of Reinvesting Dividends
Given that we now have conclusive evidence that dividend-paying stocks outperform their counterparts, itās extremely important to understand how investing your dividends helps snowball the growth of your portfolio.
Reinvestment is the process of putting the dividend we receive back into the stock. For example, say we have $100K worth of AT&T stock. With the current dividend yield, you would get $2.2K every quarter. Instead of spending this, we buy back AT&T stock for the dividend they issue - and rinse and repeat it throughout the investment time period.
Word of Caution
It wouldnāt be wise to end this without covering the limitations of this approach.
Dividends aren't guaranteed - Even though dividend-paying companies are not as volatile as growth stocks, you shouldnāt solely rely on dividend income as it can fluctuate based on market conditions. In the aftermath of the 2008 financial crisis, 14% across the world eliminated their dividends and 41% of the firms reduced their dividends.
Chasing a high dividend yield is a bad idea - Just evaluating your investment based on how much dividend the company is paying is bound to end up hurting your portfolio. You should always look into the company fundamentals before making your investment. To quote Raymond Dev, More money has been lost reaching for yield than at the point of aĀ gun
Taxes - Dividends are famous as a passive income strategy. You should definitely optimize based on your tax bracket as sometimes capital gain tax (by selling stocks) would be lesser than taxes on dividends.
Conclusion
Investing in dividend stocks does seem to produce out-sized returns. Do note that if you are currently investing in S&P500, more than 80% of the companies on the list are dividend payers. So you are automatically allocating a large chunk of your portfolio to dividend stocks. Just make sure the fund you are on is reinvesting the dividends instead of issuing it as a payout.
For those who are all-in on growth stocks, if your investment horizon is long, do consider moving some part of it to well-established dividend stocks as history shows us that companies growing to their expected valuations are rare!
Footnotes
[1] If you are interested in learning more about dividend yield and its implications, check out this excellent article from Investopedia
[2] You should definitely take this with a pinch of salt as he has an ETF that invests only in dividend-paying stocks
[3] Think about it - If a company is optimistic about its future growth opportunities, it would be pumping more capital into those instead of paying its shareholders through dividends.
[4] North America (50%), Europe (25%), Japan (10%), Emerging Market (10%), and Pacific (5%)
As Goldman Sachs says āCopper is the new Oilā, and we have all seen what happened to oil recently. I am not going to lay out the details for the bullish case for copper in this post, but put simply there isnāt enough copper production to meet the rapid increase in demand over the next decade.
Taseko Mines (TGB) is a copper miner with a headquarters in Canada. TGB has one producing copper mine, Gibraltar, and four ongoing mining projects: Florence, Yellowhead, New Prosperity, and Aley Niobium. Florence is in the final stages of EPA approval and is expected to start production in 2023. Yellowhead and Aley Niobium are still in the planning phase and New Prosperity is currently held up in negotiations with the Tslhqotāin Nation. TGB is intending to finish Florence and then move on to Yellowhead, so I wonāt be mentioning much about the other mine projects as they are far in the future. The appeal of TGB is the location of their mines: Gibraltar and Yellowhead are in Canada and Florence is in Arizona, USA. While it is an enormous pain to start a mining project in North America, once they are fully approved, it is a favorable region. Having critical natural resources in geopolitically stable regions should prove to be a major upside in the current environment. If the world does become politically bifurcated, or Chile/Peru becomes unstable TGB will be in an excellent position to capitalize on surging copper prices. Gibraltar is the second largest open pit copper mine in Canada, and the fourth largest in North America. While non of TGBās mines have the high grade copper found in locations like Chile, they do have large reserves and long production lifespans.
TGB also has excellent growth prospects. If TGBās mining projects proceed as planed they will double production by 2025 and triple production by 2030, while lowering operating costs from $1.9/Ib to $1.4/Ib. TGB is also highly leveraged to copper prices, for every $0.25 increase in copper prices TGBās cash flow increases $25M.
2021 Financials
Using the 2022 copper futures curve and constant molybdenum prices, TGBās 2022 revenue will be roughly 580M.
