The Rundown (2/12/21)
Welcome to The Rundown! Each week we’ll feature a couple talented guest writers to give their thoughts on whatever is happening in the markets right now.
One of our guest writers this week is the Undefined Mystic! He’ll be sharing his thoughts about Redball Acquisition – a SPAC being led by one of the smartest men in baseball, and the subject of the book and movie Moneyball, Billy Beane $RBAC.
I’ve made the focus of these blog posts to be on low risk high upside opportunities in the stock market.
I believe I’ve uncovered the king of such a play
We will go through 3 different ways to play this based on your risk tolerance
Disclaimer: This is not investment advise I’m not a financial advisor, just sharing my rambling of thoughts
Pre- Merger SPACs
Over the past few months we’ve seen the general market get hip to something a lot of us who have followed SPACs closely have known. Buying SPACs with all star management teams priced near their 10$ floor (NAV) is the one of the best investments out there. Indeed there aren’t any “top tier spac’s” that are trading under 11$. With the exception of one.
In this post I will make the case that not only is this stock criminally under priced for 3 absolutely stupid reasons. I will also clearly identify the target which I wildly SPECULATE it will be, and it is EPIC.
I will also outline a more risky strategy that has a potential 30% loss downside but offers upside of a 200-750% return.
The SPAC I am targeting is RedBall Acquisitions https://www.redballac.com/
It trades under the ticker symbol RBAC.
It is led by Billy Beane.
It doesn’t require “inside baseball” knowledge to know the basic story of Billy Beane.
It’s been well documented in the NYT best seller “Moneyball” and even more popularly by the film “MoneyBall” which was nominated for 6 oscars. Including Brad Pitt for best actor in his portrayal of Billy Beane. Beane essentially changed the entire landscape of how baseball teams valued players by just being focused on smart data analytics and ignoring everything else. This had a domino affect changing not only baseball but all professional sports. The integration of data analytics as the primary metric of building a successful professional sports team is now nearly universal.
The “MoneyBall Effect” has even been credited with transforming everything from health care to criminal justice.
But to call this a “Billy Beane” SPAC is just really touching the surface of the amazing team RedBall has put together. It’s Co-Chair Gerry Cardinale a Goldman Sachs legend who moved and started RedBird capital partners. I’m not a big copy and past kind of guy so check out his bio here . The bottom line is Gerry having worked on huge deals with everyone from the Yankees to the Cowboys Gerry is the undisputed “hulk” king of sports related finance.
The rest of the RedBall team is equally impressive from one of the worlds top economists, titans in the media industry, top tech investors and even Condi Rice. All the bio’s for the team are on the website.
So the all star team confirmed. What’s more they aren’t targeting the overcrowded ESG market they are focused on “businesses in the sports, media and data analytics sectors, with a focus on professional sports franchises“. There are very few SPACs that are targeting this area and they are by far and away the best team out there targeting this area, and their funds trust of $575,000,000 is literally more than double the size of other SPACs looking into the sports arena. So the chances of them landing the best possible company looking to SPAC in this space are extremely high. They also have one of the strongest high quality institutional investors loading up shares including Seth Klarman who bought $52 million worth of RedBall.
Why is the stock so cheap then?
Why then are most all star managed large trust pre merger spacs trading between 11-14$ and this SPAC is trading as of fridays close at 10.58 ?
I believe there are a few (uninformed and stupid) reasons for this.
The truth the stock recently traded up to $11.23 but sold off on a axios report that the deal they were previously reported to be targeting for Fenway Sports Group fell apart investors felt now they were back to square one as far as waiting for a merger so they sold off heavy assuming they can return to RedBall in a few months time. However I feel this is big mistake. I feel very strongly that the RedBall Fenway talks fell apart months ago. It was reported at the time of the original fenway rumors that should the deal go through OBVIOUSLY Billy Beane would have to leave his position with the A’s the report in the Wall Street Journal even said if the deal went through he would be leaving baseball behind altogether . However Beane was active during the entire offseason wheeling and dealing on behalf of the A’s and publicly confirmed in early December that he was most definitely staying on with the A’s for the 2021 season. Now if there was even a remote chance at that time of the Fenway Group deal going through there is no way he could stay on with the A’s. So I feel it is a fact the Fenway group talks were for sure over and done with by December and more likely was over by November. Allowing for no conflict on interest in Billy’s deal making in the MLB offseason on behalf of the A’s. So when the Axios story broke that talks with FSG have broken down it really wasn’t news at all. This is backed up by the fact the the dip has been aggressively bought up both in the commons and the warrants including seeing very large block trades every day. In this past week alone I’ve noticed over 1 million shares in block trades bought this week originally every time I saw a big one I tweeted it but it kept happening so often that I stopped.
