Pine Island (PIPP) is the ticker for Pine Island Acquisition Corp. a Special Purpose Acquisition Company (“SPAC”) that IPO’d back in September of 2020. The focus of $PIPP is to find a merger candidate in defense, government service or aerospace. The initial float was 34.5 million units consisting of 1 common and 1/3 of a warrant. Units split on January 6th, 2020 with commons initially trading at $10.12 and warrants at $2.43. $PIPP garnered a lot of attention because of who is on the team and their connections to the current administration.
$PIPP has been nicknamed “the Biden SPAC” for its ties to high level administration officials. When you see the team below you will see why.
- $PIPP is a SPAC focused on defense, government services or aerospace
- The team is a who’s who of insiders with ties to the Biden administration
- Increased volume of warrants and call options implies a merger announcement is imminent
The Chairman of $PIPP is John Thain
John Thain has a BS from MIT and an MBA from Harvard. He was formerly the CEO of the New York Stock Exchange, the CEO of investment bank Merrill Lynch and the CEO of CIT Group.
The current and former team members include:
Long time Democratic official and diplomat. He stepped down from the $PIPP team when Biden nominated him to be the next Secretary of State.
General Lloyd J. Austin III, Retired
Retired four-star Army General and previous CENTCOM commander. He stepped down to become the Secretary of Defense.
Blinken and Austin are Biden’s right and left hand man
U.S. Senator Saxby Chambliss
Former 2 term Republican Senator from Georgia and Representative from Georgia who served on the Senate Armed Services Committee
U.S. Senator Tom Daschle
Former US Air Force Intel Officer; Representative and Senator from South Dakota and Senate Majority Leader.
U.S. Senator Byron L. Dorgan
Former Senator from the state of North Dakota and Chairman of the Senate Aviation Panel.
Michéle A. Flournoy
Former Under Secretary of Defense for Policy under the Obama administration.
Representative Richard Gephardt
Former House Majority Leader, now lobbyist/consultant for Boeing and Spirit Aerosystems and other aerospace companies.
Admiral Michael Mullen, Retired
Former Chairman of the Joint Chiefs of Staff and Chief of Naval Operations
This is a who’s who of insider access.
With these ties some big firms took large positions right off the bat with Citadel holding 7% of the float and Millennium Management taking 5%.
Investment Thesis: Any company in this space considering a SPAC would be foolish to pass up a team with strong ties to The Secretary of State and The Secretary of Defense and including former House and Senate Majority leaders, and former Chairman of the Joint Chiefs, Under Secretary of Defense and Senate Aviation Panel. Potential targets are not going to hardball these guys for an inflated valuation as they need to curry favor with these insiders since most of the income in this space comes via government contracts.
$PIPP drew a lot of interest when it originally IPO’d with commons reaching a high of $14.94 and warrants $4. It took a pummeling like many pre-DA SPACs did during the spring when both institutions and retail got burned out on too many crappy SPAC deals coming down the pipeline. Now we see institutional money flowing back into some of the better SPAC deals and retail has followed, causing the better SPACS to see a big run up, most recently $GGPI/Polestar.
Why $PIPP now? Well this stock has been dead for months and months then suddenly started to pull volume, it was a top 5 ticker for SPAC volume last week. Warrants are up nearly 50% already with large buys rolling in. There has also been a large buying of calls with almost 5,000 Open Interest on the January 10c with 10% of that opened just on Friday. It is my belief based on this movement that a merger target will be announced by the end of the year and based on the team I am willing to bet it will be a good one. Its been 11 months since $PIPP IPOd and the average time from IPO to merger announcement for SPACs also happens to be 11 months so the timing fits.
Warrants and Why I Like Them
For anyone not familiar with SPACs they IPO originally as a unit which is a common share bundled with a warrant or partial warrant. The typical SPAC warrant allows you to buy a common share for up to 5 years post merger for $11.50. They are a bonus sweetener to the funds who buy the SPAC IPO, those funds typically try to sell the commons for a few cents over what they paid post unit split then keep the warrants as a “freebie” of potential upside if the SPAC does well post merger. Anyone can buy these warrants though (except Robinhood users – sorry) and have access to the benefits of what is essentially a 5 year call option that doesn’t suffer theta decay.
The other benefit of warrants is leverage. If commons are $10 and warrants are $1 and you have $10,000 to invest you can buy 1,000 commons or 10,000 warrants. If commons go to $11 you make a $1,000 or 10% return. Warrants would go to $2 giving you a $10,000 or 100% return. The downside of this higher reward is as always higher risk. If no merger happens SPAC commons can be redeemed but warrants go to 0. I see a very minimal chance of that happening with this SPAC and this team. As stated above I believe a merger announcement is imminent.
This article was written by u/chris_ut.