Let us say there is a little crappy bank, on the verge of death, that agrees to be bought by a publicly-traded SPAC. The deal appears to be a done deal. The shares of the crappy bank do not budge for over a month. Then, with no news, the bank’s shares jump 100% in two days. The shares of the SPAC barely budge. The bank on the verge of failure is Frontier Financial Corp (Nasdaq: FTBK) while the SPAC is SP Acquisition Holdings, Inc. (AMEX: DSP). SP Acquisition Holdings will give shareholders of FTBK 0.053 shares of DSP and .053 warrants (exercisable at $11.50, over 15% above the current market price) for each share of FTBK. This translates into a value of under $0.70 per FTBK share.
Here are their charts
There are two potential ways to play this. A trader could play this as a reverse merger arbitrage and buy DSP while shorting FTBK. I will look to play this as a daytrade by shorting FTBK with gusto when it goes red tomorrow or the next day. The risk either way is that somehow another buyer will come quickly and buy out FTBK at a higher price. I think that highly unlikely but the huge volume today could be indicative of some corporate raider taking that route. If DSP shareholders do not approve the merger and there is no other buyer, FTBK will likely be forced into bankruptcy.
VeriChip Corporation (NASDAQ:CHIP) -Up on news yesterday, but this move looks a bit overdone. I will look to short on green/red. The move is news-based so I won’t be very aggressive.
BSD Medical Corporation (NASDAQ:BSDM) – Big move today on news. It should be a good mover tomorrow, likely to the upside. I would be a buyer on red/green or a strong open as long as it doesn’t gap up much.
Gray Television, Inc. (NYSE:GTN) – After the last real news, earnings around August 7th, this stock was under $0.50. Now just under $3, this is an easy short on green/red or on a break below today’s lows. It was a good short for me today on green/red but it closed near yesterday’s close. Perhaps tomorrow will be its big down day. If it doesn’t do much tomorrow I’ll remove it from my watch list.
Disclosure: No positions. I have a disclosure policy.