People think this SPAC is buying a sports franchise which is kind of boring.
This is completely wrong the companies prospectus and management team reflect a distinct interest in sports data and technology. The bid for fenway group has been mistakenly viewed by the public as a bid for a baseball team. WRONG. The real gem in Fenway Groups cap is their ownership of the Liverpool football team which is like owning the NY Yankees except X100 for those familiar with the rabid fan base for Liverpool.Liverpool is also famous for incorporating the “MoneyBall” way more than any other team in football. I also feel if its not liverpool RedBall will not go after any other euro soccer clubs as Beane already has a share in a few euro soccer teams, if it’s NOT liverpool its nothing. Also fenway doesn’t just own the red sox they have a extremely large portfolio including sports media. Fenway is the cream of the crop acquisition and now that the deal is off I don’t think RedBall is just gonna go after another sports team like the Houston rockets. They are going for a elite top quality acquisition nothing less.
Jim Cramer has referred to RedBall as a joke “celebrity SPAC”. You shouldn’t be shocked but Cramer has no idea what in the actual fuck he is spewing. If you know anything about Billy Beane he is the most reluctant celebrity if he even can be called a celebrity. He shuns the limelight and only agreed after much pressure to let Michael Lewis speak to him for “a piece in the New York Times” which nobody ever imagined would turn into a massive motion picture. When the movie was being made he famously refused to give much personal information. He also turned down a very high profile job to take over the red sox so as not to move his family as is shown in the end of the feature film. If you listen to him talk his is extremely humble constantly crediting everyone around for his success and shuns the limelight. in every way possible To call him a celebrity and the SPAC a joke is absolutely insane especially when you look at the rest of this management team and the heavy amount of smart money that has piled into this SPAC. I’ll trust Seth Klarman’s 52 million dollars over Jimmy Chills lip service desperate attempts to remain a relevant personality in the ever changing medium of financial investing with his pathetic attempt at a “hot take”.
I think these three absolute stupid reasons is the only thing standing between RBAC and a 13$ pre-merger price, and the only reason why you can buy the warrants for under 3$. That being said it is very likely that even without no merger announcment soon the stock and warrants will continue it’s trend up to it’s previous high’s in 11.40s area making it a very attractive buy down here.
As you can see in the chart the dip has been heavily bought and is steadily trending upwards.
What’s the most likely target?
The following part of my post is pure speculation.
If we take sports team off the table and focus on the sports tech data analytics part of the RBAC stated acquisition target there is one company that stands out above the rest SportRadar . They are head and shoulders the leading company in sports data technology here’s some copy and paste from the companies website “Sportradar is the leading global provider of sports data intelligence. The nexus between sports and entertainment, we serve leagues, news media, consumer platforms and sports betting operators with deep insights and a suite of strategic solutions to help grow their businesses.
As a trusted partner of more than 1,000 companies in over 80 countries, Sportradar serves as the official partner of the NBA, NFL, NHL and NASCAR as well as FIFA and UEFA. It is also the only provider entrusted to work with the US sports leagues in an official capacity to distribute sports data (NBA and NHL) around the world for betting purposes. The company monitors and delivers insights from more than 400,000 matches annually across 60 sports categories, having developed the industry’s most proficient software while setting new standards for speed and accuracy.“
Also SportRadar is the only sports technology company in the world that has had multiple reports that it is looking to go public via A SPAC last July. But excitement in the general market of SportRadar going public have died down over the last few months but last month some very big news dropped and many may have missed it.
SportRadar last month hired Jeff Yabuki as it’s new chairman, Yabuki extensive resume is epic and he has led many major M and A in his storied career. Sportico has reported this hiring together with it’s plans to go public likely via SPAC
“Yabuki, 60, joins the company at a critical time. Sportradar recently underwent a global reorganization and is exploring going public, possibly through acquisition, according to people familiar with the plans.“
I DM’ed the author of that article just to double check that his reporting on SportRadar going to SPAC was based of recent reporting not on the earlier july reports his response “Yeah, that’s still the plan according to my reporting. My expectation would be going public through acquisition, but IPO was being considered as well“
Screenshots available upon request.