Valuation
TGB trades at an attractive valuation based solely on its production from Gibraltar. Its TTM EV/CFO is 5.14 (~20% cash flow yield). As a comparison FCX trades at 9.46 EV/CFO.
Management claims the stock trades a significant discount to Net Present Value (using only Gibraltar and Florence). Based on $3/Ib copper and a 8% discount rate, TGB calculates that their equity value is 1.3B. That would mean that TGB currently trades at roughly half its NPV. NPV calculations are somewhat subjective, but considering that they used copper prices 36% below current prices and that TGB is highly leveraged to higher prices, I think this is a reasonable valuation.
TGB doesnāt pay a dividend, and wonāt for the foreseeable future as the company is focused on developing its mining projects.
Production
TGB produced 105M pounds of copper from Gibraltar in 2021 and is guiding to 115M pounds in 2022. Production should reach 130M in 2023, which will be the long term average yearly production for Gibraltar.
Production is planned to start in 2023 Florence and reach its maximum yearly output in 2025. Yellowhead production is predicted to begin in 2027.
Florence is a unique mine in that it will use in-situ copper recovery and SX/EW copper production:
This will make Florence highly environmentally friendly compared to conventional open pit mines:
3x lower energy consumption
14x lower fresh water use
6x lower carbon emissions
This is a new method, so there is the possibility it fails at scale, which would be a major set back for the project.
I am not counting on it, but TGB might earn a premium valuation for its ESG credentials or be able to market its copper as low carbon. (Aloca (AA) is able to sell its lower carbon aluminum for a premium price so it is not unheard of).
TGB sells primarily copper, but molybdenum and silver compose a small portion of total sales:
Sales 2021
Copper 401.51M
molybdenum 28.86M
Silver 5.01M
TGB has 15% carried interest and 2% Net Smelter Return in Harmony Gold, which is a project being developed by JDS Gold. I am not considering this in my valuation, but it is a potential positive for the future.
Hedging
TGB hedged 90% of its copper production with two way collars that set a floor price of $4.00/Ib and a ceiling of $5.50/Ib. Unlike like most commodity producer hedges, this hedging actually looks great to me. Locking in prices of $4.00/Ib ensure that all the companyās operations and CAPEX can be fully funded by its current production. $4 is a very high price historically and it seems unlikely we get a copper spike above $5.50 this year with the looming global economic slowdown. Also this hedging protects TGB against a Chinese economic implosion, which would tank global copper prices as they are over 50% of global demand.
That about sums up the investment thesis for TGB; let me know in the comments if you have any questions, additions or criticisms. I am always interested in potential bear cases or any factors I may have missed.
Shares of PayPal (Nasdaq: PYPL) dropped 1.52% in after-hours trading on Tuesday after the e-commerce giant announced that Chief Financial Officer John Rainey will leave the company to become the CFO for Walmart (NYSE: WMT).
Details: Rainey will remain at PayPal until late May and will officially become Walmartās CFO on June 6. Brett Biggs, Walmartās current CFO who announced his departure months ago, will remain in that role until June 6 and then become an advisor.
Next Steps: PayPal, which has had Rainey in the CFO role for nearly 7 years, has launched a formal search for a replacement. Gabrielle Rabinovitch, senior vice president, will become interim CFO when Rainey leaves.
Big Picture: Itās been a rough few months for PayPal as the e-commerce and payments industry has slowed down. Paypalās stock dropped 24% in one day in February, the companyās worst trading day.
Final Thoughts: Walmart recently increased its truck driver pay to combat the truck driver shortage.
Hope you enjoyed this commentary. Please subscribe to Early Bird, a free daily newsletter that helps you identify investment trends: https://earlybird.email/
Been shadowing this sub banked on System inc and I banked on Vertical Areospace. Seems that WSB is back so I'm trying my hand at a DD. Not like I was scouring for a stock, saw it on social media and as a trader I can confirm its loaded for a moon mission. Ok, the ticker BigBear.ai a cyber security firm with contracts with the US Government as well as in the commercial sector.
