Speculators Propel Triple-Digit Rallies in Blank Checks, De-SPACs

Speculative investors flocked to low-float blank-check stocks and firms that recently completed tie-ups, driving price swings reminiscent of the go-go days for SPACs.

(Bloomberg) — Speculative investors flocked to low-float blank-check stocks and firms that recently completed tie-ups, driving price swings reminiscent of the go-go days for SPACs.

Ocean Biomedical Inc. at one point surged as much as 453% Thursday, triggering at least 11 trading halts before cutting gains to 125%, while special-purpose acquisition companies Genesis Growth Tech Acquisition Corp. spiked as much as 163% and Lionheart III Corp. soared as high as 113%. Genesis Growth’s rally was trimmed to 64% as gains for Lionheart III mostly evaporated. The swings came as holders redeemed more than 98% of public shares in the SPACs for cash, according to disclosures over the past month.

Similar volatility has been apparent in a range of companies that have seen the majority of investors bail on SPAC deals, drawing traders anxious to flip the low-float stocks. It continues a trend that resembles gambling more than investing as speculators push stocks far above their fundamental values in hopes of pocketing a quick profit.

The risks that come with chasing rallies were also on display Thursday. Intuitive Machines Inc., which had soared 1,200% in a raucous stretch to briefly become the best performing ex-SPAC, tumbled 75% on Thursday. The stock has wiped out 85% from an intraday high hit on Wednesday.

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The volatility garnered attention from retail traders as Ocean Biomedical, Lionheart III and Intuitive Machines were among the trending tickers in trader chatroom Stocktwits. Ocean Biomedical was among the most-traded assets on Fidelity’s platform with buy orders outpacing those to sell.

SPACs are known as blank checks because they raise money from investors in an initial public offering with the goal of buying a private business that isn’t identified yet. The vehicle enables investors to redeem shares for cash if they don’t like the deal or simply wish to recoup their investment. Redemption rates have held above 90% on average this year, meaning the newly-public companies now tend to have very low share floats, which in turn can exacerbate price swings. 

(Updates with trading throughout)

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