Buy Alert: A Big SPAC With A Big Deal CEO Looking For Fintech

Summary

  • Fortress Capital Acquisition Corp (FCAX.U) recently went public and is seeking an acquisition in the financial space, likely fintech or blockchain related.
  • FCAX.U comes with low downside risk and the upside of warrants, ala, MP Materials.

Fortress Capital Acquisition Corp (FCAXU

This SPAC is offered by Fortress Investment Group, LLC and is intended to seek an investment in the financial space. This is a different investment team than the one led by Chamath Palihapitiya which took MP Materials (MP) public.

Here’s a super quick overview of Fortress SPAC activity. 

Financials SPAC Fortress Capital Acquisition files for a $300 million IPO

This team is led by Michael Nierenberg who is a financial veteran of several large firms and a partner at Fortress. Here’s what Reddit said about him: 

So, the Elmer Fudd like description aside, the guy is a heavy hitter. And, the kiddos on Reddit are fixin’ to maybe bid this one up soon.

Fortress Capital Acquisition And Fintech

I believe the company ends up acquiring a fintech company, very possibly in blockchain, that is accelerating growth, has a tech advantage and needs scale.

If you have been listening to Jaime Dimon over at JP Morgan (JPM) he’s made the point that this is a space that could upend tradition banks. Meaning, traditional banks are going to be buying fintech companies. Maybe whatever this becomes down the road.

The Upside And Downside Of Fortress Capital Acquisition 

The downside is small as you get your prorated share of the trust money back to the company if they don’t make an acquisition. That’s around $10 per share.

The upside is the stock in the new company and the 1/5 warrant priced at a strike of $11.50 you get with each share you buy. So, buy 5 shares of stock and get a warrant that is “in the money” if the stock goes over $11.50.

The warrant is a big deal. You get up to 5 years from the acquisition to exercise it, so think of it as a 5 year call option. It’s bundled in the current shares, but will split off if the acquisition is made.

The Fortress Capital Acquisition Trade

I am taking a bit more than a starter position. I’m taking half positions, i.e. 2% of portfolio value, and in some accounts a full 4% position. Why? Because I think these guys are in it for the big money and the warrants are offer super upside.

Yes, it’s a bit speculative, but with the safety net of the cash in trust that we have a share of, the downside is limited.

More to come on this company soon. In the meantime, try reading the filing document: Fortress Capital Acquisition Corp. 30,000,000 Units