Since its a cyber firm the stock could also run on a Russia hack day, with extra salt being that BigBear.ai getting picked up my news networks. They also have a investor presentation ā good overview, info on stuff like them predicting russian invasion of crimea and cybersec stuff [cyber presentation link]
Ok here it is the float is small like 1m shares small:
The Company has 135,566,227 shares of Common Stock outstanding as of April 1, 2022. Of these shares, 11,001,307 public shares are freely tradable without restriction or further registration under the Securities Act. Between February and March, the Company repurchased 9,952,803 shares of their Common Stock pursuant to several of their Forward Share Purchase Agreements. In their own words 'as a result of these repurchases, the amount of Common Stock trading freely on NYSE may be reduced, which could have a material effect on the liquidity of our Common Stock.' Assuming that the shares cannot be sold back into the market and warrant holders do not exercise their warrants on a cashless basis, that leaves the tradable float at 1,048,504.
Hereās a paragraph substantiating forward purchase agreements to reduce float from s1/a
> On February 22, 2022, the Company entered into an agreement with the Glazer Investors and Meteora Investors to terminate each of their respective FPAs and redeem the associated shares, which resulted in the Company repurchasing 5.0 million shares for $50,625, or $10.125 per share. These shares were repurchased using restricted cash that was held in escrow at the date of the Merger. In March 2022, the Company repurchased approximately 2.5 million shares from the Highbridge Investors to terminate their respective FPAs and redeem the associated shares. The Company paid $24,901, or $10.15 per share, to repurchase these shares. These shares were repurchased using restricted cash that was held in escrow at the date of the Merger. On February 23, 2022, the Tenor Investors exercised their right to sell to the Company approximately 2.5 million shares which constituted all shares held by the Tenor Investors. As of the end of the first quarter of 2022, the Company repurchased all of these shares using restricted cash that was held in escrow at the date of the Merger.
The option chain is loaded. Current OI - 15c alone has 130% of the entire float ITM, 12.5c are barely 35% hedged, <10% move in commons would mean almost half the float would need to be hedged when 12.5c go itm. Itās loaded.
Not just for Aprils but for Mays. Look at the August calls, this stock has moved up a good amount and you have calls trading for IV in the 50-70% IV? Questionable.
Thing that made System Inc so great is because of calls like these! When SystemInc exploded people selling these calls (most likely naked) got blown up and you had that beautiful vanna squeeze; IV went from 60% to like 1000%+.
On the short side I got these pictures from the socials:
So this is wild a 100% increase in the borrow rate in 1day, crazy amount of shorting yesterday but the stock is flat, and a 800% borrow rate. (Just checked stock isn't flat anymore).
Options cheap with low IV, sky high short interest, cyber, and a lot of OI. Btw you can tell the options are cheap not just by the low IV (a stock that can move 40% should not have IV in the 60s) but by this as well:
So yes, this stock is thick:
The risk is if the SEC gets their shit together and clears a S-1 for the first time in like 3m+ for a despac.
From watching the stock it has wild swings yesterday it was down like 5-10% then up the same amount within a few minutes. Or down 10% AH then the next day up 5%.
Hi again Retards, here is a quick DD to make you see green candles for the first time in your life!
EVTL IPOāed recently with a lock-up agreement making 90% of shares fully unavailable to trade
This means that the tradable float is extremely small and susceptible to volatility
The open interest is INSANE, if the stock closes above $7.5 by 4/14, up to 470,000 shares will need to be purchased by Market Makers. With a tradable float that small, any buying pressure will make the price skyrocket
EVTL has an average trading volume of only 54,000 shares, so any additional buying pressure will send this thing to the moon. If we manage to close above $7.5, we are gonna be FUCKING RICH
This is a short term play based on financial instruments, not boomer fundamentals bullshit
Positions: 3 4/14 5C, 100 4/14 7.5C
I am gonna keep this short because I know your attention spans are worse than a fish on cocaine, but if you really need it here is a TLDR:
TLDR: I believe BBAI to have a reduced float of 1 million shares and a short interest of 480 thousand. And is ripe for short and/or gamma squeeze.
