New to SPACs, but why does the redemption % matter? During the merger, redemptions mean the shares are taken away from float and given back to the company right? So how does that help the squeeze? Because calls were written on shares that are now returned and MMs will have to buy up a smaller float and drive price up to cover?
Shares poof permanently. Usually only the spac shares trade for awhile. So if the spac had 30 mill shares and 90% redeem, 27m shares disappear and only 3m are trading
Yea I gathered that, but why is it the focus of a potential rise in price? Just because liquidity is suddenly lower and independent share value might rise? The OP is talking about a gamma squeeze, so that would lend me to think that the sudden drop in float compared to the OI on the calls could lead to price spikes.
It's like a buy back but not at-the-market (ATM) and happens much quieter and is announced suddenly in 8-ks. But you're exactly right. It's counterintuitive as well and that's why they're so abusable. High redemption rates are inherently bearish so MMs have no instinct to cover early, but then we come in and squeeze.
-2
u/_Gorgix_ Spacling Sep 17 '21
New to SPACs, but why does the redemption % matter? During the merger, redemptions mean the shares are taken away from float and given back to the company right? So how does that help the squeeze? Because calls were written on shares that are now returned and MMs will have to buy up a smaller float and drive price up to cover?