PECK Electric – Peck Electric’s Perfect Moment in the Sun Offers Traders a +700% Short Squeeze
In late June, 2019, solar company PECK (NASDAQ) had a one day move that shined for all to see. The brief flare offered traders an opportunity for quick profits.
Every stock gets its moment in the sun. For Special Purpose Acquisition Company (SPAC) Jensyn Acquisition Corp., the news they agreed to merge with Peck Electric created a flurry of activity for their stock.
A Little Stock With a Big Heart
Before reading this article, had you ever heard of Jensyn or Peck Electric? What about before the famous trading day that highlighted the stock? Me neither. It’s not really a surprise either. Look at the chart for PECK’s (previously Jenysn) trading. You could go days, sometimes weeks before seeing any trades. Even if you wanted to place a trade, you’d have been lucky to find a counterparty.
On some of the best days, Jensyn (NASDAQ: JSYN) would trade only 100 shares. Unless you followed this company already, or hunted SPACs, you’d have never seen this stock until things started to show up in the news.
Who or What is Jensyn or Peck Electric?
When Jensyn completed the acquisition of Peck Electric, the new company debuted under the ticker symbol PECK on the NASDAQ. Previously, Jensyn traded as a SPAC since their IPO in March 2016. SPACs refer to “blank check” companies, where investors offer capital to management. Management then uses the proceeds to acquire a company within a certain amount of time.
What’s interesting is Jensyn doesn’t seem to have a specific industry or group they planned to target with their SPAC. Go to Jensyn’s website and you don’t get much about who they planned to target. Rather, they talk about having attributes like EBITDA over 10%, gross margins over 30%, etc.
Peck Electric has actually been around for quite a while. Started back in 1972, this little company out of Burlington, VT became a powerhouse commercial solar contractor. In fact, Solar Power World ranked them #75 in 2018, #60 in 2017, and as high as #58 in 2014 for commercial solar contractors both in the Northeast and the entire U.S.
The company delivers engineering, procurement and construction (EPC) services for solar projects ranging in size from several kilowatts to multi-megawatt systems for large commercial and public works projects. Despite being known for commercial installations, the company also worked with residential customers throughout the region.
Guessing in the Dark
Actually – take a step back. Look at the volume leading into the 19th. Remember how you would barely see 100 shares trade on any given day? If the news didn’t come out until the 19th, why do you see the following?
Bringing in a 5-minute chart in the few days leading to the announcement, notice the elevated volume. While you’d struggle to find a day with 1,000 shares in the past six months, the 17th 7,500 shares traded and the 18th 6,300 shares traded.
On the 14th, Jensyn announced they planned a special meeting for the 19th in place of the annual meeting originally scheduled for the 18th. The shares changing hands were either traders guessing on a news catalyst, owners dumping shares, or insiders looking to beef up their holdings.
A Ray of Sunshine
Despite the possibility of a merger vote (which would be the most likely reason for a special meeting), the share price didn’t trade favorably. Leading into the 5.p.m announcement, the price plummeted throughout the trading day.
Shares opened the 19th at $9.25 after dropping from $10.58 the previous day. By the close of business, PECK traded at $5.03. Imagine if you followed SPACs and tried to front-run the news. Your holdings would have dropped by 50% in a matter of days.
Even if you watched the stock throughout the trading day, you wouldn’t have had much chance to react. Hardly any shares changed hands in the morning. Yet, within 30 minutes of the open, shares were already close to their final resting place.
Some traders on Twitter were caught a bit off-guard by the reaction in the stock. Luckily for @kcprinters, even though the trade looked scary at first for, they probably were pretty happy by the late afternoon.
Powerful Post-Market Profits
Once the news hit of the merger, things started to move for shares in the post-market. Volume remained somewhat steady through the post-market. However, share prices climbed steadily. By 5:30 p.m. shares had doubled to over $10. By 6:00 p.m. they had tripled to $15. Shares traded in a narrow (relatively speaking range) until the next morning between $13-$17.
Good Day Sunshine
Early morning saw shares trading in the same range as the post-market. As day traders grabbed their morning coffee, began to sit down at their desk, and sift through the news, PECK must have shown on a few scanners.
Shortly after 9:00 a.m. price ramped up to a high of $35! If you happened to buy at the close of Wednesday, you would have been up 700% before the market even opened. Most traders catch lightning like that once in their careers, if they’re lucky.
But, the market had other plans. Within a matter of 10 minutes, price backed down to the $20 mark. Shares opened the day at $18.60. Anyone who bought the open hoping for a quick buck lost their shorts instead.
At 9:36 a.m. trading halted from a circuit breaker down at $17.36. It took 20 minutes before trading resumed. Anyone buying the open had to sit until 9:56 a.m. before they could get out of their positions. As often happens with circuit breakers on the downside that last a good length of time, shares dropped to begin trading at $13.
So, for reference, if you bought the open and sold on the gap down, you’d be down about 50%. If you bought the prior close, you’d be up to a little over double, but off of your quadruple (and septuple pre-market). If you held shares as a normal investor, you’d be up about 30%
The Mid-day Stretch
Despite the selloff, shares found a low at 9:56 a.m. at $10.81. From there, the price roared higher on solid volume. Each minute saw several thousand shares changing hands (which certainly helps day-trader liquidity). By 10:29 a.m. shares peaked at $20.43, tripping a circuit breaker going higher.
Shares gapped up to open 10 minutes later at $23.00. They ran to $26.09, where price and volume peaked. Volume began to dry up through the remainder of the day. Shares slid back down steadily. By 3:25 p.m. they hit a low of $14.57. Price floated on light volume through the close to end the day at $17.90.
Falling Into Dusk
As with most tales of SPACs that we’ve covered, PECK’s moment in the sun slowly faded. The next day saw a meaningful reversal in the stock. Shares opened at $15.15 and finished the day at $11.10. While they made a quick high at 10:30 a.m., almost reaching $18.00, they never offered a chance for traders to get out again at reasonable levels. Shares melted away on steady volume to close the day near where the whole festival began.
If that wasn’t enough, the next day gapped down to open at $9.10. They fell hard, closing the day at $6.60. The next day saw similar action. Shares opened near the high at $8.60 and closed the day at $6.87. Outside of a glorious spike on 1.12m shares on July 12th to $8.87, the price never recovered. Today shares languish just above $5.
Before We Shut Off The Lights
Compare the charts of PECK to the charts of KERN and HUNT. The one major difference here happens to be the action leading into the main day. While other stocks tended to appreciate on increasing volume, PECK took the opposite approach. Leading into the merger announcement, shares tanked by 50%. Other SPACs we’ve looked at saw price actually increase.
Furthermore, the volume leading into the PECK meeting announcement was non-existent. Days would go by without any trades. At least with KERN and HUNT, you saw some volume daily. Even with Hunter Maritime being a somewhat shady outfit, they at least had a stated purpose for their SPAC. Looking at PECK, you really couldn’t tell who or where they planned to pick up an acquisition.
Frankly, unless you had your finger on the pulse of SPACs, you’d probably have missed the move until it actually happened. It’s entirely possible that all the volume on the 19th was short-sellers. Even if that was the case, you’re still talking about 100K shares vs a float of 3.9m.
So, could this have been a short squeeze? Certainly possible. We know momentum definitely played a huge part. Else, why would a stock drive excessively high on actual news, only to now trade below the original IPO? One thing is for certain. SPACs certainly holds a special place in major day trades.