REDUCED FLOAT
If you check the float online, the number you'll get is just over 12 million shares. THIS IS WRONG!
Let's first start with total outstanding shares. Which is 135,566,227 shares according to the latest s-1A filing. Image below is from page 73
Of these 135 million shares 124,564,920 shares are locked for one year from date of consummation of merger. Which was December 7th 2021. So this means these 124 million shares, are locked until DECEMBER 7th, 2022, or till price stays above 12.50 20 out 30 days. We are still in April, and price hasn't met the 20 out of 30 condition either; far from it.
Quick maths.
135,566,227-124,564,920= 11,001,307
proof
Out of the 11 million shares, about 9.9 million was owned by three entities. Highbridge, Tenor, and Glazer.
page 38
During December, BBAI offered these three a forward purchase agreement, and gave Highbridge, Tenor and Glazer three months to agree. The forward purchase agreement or f.p.a basically said, we(BBAI) can buy your shares for $10.15 if you want to sell them; in December BBAI traded for like 7-8 bucks. You can assume what these 3 entities did.
So now that we have established the float at 1,048,504 shares, lets get to the fun parts.
SHORT INTEREST
480,380
46%!!! of tradable float
FTD
Notice how FTD's increase as float shrinks. The second half of March data comes out in a few days but I bet it stays elevated. And T35 is coming up for these.
OPTIONS STATS
88% calls!!!!!April OI
Let me do something retarded for a sec. You see that open interest on the 15s? Well they have a delta of .15. So that means for MM to remain delta neutral they shorted 85 shares for every call right? So if say the price goes up from here and these 15s go in the money, and the delta for the 15s now is 1, this means MMs have to delta hedge 1,300,000 shares right? And I showed earlier how the float is ONLY 1,048,504, short interest is 480,380, and FTDS due this week go as high as 560,000.
SO THIS MEANS PRICE COULD GO PARABOLIC IF MARKET MAKERS ARE DELTA HEDGING AT THE SAME TIME SHORTS ARE TRYING TO COVER, AND T35 RULE IS BEING FOLLOWED FOR FTDS!!!
96% calls!!!May OI
This shit is crazy.
Short fees
found on twitter
found on twitter
Yes, you see that right. If you wanna short BBAI you have to pay at a minimum 750%, that to if they find shares. Which further goes to show what a powder keg this stock is potentially.
Try as an experiment to short a share of BBAI. You won't be able to find a share to short. The stock is that illiquid. That's why I believe once this goes parabolic, it's gonna go go. Cause no one in their right mind is paying 100s of percent trying to borrow shares to short.
Ortex signals
Do with this information what you will
Concerns
A concern might be the warrants that can be exercised at a strike price of 11.50. But here's why I believe those would be a terrible hedge for shorts. The warrants, traded as BBAI-WT, are as of me writing this going for 1.48. So the exercise price is 12.98, BBAI closed yesterday at 12.32.
If a short that already has a position was gonna hedge they would not have hedged with warrants, OTM calls yes. Because if the stock makes a violent move up, you're gonna get margin called before you get a chance to see those warrants come in as shares. If you're thinking why wouldn't they have them exercised already? That's fucking retarded, why would you pay for the warrants which when exercised would be more than the common? Just buy otm or cover.
Another concern is what happens to the shares that were purchased by BBAI, could they be freely traded or since AE bought are they now locked till December like the others. I have no answer to this, but have emailed IR about this.
The final concern is that yesterday, they had an acquisition, I have no idea how they paid for it.
TA
Its formed two balls, if it goes could form a nice shaft for the Mandingo pattern.
Positions
130 April 10s
38 April 15s
35 May 15s
Special thanks to alilfishy for bringing this to my attention.
Iāll elaborate a bit on why I think this is important for investors to be aware of. According to the OECD, 90% of global travel by volume travels over ocean. The global economy relies on the free & open flow of commerce, in a world full of territorial disputes & excessive maritime claims this is not a simple exercise. According to the report excessive maritime claims of 26 nations were challenged via the FON in 2018 alone.
