Two plays I am currently long and looking to further build.

Two near-term plays with unique risk/reward dynamics - 12/29

Thanks for taking interest in my substack, I wanted to try it out after receiving numerous requests to share more insights into my trade ideas and strategies I’ve been utilizing - specifically when it comes to SPACs. I could tell you I’ve been trading for x years, returned 2,000% this year, etc etc — but anyone with a keyboard can put that online with no verification or audit required. So instead I give you my resume in real time and hope you have found some value in my twitter account (and made some $).

Enough small talk, lets cut to why you clicked on this newsletter.

Trade idea #1: ESSCR (rights). Currently trading at 0.38. 10 rights entitles you to 1 share upon completion of business combination. That gives you a breakeven of $3.80/share if ESSC is able to complete their merger with Ufin. The transaction is expected to close in 4Q 2020 or early 2021 per their investor presentation, with a pro forma EV of $300M.

UFin is a technology platform providing comprehensive solutions to sales forces. They have big-name customers including JD & ByteDance, and an impressive management team comprised of former Tencent, AliHealth, and Samsung execs. They project revenues to grow at a fast clip into 2022 shown below:

Why the rights?

Here is some other SPACs with rights current prices (all 10 for 1):

ADOCR: .419 (haven’t even found a target yet)

ALACR: .65 (haven’t released an investor presentation yet)

TOTAR: .9

MCACR: .94

LOACR: 1.22

NBACR: 1.24

I prefer the rights here, versus warrants or common, for the margin of safety and downside protection. Today for example, SPACs are getting clobbered for the most part, while ESSCR are sitting +2%. I view the risk/reward of this trade to be extremely favorable, and will further accumulate on weakness.

Risks: ESSC has not yet announced their potential $50M PIPE. I suspect this team will have no problem getting one, but it is worth noting.

Investor Presentation: https://sec.report/Document/0001213900-20-038635/

Trade idea #2: BRPA, BRPA.WS, BRPAR

BRPA: 30.69

BRPA.WS: 5.75

BRPAR: 1.44

One BRPA.WS (warrant) gives you the right to buy 1 share of BRPA @ 11.50. You can not exercise these until 30 days after the business combination (and provided there is an effective registration statement). However, if you could, they would trade at 19.19 (30.69 - 11.50). That is a large discount from their current price of 5.75.

10 BRPAR (rights) entitles you to 1 share of BRPA upon consummation of business combination.

Worth noting: Both warrants and rights go to zero if business combination falls apart for any reason.

What is BRPA?

BRPA entered into a definite agreement with NeuroRx, with a pro forma EV of $525M. They have two drugs:

1) Aviptadil - a promising Covid-19 therapeutic (receive 50% profits in US, Israel, Canada, 15% in Europe and 20% in rest of world).

2) NRX 100/101 - Anti-Depressent Drug Regimen for suicidal Bipolar Depression

Thesis behind trade?

I’m not going to bore you with details about the drugs, but instead give you my thesis behind the trade: I am speculating that $BRPA (NeuroRx) receives Emergency Use Approval for Aviptadil following their top line data expected in early January 2021.

Criteria for EUA: Must be proven to be safe and MAYBE effective. They saw a 72% survival rate in the first 100 patients, and if remotely similar results are seen in the 200+ patient enrollment then I think this will receive EUA…. full FDA approval is not out of the question but I am not speculating on that.

Why is this important?

I am speculating that with BRPA receiving EUA, it could potentially send the stock for another run similar to the one on 12/22 that reached nearly $77. Remember, BRPA has a nano-float of 500k shares, which can create some wild price action. Technically, the chart is finding support in the $28-$30 area and digesting the recent run up on declining volume. I am personally playing this with a mix bag of common, warrants, and rights. This is a high risk/high reward setup, so size accordingly and know that if top-line data is a flop this stock will get clobbered.

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Disclosure: The above references are an opinion and are for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice. The information provided has been gathered using publicly available information from SEC filings by the companies ESSC and BRPA.