Tortoise Acquisition Group (NYSE: SHLL) first attracted the wallets of Wall Street when they announced their intention to acquire EV company Hyliion. The hype started to die down as the SHLL merger is still another month away. However, today Tortoise Acquisition surged 15% on what seems to be no news. Bullish investors hold their finger over the buy button as they do not want to miss out on another explosive run. Whereas the bears are screaming a day trade pump and dump. Thus, today’s article will provide our readers with an explanation of why SHLL is up and whether we see value in an investment.
Table of contents 1. Why did SHLL surge off no news? 2. Does YIG see value in a SHLL investment?
Why did SHLL jump 15% on no news?
Usually, when a company rises out of the blue, it was an institution pouring in a gigantic amount of cash. Institutional buying seems to be the reason SHLL gapped up today. Especially as a number of hedge funds have started increasing their positions. For example, Cambridge Investment Research recently acquired 21,650 shares valued at $594,000 in the second quarter. Also, hedge fund Alberta Investment Management increased its stake from 375,000 shares to 850,000 shares in the last quarter. Once the institutional buying news got out, retail investors likely reacted positively by buying SHLL. Institutional buying plus reactive retail investors are probably the reason for today’s surge.YIG would like to point out that institutions tend to set the trend, and then retail investors will react.
Does YIG see value in a SHLL investment?
Before I begin, I am obliged to remind our viewers that this is not advice but rather investment commentary from extensive research
Short answer: Waiting for the hype to die down and riding the merger craze holds the most weight (opinion not advice)
Attempting to make a quick gain today does not seem like a smart play. Because FOMO and greed are probably telling you the stock will continue to rise. However, considering the jump is off institutional buying and no fundamental news, we should see SHLL decline. Nonetheless a medium-term investment should not be ruled out (opinion not advice) and here is why:
Smart money is backing the SHLL merger
Following the ‘smart money’, especially in a turbulent climate, is a clever strategy. In SHLL the smart money is coming from Morgan Stanley, Credit Suisse, UBS, Goldman Sachs, Bank of America, and many more. To view the full list of hedge fund and investment bank ownership in SHLL then click here. YIG would like to point out that the smart money will likely only stay until the merger. Because that is when the retail investors will flock in the masses. Plus, after the merger hype fizzles out, there is no incentive for the institutions to stay in. Hence hedge funds and institutions will likely sell or significantly reduce their positions once Tortoise mergers with Hyliion. Thus, following the smart money until the merger is a smart play.
Growing EV fever
Investors are going crazy for EV shares. Especially as companies like NIO, Nikola, Tesla, and Workhorse are providing unrealistic returns. Once the word spreads and SHLL announces the merger date with EV manufacturer Hyliion than investors should flock in the masses. Because people will not want to watch another EV opportunity pass them by.
Call options indicate bullish future ahead of SHLL merger
Options activity is a great way to track the underlying sentiment of a stock. SHLL call options are trading at much higher volumes than SHLL puts for August, September, and October. A lot of investor interest revolves around the $35 call options, which is currently out of the money. Overall the current options activity indicates a bullish sentiment. However, the bullish attitude towards SHLL could easily become bearish after the merger as the smart money sells.
However, before investing YIG would like to point out that SHLL is a Special Purpose Acquisition Company (SPAC). If the word SPAC or PIPE investor sounds foreign than you need to read this before investing in SHLL.
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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.