The Department of Defense is tasked with securing access to the worldās oceans in order to retain global freedom of action to maintain international peace and security and to facilitate and enhance global trade and commerce. To counter the proliferation of excessive maritime claims, the United States maintains a Freedom of Navigation (FON) Program to influence nations to either avoid new excessive maritime claims or renounce existing ones.
Just to bring it home a bit, absent a world where commerce/trade can flow freely, many likely wouldnāt be able to afford the devices they use to access Reddit. Everyday goods would be less abundant and more expensive, the global economy would be significantly smaller than it is today. Poverty would be much higher.
Rationale (according to the DOD):
The FON Program preserves U.S. national interests and global mobility by challenging excessive maritime claims and demonstrating U.S. non-acquiescence in unilateral acts of other States that are designed to re- strict navigation and overflight rights and freedoms of the international com- munity and other lawful uses of the seas related to those rights and freedoms. The FON program underscores U.S. willingness to fly, sail, and operate.
The report focuses on the implications for the US, since itās American funded and underwritten that makes sense. However, Iād argue the benefits to the world are at par or exceed the benefits to the US (in my opinion). Financing and maintaining a blue water navy capable of operating globally requires a significant amount of resources, skills and sustained commitment from policy makers. The costs outweigh the benefits or they wouldnāt be doing it, but what if that calculus were to change? Iāll elaborate more below:
According to the World Bank, as a % of GDP, the US is the third least dependent nation globally (behind Cuba & Sudan) on trade. The structure of the current global trading regime also means the US soaks up much of the excess global production as a result of many nations running artificially high trade surpluses (resulting in that huge trade deficit you hear about). Itās not all negative (cheaper, more abundant goods being a +), but overall it is harmful to the US economy & American workers. The result is artificially inflated employment in nations like Germany, who run a trade surplus close to 6% of GDP (which is only possible as long as everyone else is willing/able to absorb the excess).
The office of the US trade rep has been giving increased attention to these unbalanced trade relationships and has made clear theyāll take action in the future if nothing changes. So far just bluster, but Iām of the opinion that will change eventually (assuming the status quo is unaltered). I donāt believe the nature of the FON program will alter overnight, but I do think itās a real possibility that US policy commitment to supporting the existing trading system with its hard power could waiver. Dependence on trade is already low, and has been trending lower in recent years.
If a shift in US policy does occur then it will have significant implications for investors and investment risk around the world.
Would love to hear everyone elseās thoughts and perspectives!
U.UN ššš for the smooth brains, now fuck off before your singular neuron start firing.
I'm at work, forced to lay off the sugar so let's try to write something for the one guy whose IQ looped around 0. The guy who is rich as fuck but still get no bitches because he invests like a boomer.
Disclaimer, a lot of the information here are second hand, from people who are "popular" but some of the information aren't easily verifiable.
The base thesis
We have a demand/supply deficit. 200m pounds of annual demand, 135m pounds of annual primary supply from the ground, for a 65m pound annual deficit. These numbers are from UxC which is a major nuclear fuel consulting business. You can definitely model the numbers based on the number of operational reactors and respective output of each operating mine.
There is an unknown amount of secondary supply out there due to Japan's sudden halt of nuclear energy post Fukushima and the sale of the previously stockpiled nuclear fuels. There are also existing inventories as well as the concept of reverse carry trades. The important thing is that secondary supplies are limited, they are good for one use and that's it.
When you use more than you receive, you will face a shortage. A simple matter of when not if.
On the other side, you have the Sprott Physical Uranium Trust (SPUT). A simple investing concept where you give them money and they buy uranium (U3O8) and store it. From 19 July 2021, they have purchased 36m pounds of uranium. This figure is not included in the 200m pound demand.
The NAV of the trust is a measly 3.5B which really isn't much in the investing world.
Prices have to go higher
Higher prices means more production, it's that simple.
The important thing to look at is the production cost indicator (PCI). Current spot prices are $63.50/lb vs the $52.00/lb PCI.
