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PreMarket Prep Stock Of The Day: Pivotal Investment

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PreMarket Prep Stock Of The Day: Pivotal Investment

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

Although SPAC IPOs have been around since 2003, they’ve received a lot of attention in 2020. More than 100 SPAC IPOs have launched this year, and the price action in these trading vehicles has been fast and furious.

One SPAC that flew under the radar until last week is Pivotal Investment Corporation II (NYSE: PIC), the PreMarket Prep Stock of the Day.

What Is A SPAC? A special purpose acquisition corporation is a blank check company. It's formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses or entities.

Pivot Investment Corp. is bringing XL Fleet public via a SPAC. XL Fleet provides electrification solutions for Class 2-6 vehicles. Investors are optimistic that the company will succeed with the incoming Biden administration’s broad plan for electrification in the automotive industry and lower emissions.

Initial Jolt: As is so common with the early price action in SPACs, the majority of the price action takes place at the $10 area at the onset until the acquisition target is announced.

On Sept. 18, the company announced their merger with XL Fleet, with an enterprise value of $1 billion and plans to begin trading on the NYSE under the symbol "XL" in the fourth quarter. 

On that day, the issue rallied from $10.59 to $12.10. The following day it put in its all-time-high at $14 and ended the session at $13.31, its all-time-closing high. The issue was back to its point of origin ($10.50) by early October in choppy and volatile trading. 

Recharged: After laboring at the $10.50 area for the next month, it began another rally on Nov. 19, moving up from $10.47 to $11.67 on much heavier-than-average volume.

The catalyst for the rally was the announcement that third-quarter sales were up from $2.6 million to $6.3 million year-over-year.

Before the open, the company announced that its acquisition target said it expects a significant increase in 2021 sales from its largest partner.

After a small loss on Friday, the issue reached $12.64 earlier in Monday's session and is still trading in the $12 handle, up 6.83% at $12.12 at last check. 

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Moving Forward: From observing the price action in other SPACs during their transitional phase, the issue can go anywhere.

With so many investors underwater from the last pop-and-drop, there may a plentiful overhead supply in the issue as it rebounds, with investors attempting to break even or eke out a small profit.

The current high of the session ($12.64) coincides with a series of five consecutive highs from Sept. 24 through Sept. 30, from $12.10 to $12.36. This entire area will be an important hurdle to clear.

If that area is breached, the issue will then have to contend with the trio of highs from $13.55 to $14 (all-time high) from Sept. 21-23.

Photo courtesy of XL Fleet. 

 

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