East Resources Acquisition (ERESW), mcap=$423m, price $0.07 vs $0.25

Pitch: Mispriced SPAC warrants at $0.25 with no target yet and limited time left till expiration (Jul’22). The thesis rests on the successful closing business combination – this is supported by historical SPAC completion rates and a limited number of SPACs competing for deals in the traditional upstream energy space. The market is implying a ⅛ chance that ERES business combination will be completed before the deadline. The author thinks the chances should be higher at around 25%.

Valuation: 95% of completed SPAC deals at $8-10 trade with warrants around $1-$2. Assuming 25% chances of completion, the warrant should trade now at a $0.5 price based on the base rates and strong energy deal flow environment.

Exp. gain: +700% to $2/warrant on deal completion.

Full ERESW write-up (free guest account required):

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