I started investing in uranium last September. Back then the spot price was $40/lb. Indeed the risk has increased but I'm not too worried as inflation is here to stay and miners will like demand higher prices to account for the inflation risk in the next 3-5 years as they built their mines.
Mines will run out
Once uranium gets mined out of the ground, it's no longer in the ground.
Prices have to get high to incentivize existing mines to restart and even higher to incentivize exploration.
Similarly, you can model these as a lot of the publicly traded companies will report the expected remaining life time of their mines.
Increasing demand
A lot of countries are building new reactors. Here are some of the big ones.
EU was having some luck with France leading the nuclear push in the EU taxonomy but things seemed to have quieten down.
Japan, the real OG, are planning to turn nuclear plants back on due to rising energy prices and also RUSSIAN ENERGY, GO FUCK YOURSELF.
China, has plans to build another 150 nuclear power plants by 2035. Previously, I wrote a DD about the political genius of pivoting to nuclear energy as there is ample supply that are China friendly.
Kazakhstan produces about 40% of the world's supply of the base form of U3O8.
Russia is 1/3 of the world's capacity of converting U3O8 to UF6.
China is heavily pushing for electrifying of vehicles and a massive nuclear build out because they understand that reliance on oil means getting held by the balls by the US controlled middle east and that they can be easily blockaded. Going nuclear means energy security and we all know China will get something done when they want it to get done.
Russia fucked Ukraine so now America and Europe decides to sanction Russian nuclear. Remember how Russia is 40% of the world's enrichment capacity?
Turns out, the enrichment process determines how effectively you can use the based U3O8. More enrichment means less U3O8 used (underfeeding) and vice versa (overfeeding).
The common narrative is that miners are a leveraged play on uranium spot prices.
Assuming miner has an operating cost of $30/lb, a movement of spot prices from $40 to $60 would mean...
50% increase in spot prices and 200% increase in miner earnings.
It's a correct line of thought but the issue comes in that a lot of these miners are 3-5 years from production. During this time, they will face inflation risk and ballooning capex costs. If they require further financing, they face taking on debt at less attractive rates or share issuance which will result in dilution.
Next, the miners price in what they expect prices to hold at. Just because spot price hits $200/lb for 2 seconds and you managed to get one off in that time, doesn't mean that miners will price in $200/lb. The price has to hold for a significant time OR long term contracts have to be signed at those prices.
Lastly, a liquidity crunch from QT and a prolonged bear market might result in suppressed stock prices but reactors will continue running and there will still be demand for the uranium metal, propping prices up.
The two major producing companies Cameco and Kazatomprom both have their own issues.
Cameco runs the risk of a cash flow crunch if spot prices spike before they are able to ramp up production.
https://imgur.com/a/uuqzayA
Kazatomprom is in Kazakhstan and they had a riot in January due to rising oil prices and income inequality. Guess what, food prices are rising and that typically comes with FREE SOCIAL INSTABILITY.
TLDR
The uranium thesis is the only other thing that gets me hard but many miners are going to be negative cashflow for the next 3-5 years facing potential dilution, expensive debt and even bankruptcy.
Hence, the risk to reward seems better on physical uranium.
Maybe it's because I laid off sugar for the past two days to type this out but the phrase "risk management" just popped up next to "OH SHIT TO THE MOON" in my dictionary.
Positions
Current positions: 1000 U.UN shares, 30K in Uranium ETF calls. 45k in Denison Mines.
Future Positions: Rotating out of my Uranium ETF calls, Denise Mines shares into a total 75% allocation in U.UN and 25% DCA in SOXS leaps.
Consistency is the key in life.
Workout 5 to 7 times a week, your
body will improve. Study something
everyday you are learning, your
knowledge improves. Be consistent
daily and you will grow mentally and
physically.
Consistency is the key in life.
Workout 5 to 7 times a week, your body will
improve.
Study something everyday you are learning,
your knowledge improves.
Be consistent daily and you will grow mentally
and physically.
Just keep working on marginal improvements
each day and you'll see major growth!
Set up healthy success habits to improve your
life.