SportRadar also posted three weeks ago on LinkedIn a position for head of Business development and m & A 3 weeks ago.
SportRadar early investors are among the elite sports franchise owners who a few google searches will tell you swim in the same circles as Billy Beane. Early investors include Michael Jordan, Mark Cuban, and Ted Leonsis. This is definitely a company that attracts people who run sports franchises. And also demonstrates that the waters have been tested and there is no conflict of interest between owning a sports team and owning sportradar clearing the way for Billy Beane to be able stay on with the A’s for as long as he wants. Leonsis is not only a investor but sits on the companies board.
I have no idea if RBAC will merge with SportRadar
I am just speculating
RBAC has a target of Sport Data
SportRadar is the only SportData company reported to be going public likely via spac
All the other Sports or gaming SPACs trust funds are way to small to take a piece of SportRadar.
Given the insane massive growth seen these past few months as more states legalize gambling and the insane expected growth over the next few years the odds of SportRadar looking for a U.S based SPAC makes all the more sense.
If you Listen to Jon Senor podcast interview with Billy Beane this past december the topic of sports betting comes up a few times Billy makes note of how good they are at regulating it in EURO. And how the topic is starting to become much less taboo in baseball circles. It’s all in all a great interview very insightful and highly recommended regardless.
Safest way to play it
Buying the RBAC Commons or Units is the safest way to play it. The downside over here is barely existent, and the likelyhood of this moving back up to the 11.40 area in short term is highly likely. Of course on any merger news aassuming it is at the very least a good if not great target will see the stock immediately trade anywhere from 13-20$ depending on the merger. If my wild speculation is right and it is indeed SportRadar well the stock should be trading near 30$ very soon.
If you are looking for more upside I love the warrants currently trading around 2.10. They are not as safe as commons but offer substantially better upside and will easily double as long as the merger target is good. If its great or amazing obviously the expected returns are much better
RBAC is one of a few Pre-Merger SPACs that offer options trading. Options trading in pre merger spacs offer unique upside. The price of the options are done by algorithms based on the stocks previous price therefore Option premium for stocks like RBAC are relatively low as the options generally do not price the impending massive increase in volatility when a merger is announced therefore the OTM options are priced very cheap. However being that we don’t have any idea when a merger will be announced there is a high likelihood off literally losing all your money with a small chance of making a 10 bagger. However the 10$ options offer a safety net with the likelyhood of the stock moving back up to it’s recent highs at around 11.40 in the next month. Buying the 10$ calls like in june which they were filling you all day on the at 1.30 is less risky and still gives you massive upside. Assuming there is no merger news it is still very likely to assume that the stock continues its uptrend to it’s previous high meaning in a months time there’s a very strong possibility that then 10$ june calls at 1.30 can be In The Money with 2 months to spare also leaving room for the huge upside if a merger is announced between them. Obviously that is not certain. But given that SPACs have a Net Asset Value of 10$ and RBAC having a floor of about 10.40 range you don’t risk losing your entire investment with the 10$ calls
In a interesting interview of Alex Rodriguez and RBAC co-ceo Gerry Cardinale Alex talks about doing his own SPAC then he says
“When I saw Gerry’s SPAC [RBAC] I said boy that’s something I would wanna do business with because it’s specific he’s got supreme talent around him and he brings himself he’s a superpower”
It’s also clear the ine interview how close ARod and Gerry are.
Arod on friday filed his SPAC SLAMU which is under written by goldman sachs thats Gerry’s place and goldman also underwrote the RBAC SPAC. Very likely Gerry assisted alex in getting that SPAC done. Now perhaps Alex lays the PIPE for Gerry.
I heard some london based banker chatter that RedBall is in the process of filling for their second SPAC…if we that come soon that is a strong indicator that they are close to finishing a deal. Why would you file for a second spac if your having trouble with your first? so be on the lookout for that.
Also watch the Options Market a few weeks back there was a large call sweep buyer that sent the stock flying and halted…I have seen more options buying the last few days these can be a a strong indicator as to whether we are getting closer to a deal or not?
What do you guys think of RBAC?
Any other targets you think would fit?
Hit me up on twitter
Disclosure: I am Long $RBAC through commons warrants and options
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