SHLL surges 60% off EV merger announcement – could you profit off shorting the speculation?

Tortoise Acquisition Corp (NYSE: SHLL) is acting like a magnet to robinhood investors as the stock surged 60% in a few days. The imminent merger between Hyliion incorporated and SHLL caused the volcanic eruption on wall street. While the merger sounds promising, some investors question the validity of the bullish move. Leaving many investors at the stock market theme park wondering should they jump on the SHLL rollercoaster or sit this one out? Let us tackle this investing dilemma today.

Table of contents 
1. SHLL and Hyliion merger overview. 
2. What is Hyliion's business model? 
3. Should you invest in SHLL?

SHLL and Hyliion merger – what you need to know.

Tortoise Acquisition Corp and Hyliion are merging in the imminent future, with the new company trading under the ticker symbol (NYSE: HYLN). First, SHLL is a publicly-traded special purpose acquisition company. Essentially, their sole mission is to look for a merger. Also, SHLL holds a strategic focus on the energy sector and decarbonizing commercial transportation in North America. Considering SHLL’s mission, it makes sense for them to marge with Hyliion, an EV truck company looking to reduce greenhouse gas emissions.

Hyllion will receive $560 million from the merger. The funds will enable Hyllion to commercialise and complete the mass production of the businesses EV trucks. EV fever is causing stocks like Nikola (NASDAQ: NKLA), and Nio (NASDAQ: NIO) to experience unprecedented traction. Thus, it should come as no surprise that EV fever is latching onto the future company. Ultimately, the positive speculation around the Electric Vehicle market caused the SHLL buying frenzy this week.

Hyliion’s business model

Hyllion’s (Hybrid-Lithium-Ion) mission is to “reduce the carbon intensity and greenhouse gas (GHG) emissions of commercial transportation Class 8 vehicles, such as trucks, by being the leading provider of electrified powertrain solutions”. The EV company leverages software algorithms to ensure the trucks can decrease its ecological impact. Despite the fairytale story, Hyllion does not currently have a product on the market yet. I’ll repeat that Hyllion does not have a product on the market. Thus, no matter how ecologically visionary Hyliion is, the speculation is quite dangerous.

Is SHLL a viable investment?

Before I start, I am obliged to remind our viewers that this is not advice only general commentary from my extensive research in this area.

Short answer: SHLL has the potential to rise as long, at the music keeps playing (opinion not advice).

Getting in on the SHLL hype

Riding the wave is luring. Especially, as speculative companies like Hertz (NASDAQ: HTZ), Nikola (NASDAQ: NKLA), and Inovio Pharmaceuticals (NASDAQ: INO) are giving investors unrealistic gains. Investing in the SHLL trend could possibly provide a small gain next week. Because the aftermarket trading suggests investor confidence is raising the resistance levels. Also, if we are going off the growth of NKLA before hey finalised their merger, than SHLL may have room to grow. However, the music could stop or slow down if the coronavirus fears infiltrate SHLL investors’ minds, causing a sell-off. Ultimately, leaving you with a loss. If I were investing, I would look for a modest gain of 5%-10% to mitigate the risk of being caught in the sell-off trap. (Opinion not advice)

Investing in the warrant and shorting the SHLL stock

The beauty of investing is that there are usually multiple angles you can play. In the case of the SHLL and Hyliion merger, we have the warrant-stock arbitrage strategy. The strategy involves going long on the warrant and shorting, either through a put or selling a call, the SHLL stock. The warrant is another way for a company to raise capital and is like an option in that you buy the stock at a certain strike price in the future. Ultimately, as the stock overinflates, the warrant price will rise, allowing you to profit if you bought the warrant early. Then when the stock finds a more natural equilibrium, you could profit off your short. Overall, a more lucrative play on the future company and a short on the current speculation.

Understand the risks

The growth is purely off speculation. Speculation is the mother of evil. At one moment you can be on top of the wave, the next the wave drowns you and your board. Thus, if you invest in SHLL, make sure you understand the risk of speculation, and your investment reflects your financial interests.


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The information above is not financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.

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Written by Patrick McLoughlin, Senior Manager of YIG.

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